How to hire during a recession
It’s arguably the toughest time for tech companies since the dotcom bubble burst some twenty million lightyears ago. A chill is in the air, and as Gergely Orosz observes, the industry faces a perfect storm of challenges:
- Facebook/Meta have announced a hiring freeze
- Cameo, Reef, OnDeck, Robinhood, Better, Noom, Vise, Tharasio and Blend announced layoffs. You can track the latest layoffs using this tool.
- The Russia-Ukraine war has increased uncertainty, impacted economies and led to a brain drain from Russia.
So, how do you hire top talent during a time of recession? Below, we explore some tips for how hiring teams can navigate the choppy waters of summer 2022 and beyond.
The big freeze is here
High-flying tech companies like Zoom, Okta, Block and Twilio more than doubled their workforces in 2020 and 2021 while their stock prices soared. But since mid-November, shares in these companies (and others) have slumped, leaving the industry bracing for a wave of cost-cutting, hiring freezes and layoffs.
An Axios blog expands on these trends, noting that e-commerce is struggling due to the recovery of retail; rising interest rates have made it tougher for startups to raise capital; and the share price of streaming and social media companies has taken a battering. In fact, the Nasdaq Composite is looking like Blackpool Pleasure Beach’s Big Dipper rollercoaster:
But if history is anything to go by, every disaster is a chance to seize an opportunity. Dan Rose, who spent twenty years at Facebook and Amazon, illustrates this point in a series of tweets.
You only have to look at the last two years to see how dramatically a company’s fortunes can change in an instant. Zoom’s overnight success in 2020 was actually nine years in the making, but cometh the pandemic, cometh the video conferencing app.
Moreover, savvy investors know when to spot an opportunity, and this is often at a time of crisis. Tellingly, Warren Buffet’s Berkshire Hathaway invested more than $50bn in the first quarter of 2022 after years of stockpiling cash, and Buffet recently compared the market to a “gambling parlor”.
While things are somewhat uncertain, in many ways we’ve been here before (to put it mildly). Or as this Financial Times piece put it:
‘Tech stocks may be in a bear market, but don’t worry, a dotcom crash in the making this ain’t.’
Can your hiring team take advantage?
Every business is at a different stage in its journey, and in these unpredictable times, it’s worth figuring out how likely it is that your company will continue to grow before modelling your hiring needs accordingly.
For some companies, the belt-tightening environment may mean that hiring budgets are cut; those fancy expensive tools may have to go; and hiring teams themselves may shrink.
But for profitable companies that are growing fast, the cooling of the market may work in their favour. As Gergely Orosz notes:
‘Over the next few months, you should see more candidates and less competition for positions than before. You should still budget that hiring is not cheap, but you’ll likely see fewer “bidding wars” for candidates.’
In any case, lavish spending isn’t always the answer, and now could be the perfect time to get back to basics. As we’ve covered before, working on an attractive Employee Value Proposition (EVP) is a great way to win over candidates’ hearts and minds, especially in a market where candidates are king. And unsurprisingly, we’re advocates of employee referral programs as a cost-effective way to utilise your existing workforce, boost morale and cut recruiting fees. If you’re looking to track employee referrals, here are some handy templates. And while lay-offs are never good news, does an enlarged pool of candidates make now an opportune time to hire executive talent?
Looking on the bright side
A cooling market may have other unexpected upsides for businesses. If many employees are resigning – like Apple’s Director of Machine Learning – due to factors like the return to the office, this avoids the need for lay-offs, and could consolidate a loyal workforce at a company. What’s more, it’s been a candidate-friendly market for a while, but it’s possible that the pendulum will swing a little towards employers, and perhaps salaries won’t be as sky-high as before. Plus, if candidates have restricted choices, perhaps the phenomenon of ‘ghosting’ – where candidates and new hires simply don’t turn up! – will come to an end.
Here’s hoping the big freeze begins to melt and there’s a bit of sunshine on the tech horizon.