Dear Artemis: How can I evaluate employers to avoid the risk of layoffs for my next role?

Welcome back to Dear Artemis: Where you ask us tough questions and we use our collective 45+ years of knowledge in the recruiting space to answer them.

Dear Artemis,

The lay-offs in tech industry right now have me concerned. Can you explain why this is happening? And how can I evaluate employers to avoid risk when looking for my next role?

- Marketing Leader

Dear Marketing Leader,

Great question, and an important mindset to keep while you explore options for your next role.

This isn’t the first time the media has cried that the sky is falling, and it certainly won’t be the last (it’s actually been falling for 833 consecutive days, but who’s counting…). Inevitably you’ll see fear-mongering news headlines or heart-wrenching stories on LinkedIn about layoffs. While it’s true that we’re witnessing a run of layoffs in our industry, it’s important to remember that fear sells. The antidote is focusing on the facts and on what you can actually control.

First - Why all the layoffs? We’ve always known tech is volatile: tech companies solve unique and challenging problems with bleeding-edge technology, within a VC-funded pressure cooker that demands growth at all costs. The rewards of tech have always been balanced by a degree of risk.

That last part is especially important to understand. We’ve recently seen record-breaking amounts of VC money flow into startups - many still working on their business fundamentals. The media is quick to celebrate companies securing mammoth rounds and crowning new ‘unicorns’ with wild valuations, failing to acknowledge this creates a natural bungee cord that can snap companies backward in the end. The VC model of success isn’t based on a majority of wins across the board in a given portfolio, but on one huge win for every dozen or so failures. Over the past 2 years, we’ve been drawn in by the allure of the tech industry with high wages and shares, without stopping to consider why these wages have ballooned so quickly or calculating the risks of banking on share growth.

The tech industry may be one of the ‘canaries in the coal mine’, showing us investor risk tolerance levels as we head into a downturn in the global economy. In ‘bull’ markets - like 2021 - investors are excited about the high growth potential of tech startups. Now that ‘bear’ season is upon us, investors gravitate toward safer options or reduce their market activity. These two back-to-back cycles are precisely why we saw tech salaries skyrocket over the past year, followed immediately by a large number of layoffs to recover from overzealous hiring, stunted growth, and restrictions on further cash flow from investors.

There is good news though! Many companies are comparably immune to this problem because their valuations are based on substance rather than speculation. These are companies who: 1) solve sticky and important problems; 2) have strong business fundamentals and profitability; and 3) are not held hostage by insurmountable growth targets as a condition of VC cash flow.

Now for your critical question > How DO you evaluate employers for these factors when looking for a new role?

The most valuable thing you can do is to ask the right questions, and to a variety of people. Ask the recruiter. Ask the hiring manager. Ask current and former employees. Ask us. The more ‘due diligence’ you do before accepting an offer, the better you will understand the risk you are taking.

Here are some questions we’ve pulled together to guide you in this process:

1. What are your hiring plans for the next 3-6 months and what are you trying to achieve? Is there a contingency plan in place if those goals/targets are not met?

2. Is this a net-new role for the company or a replacement search?

3. How is this role material to the future direction of the company & core product/area of focus?

4. What is your current cash position?

5. What is your estimated run rate and burn rate? How recently was this calculated?

6. How does high inflation impact your business and what steps are you taking to adjust for this?

7. How transparent is the leadership team? How often are key business metrics being shared with the broader organization?

8. How many hires has the company made over the past 2 years? How many layoffs has the company made? Can you explain why the lay-offs were necessary?

9. What steps did or would your company take before laying people off?

10. What are some of your big bets or opportunities this year? What would be the implications of failing to capitalize on them?

11. How have the market fluctuations influenced your total rewards strategy? Any specific examples you can share?

12. Can you achieve profitability without additional funding rounds? Can you achieve profitability with the team you currently have in place?

13. What were your major goals for the past 12 months and where did you actually end up?

14. Does your company typically run lean and hire for current needs, or do you hire for anticipated needs due to growth plans?

15. What are the ultimate business goals for this company? Is it to rapidly scale into a market leader? To achieve stability and profitability and earn market share over time? Maybe an exit acquisition by a bigger firm? Something else?

While the company might not answer all these questions, you’ll still get more information by asking than if you didn’t. Don’t forget to do your own investigating online using tools like Crunchbase, Glassdoor and other databases that publicly share information about VC funding, revenue, compensation, and hiring trends. If you find red flags, ask for clarification.

Remember - in a job search, you are in control. You’re evaluating companies as much as they’re evaluating you. If a company holds their cards too close to the chest for your liking, you can simply move along. As a leader your need to make informed decisions should be seen as a positive, after all you are investing your most precious asset, you career and time.

Finally, and perhaps the most important advice of all: Figure out what YOU really want and need. Just because the tech industry is sometimes risky doesn’t mean you should stay away. For many of us it’s the exact opposite - being at the forefront of an industry is where we need to be to feel happy and fulfilled. If your goal is to maximize learning and growth, this is the place. How the tech industry operates isn’t inherently good or bad; it’s all related to your goals and risk tolerances. By understanding what you want, you can make sure you end up at that destination.

“What's the meaning of this period of unemployment is, now. One way to get at that definition is to ask ourselves, “What is this time for?”. The best parts of this world were not fashioned by those who were "realistic." They were fashioned by those who dared to look hard at their wishes and then gave them horses to ride.” - Richard N. Bolles, What Color Is Your Parachute

Let us know what you think: Did we miss a question? Do you have any other ideas? We’d love to hear from you.

Until next time,

Tyler & the Artemis Team