Why Your Business Shouldn’t Follow the Lead of Big Tech Layoffs

As big corporations lay off their employees massively in 2023, some small businesses also start considering this option, being especially pressured by the ongoing recession, post-pandemic consequences, and the unstable political environment globally. But do these concerning trends mean your company shouldn’t focus on retaining all the employees or put existing hiring campaigns on hold? 

While the right answer always depends on the specific business goals and growth projections, following the examples of big tech companies layoffs can hardly be a one-fit-all tactic. That’s why we, at Bridge, decided to research the real reasons behind IT layoffs 2023. 

In this article, we would also like to share our vision of the current labor market landscape and, being guided by our practical experience, explain why smaller businesses should consider retaining their top employees instead of firing them. 

The real reasons behind massive layoffs at global tech corporations

Google and Amazon layoffs 2023 became a hot topic for discussion recently. Big companies fire their employees left and right, justifying the decision with the need to cut costs — and announce huge investment projects almost instantly. For example, Microsoft invested $10 billion in Open AI right after laying off 10,000 of its employees. Amazon and Google’s capital expenditures are also not expected to be significantly cut anytime soon, according to The Street. So, global tech companies are unlikely to be on a saving plan. Instead, they are relocating their financial resources in the directions that feel more promising to them.

There are also several no less significant reasons why tech corporations are cutting on their teams. 

• Massive adoption of automation solutions. Automation solutions have been replacing human employees for several years already. For example, in 2022, Amazon started testing computer vision free-roaming robots to handle heavy items in their fulfillment centers. It is also projected that “generative AI” apps like ChatGPT could automate up to one-fourth of current work tasks in the US, which explains both the decision to cut some positions and invest more in innovative technologies. 
• Economic Recession. It is difficult to determine whether the current recession is the worst we ever faced, but it is definitely more severe compared to the 2008 global economic crisis. While 65,000 tech workers were fired in 2008, now this figure reached 165,000 employees laid off by 550 tech companies globally. For example, ThoughtWorks, a software development and consulting company, laid off 4% of its global workforce in March 2023 due to global macroeconomic conditions.
• Company restructuring. This is another reason why big companies consider layoffs. This may involve consolidating departments, eliminating redundant positions, or outsourcing certain functions. For instance, restructuring is the main reason why Meta cut more than 10,000 jobs; still, the company hasn’t announced what its restructuring will be like. 
• Overstaffing during the pandemic. Some big companies, like Amazon, Zoom, and FedEx significantly increased their hiring during the pandemic to meet the growing demands of online shoppers and those working remotely. Now, their teams are overstaffed, which means overhead costs, so there is no surprise that they look to rebalance their staff. 

Reasons to retain your employees instead of laying them off 

So, the reasons for big tech layoffs are more or less clear. They do have large teams and spend large budgets to reallocate and restructure their departments. As for the recession, cutting on hiring is rather a risk mitigation strategy than a pressing financial necessity for industry behemoths. 

Economic Recession: Why You Still Need to Hire Tech Talent

But are the reasons mentioned relevant for small businesses laying off their talent, too? For small to medium businesses, only recession is relevant, while retaining top talent is one of the most viable strategies to overcome it. And here is why. 

Replacing employees with AI tools is riskier for small businesses 

Major tech players invest a lot in Open AI with the goal of capitalizing on it and cutting overhead costs. Such a strategy can actually be right for big companies with an overwhelming scope of routine tasks. However, replacing critical employees with AI is significantly riskier for small businesses. Small companies need more agility and flexibility to stay competitive — meaning they need more human creativity and input, while AI tools can only be used as powerful assistants. So, think twice before replacing your team members with ChatGPT. Instead, empower them with AI software already available and level up their performance. 

Massive layoffs are also risky for your reputation and data security

In 2022, Snap laid off 20% of its employees, and the share of workers who would recommend the company to their professional network dropped from 80% to 30% immediately. What’s more, according to the research published in Harvard Business Review, employees who are laid off are more likely to violate the cybersecurity policies of their ex-employer, which can put company data at risk, while the cost of a data breach can be extremely high for both small and large businesses. 

Your ex-employees may join your competitor very quickly

40% of employees fired by big companies are already hired. And perhaps, this is the case when figures speak for themselves. Your fired employees will also take their knowledge, skills, and expertise with them, redelivering them to your competitors. The only exception is that they may be restricted to work for competing companies for several years after resigning, but only if you have included this condition in the NDA signed by your employees before day one on their positions. 

Hiring the best talent from scratch will become more difficult

The global talent landscape is changing and talent recruitment is becoming more and more challenging. On the one hand, big corporations behave like having too many qualified employees is burdening and fire them with ease. At the same time, small business owners can’t undervalue the impact of the Great Resignation meaning that workers are fleeing their workplaces voluntarily — and almost as massively as tech corporations are firing them. 

Build a Thriving Distributed Engineering Team Amid the Great Resignation (Because Most Likely You Cannot Avoid It)

What’s more, here is the cherry on top. Despite all these trends which seem controversial to each other, the tech talent gap is also projected to grow, meaning that hiring the best minds will become more difficult. For small companies, it also means more time to hire and higher costs to attract new employees. So, don’t rush to let your team go adrift. Those fired are unlikely to return, or, as an option, you will have to pay a double price to get them back. 

IT Workers Are the Real Unicorns or Tech Talent Shortage 2022

Right after a layoff, you may face a lack of critical expertise

Laying off valuable employees isn’t the smartest strategy, especially those specialists with top-demanded skills, like cybersecurity, Web3 programming, and IoT development. By the way, these are just the jobs big tech corporations preferred to retain, firing HR managers in particular, instead. 

The Essential Guide to Hiring a Web3 Developer for Your Startup

Now you may ask – how can you have top talent nearby without paying them full salaries when your project is on hold? Indeed, you have two tactics to consider. The first one would be to partner and stay in close touch with a tech talent sourcing vendor, like Bridge, for instance. In case you need software development talent urgently, your partner will be able to help you within a few business days.

As for the second tactic, consider building a tech talent pool for the future so that you always have the necessary specialists at hand. The only thing that remains, in this case, is to make sure they are ready to take on your project and get started with onboarding.  

10 Ways to Build a Tech Talent Pool

Find, vet, and hire top talent with Bridge

If you are a small business owner, don’t rush to lay off your employees just to follow the example of big companies. The decisions they are making now are the direct consequences of the ones they’ve taken previously, and massive layoffs hardly do them a favor. 

Instead of “cutting for saving”, consider strengthening your competitive edge with top technical talent and future-proof your business in times of economic recession and growing tech talent gap. Our sourcing-as-a-service gives your business instant access to more than 900k top-tier software developers and other ICT specialists. All our candidates are pre-vetted, so you don’t have to do a double job, while our data-driven talent sourcing engine allows for matching the candidate with the position in seconds. 

Get in touch with us now to meet highly-qualified candidates in no more than 5 days!