“As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that,” co-CEO of Salesforce Marc Benioff said in a letter to employees earlier this month.
With that statement, Benioff echoed similar sentiment from Facebook CEO Mark Zuckerberg and Amazon CEO Andy Jassy. To keep up with the demand during the pandemic, tech companies hired employees aggressively and as the demand tapers off, these tech companies are now engaging in retrenchment exercises.
According to Layoffs.fyi, a total of 26,601 employees have been laid off by 104 tech companies globally in 2023 so far. These layoffs come after 1,024 tech companies laid off 154,336 employees in 2022. Layoffs are no longer restricted to tech companies as media and investment banking companies also join the fray. The situation paints a paradox unlike any seen before.
A paradox of unemployment and economy
Tech companies like Amazon, Meta, and Salesforce have announced layoffs mainly as a measure to undo the huge number of employees hired during the pandemic. However, these layoffs are also being done in conjunction with increased interest rates around the world, a need to cut costs and a possible recession.
Despite easing inflation, a WSJ survey found that economists predict a recession this year. “On average, business and academic economists polled by the Journal put the probability of a recession in the next 12 months at 61 per cent, little changed from 63 per cent in October’s survey,” Harriet Torry and Anthony DeBarros reported for the WSJ.
Even though headlines about layoffs dominate the news cycle, employers still seem to have an appetite for hiring skilled workers. In the US, the unemployment rate is near a historic low of 3.5 per cent and Axios reports citing November jobs data that there are 1.7 open positions for each available worker.
As we reported in November, Statistics Netherlands data shows there were 382,000 unemployed in the country, which is equivalent to 3.8 per cent of the labour force. According to Trading Economics, the number of job vacancies in the Netherlands stood at 448,800 in September 2022. The number of job vacancies reached a record high of 475,900 in June 2022 and a record low of 198,100 in June 2020.
The jobs data available for major economies shows that the number of people not in work has declined almost continuously in recent years. While tech companies announce layoffs, they are also retaining skilled workforce and hiring across critical positions.
Recruiters become job seekers
The harsh reality of the major layoffs announced at tech companies is that the immediate impact is not always felt by engineers. The business function to get axed by tech companies when they announce layoffs is that of talent acquisition. Just a year earlier, tech companies couldn’t hire enough recruiters to fill all of the open technology positions and now, the same recruiters have become job seekers.
While announcing layoffs at Meta, CEO Mark Zuckerberg said that the social media giant is making reductions in every organisation but recruiting will be disproportionately affected. “Recruiting will be disproportionately affected since we’re planning to hire fewer people next year,” Zuckerberg said in a letter to Meta employees.
According to the Wall Street Journal, both Amazon and Google-parent Alphabet also laid off contractor recruiters and external recruiters as they slow hiring and cut jobs across the board. Since the dot-com bubble, tech companies have enjoyed a growth momentum unlike any seen before and their growth also meant huge demand for recruiters.
As tech companies saw pent up demand for products and services, they also saw a need to hire new employees. The demand for recruiters went up as tech companies expanded hiring during the good times and now, these same employers are cutting jobs.
“These recruiting roles are being swallowed up very fast because there’s hundreds, if not thousands, of applicants at a time,” Ashley Guccione, a 31-year-old tech recruiter told the WSJ.
While there have been marginal reduction in headcount in the past, the current boom-bust cycle can be described as the most extreme. With many recruiters also being contractors, their jobs are less secure as companies trim costs and see little or no work for these recruiters.
Julia Pollak, chief economist at hiring platform ZipRecruiter, says tech companies were advertising more than 10,000 openings for tech recruiters in April last year. The data shows those positions dropped to 2,500 by October.
“Many companies saw this moment as a once-in-a-lifetime opportunity to go after market share and mind share and share of wallet. Now you have that moment coming to an end,” Pollak told the WSJ.
Future of work and recruitment
Recruitment is unlike traditional occupation where the work is directly proportional to business sentiment of the company. With every demand, a company goes through expanded hiring and their first step often is to fill the roles of recruiters.
As tech companies freeze hiring, they are also getting rid of recruiters but it is not immediately clear what percentage of recruitment roles are being cut across industries. One thing is certain, though, the recruiters staying will be busier than ever as companies still need to fill jobs and finding jobs becomes difficult for other tech workers.
This means not only the role of recruiters will evolve but jobs themselves will evolve too. In its Future of Work Trends for 2023, Gartner predicts “Quiet hiring” will be a major trend as it offers new ways for companies to find in-demand talent.
Quiet hiring, a new spin on viral LinkedIn topic “Quiet Quitting,” will see HR leaders find new skills and capabilities without adding new full-time roles in the organisation. According to Gartner, this trend will manifest in the form of focus on internal talent mobility, upskilling opportunities for existing employees, and alternate approaches like leveraging alumni networks and gig workers, to flexibly bring talent as needed.
As recruiters become job seekers, tech companies can relook at their recruitment and hiring strategies. While tech companies have introduced a slew of digital products and services, they have largely restricted themselves to traditional means of recruitment.
With the need to bring talent flexibly as per their need, tech companies will look at embedded recruitment options like the one offered by London and Amsterdam-based Troi. With a product used by more than 150 companies and savings of €17M for European and US organisations, Troi solves 21st century hiring problems with a Netflix-style subscription offering.
“We’re seeing a mixed bag across our client portfolio from those impacted by a conservative funding environment having to pause their hiring and bigger organisations making cuts due to shareholder pressures,” says Nick Mortimer, Regional Director (Europe) at Troi.
He adds, “[There is] a general ‘paralysis’ as companies look to see where things land. On the plus side, we’re seeing new clients with ambitious hiring plans in 2023 so things seem more positive than before Christmas.”
This changing scenario will arguably drive employers towards non-traditional recruitment. Troi’s monthly subscription model with a flat fee (regardless of the number of hires) could become a silver lining in a market that is bracing for rapid changes on hiring as well as the economic front.
Mortimer believes tech hiring in 2023 will be difficult to predict but sees opportunity for flexible hiring models. “Embedded recruitment offers a smart way for organisations to keep recruiting in-house whilst simultaneously keeping a lid on costs,” he says.
“This will be a particularly powerful mixture as organisations cautiously grow post-downturn,” Mortimer tells us.