Rafael Cichini, Chief Marketing Officer (CMO) and Business Director, SQUADRA, examines the lessons companies should learn from layoffs. He addresses crucial aspects of team investments and corporate culture and analyzes how companies have invested in technology teams in recent years.
Recently, the market has grown accustomed to abundance in the technology sector. We have experienced periods in which companies, startups and technology divisions of medium and large companies expanded their structures in an endless flow, with numerous developer hires, for instance.
However, like everything else in life, changes occur. Everything has quickly changed. In the same way that the pandemic has accelerated this hiring movement, like pressing the fast-forward button on WhatsApp audio, we have the beginnings of a slowdown to keep up with the economic shifts.
Global and Brazilian political and economic uncertainties, along with the aftermath of the pandemic and compounded by a landscape of upheaval, have altered the environment we once knew. Investment funds began seeking sustainable businesses instead of making numerous highly risky bets. With credit in the market, in general, becoming expensive for financing, investors turned to low-risk ventures that provide solid alternatives, especially in times of high interest rates.
This entire panorama shifted the previous growth-focused logic back to centralizing on profitability. It may seem strange, but that is what happened. Companies hit the brakes on their expansion to refocus on performance and profitability. This change led to many actions becoming necessary, and one of them involves the widely discussed layoffs.
Layoffs are workforce reduction actions involving the dismissal of employees to cut costs or restructure a framework. In technology organizations, layoffs are often justified as essential to sharpen the business focus and efficiency. Although they can drastically impact employees, companies generally benefit from cost savings and the possibility of concentrating resources on projects that generate more financial returns.
Hence, we have witnessed notable technology companies downsizing, laying off employees or freezing hiring. This scenario has been quite common, but despite seeming negative, it has an essential side for organizations. In many cases, it means immediate survival or adjusting the strategy for long-term growth.
These restructurings carry crucial lessons for companies, highlighting the need for more criteria concerning innovation and technology initiatives. They now need to focus on two clear drivers: Revenue increase or cost reduction to preserve margins.
Most of the cuts are related to long-term projects, which include initiatives that are still uncertain about the results they can have. They also happen in peripheral areas unrelated to the company’s core activity.
During the years of abundance, organizations started hiring internal technology teams.
We often heard about how they had become ‘technology companies’ and now many are announcing shifts in their strategies to refocus on their core business. As a result, they are no longer ‘technology companies’ but are redirecting their attention to their businesses.
This market shift necessitates making teams scalable and adopting technologies that enable keeping pace with business flows, such as cloud environments and Software as a Service (SaaS) solutions able to be paid based on usage volume.
The next trend should involve internal adjustments towards a Squads as a Service model, meaning the ability to expand and contract technical teams and projects in line with development initiatives.
It is worth noting that this format is not necessarily new. This concept worked for a long time but in a model where technology consultancies provided people without contributing knowledge. They functioned as suppliers of low-added value rather than being true business partners.
Now, organizations demand support and commitment in deliveries as supplier engagement with their business objectives. Furthermore, they must retain knowledge to create value and drive Digital Transformation.
Therefore, having a partner capable of supporting business growth and technology team scaling without losing skills and technological culture is crucial. Retaining knowledge while staying lean is vital.
In summary, the five premises for success are:
1 – Truly be agile: Remember agility is about focus, prioritization, delivering more value with less effort, extensive collaboration and visibility
2 – Have truly digital partners: Partners capable of effectively helping the company’s growth and adjusting squads according to demand. They must also retain knowledge throughout this process
3 – Strategically embrace data: Look at data strategically and always seek insights for decision-making, including assisting in the prioritization of what should or should not be done
4 – Use automation and Artificial intelligence: Cut costs in repetitive and purely operational initiatives using automation and Artificial Intelligence, directing people towards increasingly strategic tasks
5 – Connect every initiative: Ensure the measurement of all technology activities throughout their value chain, whether contributing to revenue increase, cost reduction or greater operational efficiency.
With layoffs regularly occurring, change brings challenges and adapting to new scenarios needs to be quick to help companies reach the next level in the market. It is a great time to reassess strategies, analyze real needs and promote innovation by adopting new technologies with Artificial Intelligence.
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