Hiring freeze? Layoffs? What now?
Tips on how to get you and your team ready for an economic downturn
You’ve probably seen many layoffs in the tech ecosystem already. Many companies are installing hiring freezes with the intention to prolong runways (most VC’s directives are: 18-24 months). For most teams all of this is deeply unsettling, and while its not the end of the world, it’s definitely a time in which most teams will have to “do more with less” and get ready to get through a recession.
This is a time in which your team is looking to you for guidance and the super tricky part is: most of us don’t have much clarity either. The future seems gloomy, that’s for sure, but it’s not clear how bad things will really get and how long it will take us to get out of this.
In situations like this, it’s important to remember to focus on what you can control and try not to worry about what you can’t control.
How to get your team ready for an economic downturn
🤔 First of all, is there going to be a recession?
Are we headed for a global recession and how concerned should we be? Read the Take Aways from World Economic Forum in Davos here. While some economic outlets are more pessimistic and expect a recession (The Economist), others are assuming that there will be a growth slowdown (Harvard), an extended period of economic weakness (Fortune), rather than a full blown recession.
What are businesses (aka executive management) advised to do in order to prepare for a recession? 💼
👉 39 Moves to Survive (& Thrive) in a Downturn: 2022 Edition - by NFX
Cut costs to either get to profitability or to grow efficiently to reach the marks for the next round of funding (which you won’t be able to raise any time soon though), so prolonging runway is key
Try to avoid needing to raise funds until 2024; accept lower valuations, like 50-80% lower
Do layoffs deeply if you need to (once and conservatively rather than multiple times); don’t reduce product & engineering if you can;
“Repurpose” employees that are doing very well but who’s projects you’re cutting; reward the “stay team” with additional ESOP
Focus your marketing activities on rapid pay-back on spend/high-leverage activities; assess and reduce all infrastructure and software costs
Cut vanity metrics and pet projects or any other drag, focus on channels you can control and know deliver new customers
Build an M&A pipeline just in case
Try to reposition your offering so that it clearly impacts your customer’s P&L; build positive value-add relationships with potential customers that are not ready to buy yet, at a low-cost over time; so you don’t have to require them later
Anticipate your customer's behavioral changes; prioritise upfront payments
DO NOT LOWER prices! rather give more product for the same price,
Make your product a pain-killer, not a vitamin!
Opportunistically hire when there is game-changing talent knocking on your doors
What can and should you do personally in order to get ready financially? 💰
👉 How to prepare for a Recession - by The Cut
Take Aways: Asses your financial vulnerabilities, get rid of high-interest debt, stock pile cash if you can, don’t touch your investments.
👉 How to Prepare for a Recession: 8 Tips You Can Start Now - by Intuit
Take Aways: Reassess your budgets monthly and constrain your expenses, contribute more to your savings (30% monthly should go into an emergency fund), continue to invest in long-term saving plans, don’t make emotional investment decisions, focus on building up skills, try to find ways to make passive income, network monthly.
👉 5 things to do with your money right now to prepare for a recession, according to a financial planner - by Business Insider
Take Aways: Think about where to cut back, build a fund for a rainy day, try to save up a 6 months runway (expenses covered) as quickly as possible, pay off high-interest debt ASAP (credit cards, hello!). Consider investing in your training and education to make yourself even more attractive for future employment.
👉 How to Protect Your Job in a Recession - by HBR, from the 2008 recenssion
Take Aways: Act like a surviver → act confident and cheerful, while readying yourself for the worst, look ahead, not back, focus on your customers and nothing else; stay flexible and be ready to take on many different hats in your team; support your leadership team by not asking for promotions or additional benefits right now, times are toughening up and its time to consolidated, build on what’s there instead of trying to add to already too full plates.
What does your team need from you right now? 💪
👉 Communicating in a Crisis: What, When, and How - by Center for Creative Leadership
Take Aways: focus on the essentials/facts first; deliver them transparently, share what you do and don’t know; make clear what people can look at for stability and comfort; communicate broadly and repeatedly in multiple means; be proactive with your communication and give space for questions; take care of yourself before you talk to the team; you can’t help them build confidence if you are scattered.
👉 How to Talk to Your Team When the Future Is Uncertain - by Rebecca Knight
Take Aways: Prepare yourself to be the guiding light in the darkness, it will take much of what you have, be ready for that. Make a plan and share it with your team, consider your audience and put yourself in their shoes, be humble and admit what you don’t know, don’t sugarcoat, be responsible and don’t share any information pre-maturely until final decisions have been made, seek to inspired your team by showing that you believe in them as individuals and as a team.
Tips from the Bunch AI Coach:
This week’s tip “How to Include Your Team in Big Decisions” by James McClure, a former GM at Google and Airbnb and turned executive coach is walking through the concept of “procedural and outcome fairness”. When times are uncertain and you need to make difficult decisions, this tip may help you make sure your team can follow.
Have a good start of your week!
PS: Download the AI coach to get 1% better in just 2 min a day