As The Stock Market Cools, The Tech Sector Faces A Test Of Its Values

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Principal and CEO of GetFive, a leader in Career Transition, Career Development and Leadership Acceleration Solutions.

So far this year, the stock market has had its worst slump since 2008. IPO activity, a bellwether of companies raising capital, has come to a halt at least for the moment. According to Knowledge at Wharton, “the drop in IPO activity has been steep.” During Q1 of 2022, there were “77 IPOs that raised $12.2 billion.” This time last year saw 395 IPOs that raised $140 billion. Along the same lines, we started to see cracks in the venture capital arena, where first-quarter funding activity fell 13%, according to Crunchbase.

As a consequence, fast-growing tech companies are reassessing their growth plans. With greater uncertainty about the timing of an IPO or the ability to raise the next capital round, some growth companies are taking steps to slow the rate of cash burn. In many cases, this has implications for employment levels.

We have already seen sizable layoff announcements from the likes of Noom, Carvana and Robinhood, to name a few. As the first wave of layoffs starts to take shape following the tech super cycle, companies are facing some really important cultural tests. From many years of experience in this line of work, we know how easy it is for company executives to change their tune about investing in their people when things are a bit less rosy and especially when the people in question are exiting the organization. Now, here we are.

After a decade-long “Perk War,” can companies really cry poverty when crafting separation packages? Many tech companies are realizing that they cannot. Foosball and beer fridges in the break room mean a lot less when employees see their former colleagues struggling to transition and worry they might be part of the next round. Also of paramount importance are the implications of a poorly executed layoff in the ability to compete for top talent in the future.

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More companies are walking the talk. As the tech sector matures, there appears to be growing utilization of outplacement services as an exit benefit and a realization that compassionate layoffs are critical to upholding corporate values. For the CEOs who haven’t hopped on this bus, the public reaction has been swift and the reputational damage significant. Remember, the Great Resignation is still going strong. Top talent leaves when corporations don’t share their values, and they find new roles at companies that do.

Why Outplacement Is Vital

No one likes them, but layoffs are often necessary when business conditions change or when access to capital becomes more difficult. The people who are receiving their pink slips feel betrayed and at sea, and the managers doling them out don’t feel good about it either. And the employees still working for your company? Let’s just say morale can sink in a hurry to create a toxic situation in the workplace.

The way you handle layoffs is vital in preventing all of this. Here are a few reasons why.

Outplacement is part of the long game.

Transition coaches parachute into the post-layoff void—a place where no one else ventures—and help individuals move forward. When individuals are moving forward, they usually are not thinking about trolling their former employer. That is why outplacement assistance cuts down on this reputational backlash. Avoiding the hit to your employer brand couldn’t be more important for any company trying to remain the employer of choice in its sector.

Furthermore, as senior HR professionals and employment lawyers know all too well, it is the people who are the least confident about their futures who are usually the most likely to litigate.

Outplacement helps your teams, too.

Layoffs don’t just affect those who are given the bad news—they affect your employees who remain, too. If employees see their colleagues and friends being shown the door after an unceremonious layoff, it does not bode well for their trust in the company or their morale on the job. But, if they see outplacement resources and services enter the fray, helping to guide and direct their peers into new careers, it softens this blow. It takes away the “Am I next, and if so, what then?” anxiety that can cause people to update their résumés and start looking.

Ultimately, think back to your early or middle years climbing the ladder, and treat layoffs as compassionately as your past self would’ve wanted to be treated. But it’s not just about benevolence. Providing employees with a lifeboat to a new career is good for your bottom line, too. For HR professionals, ensuring outplacement as part of your company’s exit strategy for laid-off employees can help the company and its loyal workers.


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