Seemingly every day, we hear about the next batch of layoffs from the household-name tech companies: 10,000 here, 1,700 there. As we continue into earning seasons for these publicly traded (and some not publicly traded) companies, we will likely hear more. The substory is that unemployment is at an all-time low, with the job market adding over 500,000 jobs in January.
Coupled with the tech layoffs news is the impending doom of a Federal Reserve manufactured recession to stave off inflation (or at least try to). Many companies large and small are tightening their belts in response to news reports (not actual economics, but media speculation) over the economic calamity that we are to expect in the first half of 2023.
I don’t feel it is necessary to call out any individuals or companies by name (scan the news - there are plenty there to choose from), but I thought I would share a few insights that I have found through discussions (mainly off-the-record kinds of discussions) about what is really going on in the economy, especially as it relates to the tech industry.
- Companies over-hired during the pandemic. No question about it, many of the companies were spooked by productivity concerns during the pandemic and went hiring-crazy. The productivity hit never came (exactly the opposite, if you believe some of the data out there), and now they are trying to “right-size” their organizations. There is a lot of conversation in the media about the number of layoffs, but they are often missing context, specifically about the percentage of layoffs and the comparison of “normal” staff reductions from previous years. To be clear: every company has a certain amount of turnover annually. It is expected. It is actually a good thing for a company to shift talent and hire replacements with better/different skills to meet the demands of new projects. Moreover, many of these companies are still not cutting to pre-pandemic levels, indicating that they are still experiencing growth in their business units at some level.
- Hiring continues at nearly every one of the highlighted companies. One of the companies that was first to announce the layoffs of over 10,000 of their staff also has job requisitions for almost 1,000 positions on their website. To some degree, the same can be said for nearly every company that is in the news – every single one of them may be letting people go, but they are also hiring. Maybe it is looking for people that are the right fit for emerging technologies. Maybe they are looking to get new employees at a discount. Maybe it is a reaction to force employees back into the office space. Whatever the reason, and contrary to what the news might have you believe, not all of these layoffs are going to be replaced by AI or robots (though that may eventually be the case).
- Shareholder value appreciates the attention. What? Companies making public decisions to increase their shareholder value? (insert sarcasm) Arguably, this is the core responsibility of every CEO and Board of Directors. If they can improve public perception by showing that they are doing *SOMETHING* to address the coming recession, and doing so happens to increase the stock price, they can consider themselves the winner. One of the senior executives I talked to (very much off the record) specifically mentioned that they were trying to address shareholder value as part of their proposed layoffs and that the idea that they were trying to address concerns had value, even if the layoffs in his organization might never actually come to fruition. Many companies announce layoffs, but the process of downsizing takes months – even years, in some cases – and the economics of the company change by the time the layoffs actually come to be. His company is willing to take the headline trend, gain the shareholder/investor bump, and continue their regular business.
- Never pass on an opportunity. Again, the media would have you believe that the tech sky is falling, and maybe it is for some. But there are also PLENTY of small to medium-sized companies that are willing to capitalize on the opportunity. In the security industry specifically, we have talked and talked about the lack of security talent (which is still a problem not matter how you look at it), but the SMEs that I have talked to are hiring talent that they have never had access to previously, and in many cases never in the history of their young company. There is a long-running axiom in the security space that there is no such thing as an unemployed CISSP/experienced security professional. That is even more the case now, with forward-thinking companies taking advantage of slightly higher availability of certified security types to augment their dev and ops teams and finally finding FTE to fully staff key responsibilities. 12-18 months from now, you are likely to see the fruits of these hires because tech innovations in the SME sector will flourish.
The moral of this story is that as glass-half-empty as the world may appear, understanding the reasons behind it and what some of the outcomes of these actions may bring is of particular interest to me. Consuming the spoon-fed narrative of the sensationalized media is not doing anyone any good (well, maybe the shareholders…).