Finding Stars

There’s probably never been a better time to hire high quality people. Over the last few years it has been difficult to hire quality talent at the right price. However, as a number of companies have been going through layoffs, it’s now a great time for companies with the runway or business model to go out there and start to stack the deck in their favour.

According to Layoffs Tracker there have been ~40k tech layoffs in the last two months globally. While this is significantly lower than it has been over the past two years, based on the anecdotal evidence that I’m hearing, we’re not really at the end of this journey.?

The Three Phases of Markets

A friend once remarked to me that public equities typically have three separate dips as the market digests bad news. The first announcement comes as a shock to investors and causes them to change their perspective on how to value the company. For growth companies, this means investors are no longer valuing them on their ability to continue growing in???? ?perpetuity and then assigning a terminal value to them. The second cut happens when management decides that the gig is up and decides to clean house, using the denouement in the stock price to write-off any of the excesses of the previous years. The third and final slip in the stock price typically happens when the fundamentals have started to turn positive, but the market has just become so negative on the story that they perceive any news negatively.

It appears that the job market follows the same cycle, especially for companies that have been aggressively expanding ahead of their markets. The first cuts occur because companies have over hired, and growth starts to slow. The second cut occurs when revenue growth doesn’t return or even stabilize but starts to deteriorate further. Keep in mind, a lot of companies were hiring talent to service other companies, which no longer have the same requirements as they retrench their teams. The third cut likely occurs when the boards feel like there isn’t sufficient profitability and feel like they need to be seen to do something, even though growth has stabilized.

We’re likely somewhere between the second and third phase right now in Southeast Asia. This means that we’re probably not through the last of the cuts, but businesses are starting to stabilize. However, the Boards of Directors that were slow to act the first time do NOT want to be caught out again so they will potentially look to make another round of cuts.

Corporates Making Cuts

When I first moved to Singapore, I was involved with a round of layoffs and the process was eye opening. I was given a list of employees and asked to do some modelling around it, which I did. A day or so later, I was ushered into a meeting room with a couple of the business leaders and the “big boss,” the regional leader who had embraced the role in all sense of the manner (robust figure, wildly gesticulating hands when speaking, a sense of disregard for all but his direct reports – you get the picture). As we started, I was ready to present some of the ways that I had broken down the information. He interrupted and just said “Rank by salary, the top 10 are gone.” Bewildered, I asked “What if their salary is justified? Or they are the only person that knows how to do that job and it is critical to other aspects of the organization?” He responded, “We’ve been given this number by the headquarters and the easiest way to get there is to start with the biggest numbers.”

I couldn’t help but think that the approach was short-sighted and lacked any robust discussion but at the same time he was just trying to execute a task within the constraints that he was given. The point of the story is that it wasn’t just the low performers that were being culled as a part of the process, but everyone was getting tarred with the same brush.

Conclusion

This means that there will be a number of high-quality employees that are out there seeking ?their next opportunity to prove themselves. The early-stage companies that acted early and extended their runway would do well to look at the current talent and hire when they can. There are a few good resources to find employees that have recently been laid off. You could check out the SEAriously Awesome People list that was created during COVID to help those made redundant to find a new role. There are currently around 30 jobs available with portfolio companies that you can view on the Resolution Ventures website. If you believe that I can help in anyway, feel free to reach out!