An earnest apology for overhiring and subsequent layoffs has become a common refrain among tech executives as of late. From Patrick Collison at Stripe to Mark Zuckerberg at Meta, Silicon Valley executives bemoan the “tough” position of righting the ship after onboarding too many people during growth periods. Salesforce joined this CEO cluster last week, announcing it will lay off as much as 10% of its staff in the coming weeks. The reason: “We hired too many people,” wrote CEO Marc Benioff in a note to employees.
It’s a trend that smaller tech companies and firms outside the tech sector hope to avoid. That’s especially true for many consumer-facing businesses, which haven’t been as sensitive to rising interest rates and are still focused on growth and hiring.
But companies can prioritize talent growth without becoming the next Meta, Amazon, or Salesforce. The antidote is talent forecasting that’s centered on filling critical skills gaps. Thanh Nguyen, CEO and founder of compensation benchmarking firm OpenComp, suggests starting by taking inventory of the talent already within the walls of your organization. In a tight labor market, companies that are in growth mode are often quick to hire as many people as possible, almost in an effort to hoard talent. It’s better to assess the skills already in the employee pool and tap existing inventory.
“It helps the organization grow without having to try to look for that individual or that skill externally,” Nguyen tells Fortune. “See if you can leverage, optimize, and cross-pollinate.”
Beyond simply overhiring, some executives are now finding themselves unable to justify the spend on labor costs and don’t see the immediate payoff. Benioff, for instance, complained about the lack of productivity among new hires. But Nguyen likes to remind leaders that it takes an investment of time and resources to transform new hires into star players within the organization and that companies should slow down hiring sprees to ensure talent is well onboarded.
“It takes a certain amount of time to ramp and onboard an employee to a new organization. It’s not a function of that individual being a top performer, middle performer, or low performer. It takes a level of education, adoption, wherewithal, and training,” says Nguyen. Employers could prevent a great deal of heartache by more proactively investing in onboarding programs.
Though Nguyen recognizes that many corporations now announcing layoffs were facing pressure to grow at a rapid clip and meet consumer demands, hiring at such breakneck speed ironically decelerates a company’s operations.
“When you hire that many people, it’s like a snake swallowing a horse. It really paralyzes [a company] because it’s not as nimble anymore,” he says.
It’s also important that companies clearly outline why they’re hiring for a particular role. Jonathan Reynolds, CEO of Titus Talent Strategies, says hiring people without fully fleshed-out objectives, achievements, and expectations often results in disappointment for leaders and new hires.
“When things shift in the economy, you don’t want to have an army of people who don’t know what they’re trying to reach for to help the company move forward,” he says. “[Because then] you’re forced to do this big, sweeping layoff because you’re over headcount and over budget.”
One final word of advice: Make use of talent mapping. Reynolds encourages employers to look at the “group photograph” of their ideal org chart in three years.
The most compelling data, quotes, and insights from the field.
The service industry is still battling labor shortages regardless of a company’s prestige. Copenhagen’s Noma, considered one of the world’s best restaurants, announced it will close in 2024, citing staffing problems.
“It’s unsustainable,” Noma co-owner and head chef René Redzepi said of the eatery’s business model. “Financially and emotionally, as an employer and as a human being, it just doesn’t work.”
A round-up of the most important HR headlines, studies, podcasts, and long-reads.
– Recruiters have a new secret weapon: TikTok influencers. Employers are hiring TikTok users to help promote and recruit for open roles. CNBC
– Disney’s CEO, Bob Iger, is calling employees back to the office four days a week in an effort to boost culture and creativity. New York Times
– McDonald’s is the latest company to announce forthcoming layoffs. CEO Chris Kempczinski said in a Friday memo that the fast-food company will make cuts to its corporate staff. CNN
Everything you need to know from Fortune.
Nurses on strike. Over 7,000 nurses from two New York City hospitals walked off the job on Monday due to a dispute over pay and overstaffing. —Associated Press
Saturday severance. Some Twitter employees finally received their long-awaited severance offers on Saturday. The compensation was much lower than many anticipated. —Kylie Robison
Finance layoffs. Goldman Sachs is expected to lay off as many as 4,000 employees this week following a major restructuring last year. —Luisa Beltran
The great disagreement. Employers and employees still disagree about who should be able to work remotely and whether working from home increases or decreases productivity. —Orianna Rose Royle
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How to avoid the overhiring and layoff cycle that’s rocked Meta, Salesforce, and Amazon – Fortune