A Five-Point Strategy For Avoiding Layoffs

It seems like there isn’t a day that goes by where we don’t hear about layoffs in the tech industry. In some instances, job cuts are necessary—especially with a recession looming—but they should be the last resort.

As the founder of an insurtech company, I’ve watched recent developments with a mix of sadness and frustration. The seemingly callous nature of these dismissals is testing people’s faith in the tech industry to solve society’s difficult problems. Even worse, they’re upending people’s lives at a time of economic uncertainty.

Executives need to recognize that the playbook has changed. Now under increased scrutiny, they can no longer solely focus on growth and forget about the people fueling their businesses’ success.

Of course, if a startup is bloated or wants to change its strategy, layoffs may be the best course. My friend who ran a car-sharing company during Covid, for instance, had to eliminate positions once it was clear demand had stalled out. And for some firms already executing conservative business models, layoffs might not be necessary.

But if your business model is strong, yet you’re projecting stiff economic headwinds, you may be able to succeed in the coming months without reducing headcount if you can find more creative ways to increase revenue without adding to your spend.

1. Don’t default to the old approach.

For many CEOs, the decision to carry out layoffs starts with a failure of the imagination. Cutting jobs is the quickest and easiest way to lower costs. But you can’t ignore the harm this visits not only on your employees, but your business strategy. The long-term negative impacts of layoffs—from reputational damage stunting future recruitment to operational disruption—will linger long after the economic situation has stabilized.

It’s understandable to look to 2023 with trepidation. But instead of overreacting, pause, take a breath and consider whether there’s another way to improve your outlook.

2. Secure a runway.

The first thing you should do is convince your investors and board the situation is under control, especially if you’re under pressure to rapidly control your burn rate. That means presenting a detailed, confident plan on how you’re going to increase revenue with current staff. This will buy you time to make the needed adjustments. You can run a pilot of this plan for a few months to demonstrate the potential efficacy of your new approach.

Implement these changes as quickly as possible. The sooner you can report results to your investors and the board, the more confidence they’ll have that layoffs aren’t needed.

3. Give the people what they want

Each of your users has pain points that haven’t been solved by what you currently offer. It’s your job to identify those opportunities, and find a way to monetize them.

One way to accomplish this is surveying customers on how you can make their lives easier. Offer incentives for their participation. Say, for example, that you’re a software business that helps Airbnb hosts manage their reservations, and you find out that many of your clients don’t have enough cash to fund needed repairs or upgrades. You could look into partnering with lending institutions and offering financing to users through your application.

You can also take advantage of data you’re already collecting. A tennis ball machine maker, for example, might notice that its poor reviews center around the product sustaining damage during transit. Offering shipping insurance might help turn its reputation around while establishing an additional revenue stream. (Tint helps companies embed insurance into their products and services.) Assign a team member to lead this process; they can research potential solutions, gather user information and report back their recommendations.

4. Find new customers.

Many companies today rely on outdated marketing strategies. They blast out emails to irrelevant lead lists and cross their fingers. They trick people into handing over contact information and then spam them with irrelevant campaigns.

As you form deeper relationships with your users and get a better grasp of their needs, you’ll be better able to identify future customers like them. This more efficient method—generating demand versus generating leads—will enable you to grow your clientele without growing your marketing budget.

5. Get out of the clouds.

Your workers are people, not numbers. If you were them, you’d expect your leader to do everything they could to save your job.

Unfortunately, many tech CEOs are out of touch with the people they employ. To avoid this, make sure you’re regularly checking in with your workers not just on their progress at work, but on how they’re doing. If you care about your people, you’ll fight for them more fiercely when you’re under pressure to cut expenses.