It’s time to tackle the tradeoffs of “getting fit”

According to Carta, April 2024 saw the lowest tech layoffs – less than 7,000 – across Carta startups since April 2022.

In 2023, 263,180 employees were laid off globally, and the trend continued into 2024, with 96,551 layoffs across 321 tech companies to date. So, the April data was a welcome relief for many.

Is this the end of layoffs? Probably not. Layoffs will always occur, but the rate has slowed due to a combination of companies working hard to get fit in 2023, and the economy slowly improving. There are many reasons to be optimistic about the future, but we are coming out of this with a number of problems that need to be recognized and addressed, especially when it comes to tech workers.

The Problems:

1. Gen Z is frustrated (and for good reason).
   Gen Z has been at the forefront of some curious trends like ‘barely there Mondays,” indicating low engagement, but their frustrations are valid:

1. Diminished purchasing power: The house to price ratio for their grandparents was 3X and for them it’s 7X.
2. Declining upward mobility: In 1940, close to 90% of 30 year olds earned more than their parents did at 30. Now, it’s down to 50%.
3. Increased debt burden: College debt as a percentage of first year income was 31% in 1987. In 2022 it increased to 53%.

This is why 50% of Gen Z workers are disengaged at work, but it’s also important to recognize that this cohort has also shown to be extremely mission driven, growth focused and take better care of their mental and physical health compared to previous generations.

Gen Z is making up a larger and larger portion of a GTM workforce, so we need to understand their realities and priorities if we want to get the best out of them.

2. Loneliness and unproductive meetings are weighing heavily on the majority, and costing us employee engagement (as well as potentially $191B/year).

COVID changed how and where our employees work, and the downstream effects of that include more meetings and less interpersonal connectivity.

1. Rising loneliness: 58% of adults say they are lonely today, compared to 48% in 2018.
2. Isolation in remote work: More than 40% of fully remote workers polled in a 2023 survey of working parents say they ‘go days’ without leaving the house.
3. Meeting Overload: Americans have seen a 3X increase in the time they spend in meetings since 2020, with 38% of employees spending 33.3% of their week in meetings. How many of those 24 billion hours a year are wasted on unproductive meetings?

We have gone from the world of Growth At All Costs (GAAC) to one where we prioritize Profitable Efficient Growth (PEG). We can’t achieve maximum efficiency if our employees are feeling lonely, disengaged and wasting 15+ hours of their week in unproductive meetings.

3. Fear and anxiety due to layoffs.

In 2022, the premium investors put on growth over FCF margin was 11.1X. It’s been 2.9X for the last 8 quarters. For tech companies this meant cost cutting, and the number one cost for a tech company is its people. Mass layoffs were inevitable, and while painful, they did help companies get more efficient. But their impact is beyond the people laid off, and the P&L:

1. Survivors’ guilt: 74% of employees who kept their jobs after a layoff report a decline in their personal productivity and 64% observed a decline in their colleagues’ productivity.
2. Voluntary turnover: Layoffs can lead to a 31% increase in voluntary turnover 12 months after the layoff, partly because 54.4% of employees report a negative business outlook post layoff and 70% feel a lack of motivation.
3. Lack of belonging: Layoffs can decrease the sense of belonging for the employees who survive it, leading to 59% of them considering quitting for this reason and 61% saying they are less likely to recommend their employer to others.

The mass layoffs we have experienced in 2022-2023 have left tech workers feeling vulnerable, even if they held onto their jobs. Trust has been eroded and there is a lack of confidence in the ecosystem. Great work can’t be done with these overarching issues, and without great work being done by everyone in our organizations, achieving full potential is impossible.

 

The Opportunity:

The shift from Growth At All Costs (GAAC) to Profitable Efficient Growth (PEG) over the last few years has pushed many people from a state of joy and exuberance to a state of fear and anxiety. The ecosystem had to ‘get fit’ – our survival was dependent on it. Now that we have a little more clarity on the economy, we can actually focus on problems we can (and have to) solve. The best GTM leaders are excited by problems, not daunted. Time to get to work.