Why Better Headcount Planning Is Key to Preventing Tech Layoffs

Pigment is a Business Reporter client.

At least 89,000 tech employees have lost their jobs to market downturns so far, according to the Layoffs.fyi tracker. Can better headcount planning prevent further harm?

We live in volatile times at the workplace. The onset of the Covid-19 pandemic transformed our ways of working, from daily commutes and a regular nine-to-five to remote offices and four-day workweeks. 

The Great Resignation has meant that millions of professionals quit their jobs in pursuit of new opportunities. And now, economic uncertainty is causing mass layoffs and shifting power back into the hands of employers. 

This type of volatility is hardly surprising in the tech world. We’ve witnessed these ebbs and flows before—yet it seems we still have some lessons to learn. 

One of the big lessons is how to prevent layoffs in the first place by using better headcount planning solutions. 

The connection between tech layoffs and the Great Resignation     

Recruiters have a love-hate relationship with the recent era known as the Great Resignation. 

On one hand, the pandemic job market afforded employees the freedom to more fully explore their needs and passions. Job seekers often had more opportunities to be matched with a role at a company that aligned with their own principles. 

On the flip side, we witnessed what has been dubbed “the great regret”: a large proportion of job seekers who are unhappy with their new jobs and often hop to different roles in a span of months. 

In privately owned companies, the abundant influx of money often worsened, rather than improved, hiring challenges. Although this situation impacted the entire labor market, the technology space saw the issue further exacerbated due to the near-instant availability of venture capital. 

Globally, venture infusion reached new heights in 2021, up 92% from 2020, and birthed 1,000+ billion-dollar unicorns, according to Crunchbase. This excess spurred the “growth at all costs” mindset. 

The combination of employees seeking greener pastures and newly minted unicorns pushing for further growth caused companies to hire indiscriminately in a bid to quickly outgrow competitors. Then, this approach backfired, leading to thousands of layoffs and revoked job offers. 

While layoffs are not new in the tech world, we’re now in the age of instant information—and millions of eyes are watching each misfired management directive. 

Hiring decisions are mission-critical for sustainable success

There’s a stark difference in outcomes between executing a best-in-class plan or one that is merely good enough. That difference can shield resources from being caught in the crossfire of poor planning. 

The younger generations in the workforce increasingly prefer to work for ethical employers that actively involve themselves in social causes, environmental efforts and mental-health initiatives. 

Regardless of the rationale, layoffs do not portray companies as thoughtful or caring, especially when they occur shortly after a hiring spree. The reality is that these business decisions have a major impact on the professional and personal lives of company stakeholders. 

A company’s probability of success is directly correlated with the strength of its workforce. Layoffs leave bitter memories not only for former and current employees, but also for future ones. This is why each hiring and termination decision is critical in determining the future sustainability of any business. 

Headcount planning is in desperate need of a makeover

Given how much some companies invest in hiring the talent they seek, it is surprising how lackluster their headcount planning approaches can be. 

Headcount planning is the complex science-meets-art process of determining needs and budgeting for talent to fulfill a company’s objectives. 

This process involves multiple sources of data, such as human resource management systems (HRMS), applicant tracking systems (ATS) and customer relationship management (CRM) platforms. It also involves multiple decision makers. 

When legacy systems such as makeshift spreadsheet models or old business planning systems are put to the task of headcount planning, they invariably underperform. 

These legacy systems lack the processing power to crunch millions of rows of data. They are missing time-saving automation and integration capabilities, resulting in rushed decisions and human error.

The junction of lagging software and multilayered stakeholders is a recipe for bureaucracy, and, ultimately, poor hiring decisions.

A vision for the future of tech with better headcount planning

Every decade or so, new players emerge to challenge the status quo of existing software solutions. Headcount planning is no exception. Next-generation integrated business planning and analytics platforms have been stealing the spotlight from legacy giants at a notable pace.

These newer solutions offer modern interfaces that are easy to learn and intuitive to use. They outperform the capabilities of traditional headcount planning software by incorporating the critical elements of native scenario planning, extensive integration ability, intuitive formula building and powerful forecasting capacity. These headcount planning process improvements shorten the time to translate high-level business requirements to seats filled.   

The implications stretch beyond headcount and workforce planning to use cases such as sales and operations planning, capacity planning and KPI reporting. 

A robust headcount planning process affords companies a 360° view of where the business stands at any given point in time. Furthermore, leaders are enabled to prepare for every possible future scenario. 

The result is that companies and their leaders are empowered to safely preview the results of decisions before making them. 

A little bit of planning goes a long way

No leader wants to make the wrong decision, or one that backfires—especially when those decisions affect people’s lives. Layoffs are difficult events that often harm the reputation—not to mention the morale—of companies forced to resort to a workforce reduction.     

The optimal path forward, with reimagined and state-of-the-art headcount planning, will positively impact both the workforce and companies keen to invest in talent. 

The tech industry should be at the forefront of solving headcount planning challenges, with a forward-looking strategy based on upgraded systems. 

However, not only tech companies benefit from better headcount planning. While they haven’t seen the same hiring-to-firing swings as the tech sector, many large and public companies still saw sudden hiring freezes, which might have been more gradual with better tools. This key investment will go a long way toward preventing future mass layoffs.

Pigment is an integrated business planning platform helping you make smarter decisions with more confidence. Explore the powerful capabilities of our next-generation solution here.

— Julien Lesaicherre, Head of Business, Pigment

This article originally appeared in Business Reporter.

Image: iStock id863553004