Striking the balance between people and profits

This article is part of our Opinions section.

From household names to emerging startups, the tech industry is no stranger to layoffs. In fact, ongoing redundancies have led to over 80,000 job losses this year so far, leaving thousands of skilled professionals facing an uncertain future, coupled with financial strain and the daunting challenge of re-entering a highly competitive job market. What’s worse, it’s not even Q4 yet. 

Whilst layoffs are sometimes sadly unavoidable, there’s a growing misconception that layoffs are a silver bullet business strategy to all financial woes. And yet, this approach not only results in the loss of staff but the human side of business as well.

The struggles following over-hiring, AI adoption and economic difficulties are unlikely to go anywhere anytime soon, so how can businesses find a balance between people and profits?

One step ahead 

Prevention is always better than a cure. Efficient financial planning should always be a business priority, though during periods of financial difficulty, this is essential. We’re all advised to build a ‘rainy day’ fund to fall back on in an emergency, so businesses need to do the same. 

Building a buffer can be critical to providing financial flexibility to navigate tough periods without immediately resorting to layoffs, as it allows businesses to anticipate financial challenges before they arise. 

To take this one step further, scenario planning is a great way to foresee possible loss of revenue and prepare accordingly. By simulating how revenue might be impacted by different factors like a major client loss or market downturns, leadership can develop strategies to mitigate these risks in advance. Keeping a close eye on KPIs can also serve as early warning signals for financial distress. Regularly tracking these indicators allows management to spot negative trends early and take corrective action before layoffs become necessary.

Bare necessities

If all prevention strategies fail and you’re beginning to think about layoffs, you need to go back to basics. 

Start by conducting a thorough audit on spending to identify where cuts can be made, with special attention to partners and tools. These are often prime targets to scale back or eliminate altogether. For instance, consider conducting training sessions internally rather than investing in costly external workshops. Essential expenses like salaries should always be prioritised over non-critical “nice-to-haves”.

Where layoffs seem unavoidable, consider retraining or upskilling your current employees and redeploying them to other areas of the business where there’s a greater demand for staff. It’s a win-win situation: employees are able to maintain job stability, and employers avoid the costly, time-consuming process of recruitment. Hiring internally is not only a more cost-effective solution, but it also fosters a stronger company culture, where employees feel valued and supported by leadership.

Flexibility is key

Organisations should explore boosting flexible working arrangements to further cut costs while maintaining full-time staff. The pandemic saw a significant rise in flexible working arrangements, which companies can turn to for inspiration now that the pandemic is (thankfully) over. 

If not implemented already, consider making the move to become fully remote to reduce overhead costs like renting office space. Businesses can also cut costs by reducing working hours, but keeping staff employed. If need be, employees can work fewer hours or take unpaid leave, on a rotating basis, which maintains employment levels while addressing budget constraints.

Last resort

As a last resort, introducing temporary furloughs can be a pragmatic way for companies to reduce costs while maintaining a commitment to their workforce. One potential advantage of furloughs is that some employees may voluntarily choose to participate, especially if they view the time off as an opportunity to focus on other personal responsibilities, such as caregiving, or to pursue other opportunities for personal development.

This approach can help the company reduce its costs while avoiding compulsory measures that hurt morale. Furloughs also help companies retain their trained and experienced workforce, ensuring they are ready to return to work quickly when business conditions improve.

Managing costs during economic uncertainty is no easy task. However, resorting to layoffs is a poor band-aid solution for any company’s tech strategy. It’s crucial to explore alternative solutions, even if they’re not ideal, before defaulting to layoffs. If redundancies become unavoidable, they should always be carried out with care and consideration for the people involved, with time taken to reflect on the real impact, rather than simply treating it as just a numbers game.

Related reading

• What is a CBA day?
• UK industry reacts as Autonomy Founder Mike Lynch goes missing after yacht disaster
• Analyzing consumer behaviour with location-based data in retail