Worker Confidence Falls As More Layoffs Blame Over Hiring. Question: What Say You??
Chris G. Laughter
VP Client Services at First Sun Consulting, LLC- Outplacement Services
Companies are continuing to blame layoffs on overhiring—and it’s adding to employees’ worries. A new report from jobs site Glassdoor, which publishes anonymous employee reviews, found that the share of reviews mentioning overhiring has increased 24% since last March, and is up more than threefold since 2022.
“This [‘overhiring’] terminology is coming from employers, so employees are catching on,” says Daniel Zhao, lead economist at Glassdoor. “Employees hear what employers say and don’t say.”
The “overhiring” rationale—the idea that employers are cutting jobs after adding too many people during pandemic growth years—also appears to be prompting employee confidence to decline. Workers’ reviews of their companies’ business outlook rebounded slightly from a record low in February, Glassdoor’s?latest analysis found , but remains 7.3 percentage points below?July 2022’s high ?for employee confidence. Entry-level workers, in particular, are nervous, with their outlook falling in the new report to the lowest level since Glassdoor started tracking sentiment in 2016.
When companies lay off employees and blame it on overhiring, those who remain are likely to feel discouraged and question management’s decisions, especially if the quantity of work itself isn’t also down, says Peter Cappelli, management professor at the University of Pennsylvania’s Wharton School.
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“It’s demoralizing,” he says, adding that workers’ lack of confidence in their employer causes productivity to fall and remaining employees to spend their discretionary time polishing up resumes and looking for other jobs. When managers say they over-hired, rather than simply that there’s now less demand, it can remind employees of poor forecasting or past decision-making by employers.
“Describing it as overhiring as opposed to simply ‘business is down’ is a strange choice,” says Cappelli, who directs the school’s center for human resources. In many cases, he adds, they’re using the phrase because it’s “what investors want to hear.”
Overhiring was a frequent reason companies gave as they announced layoffs in recent years, after technology companies in particular—fueled by venture capital dollars and pandemic-driven buying behaviors—vastly expanded their headcount. After two years of 10% headcount growth, the tech industry shrank by 2% in 2023, Glassdoor says. According to the U.S. Bureau of Labor Statistics, some?1.6 million people ?involuntarily lost their jobs in January, little changed from the month prior.
Messaging platform Discord, for example, which announced it would layoff 17% of employees in January, blamed the reduction on growing quickly and expanding the workforce even more rapidly, according to a?memo ?announcing the cuts. During a January round of cuts across Amazon’s video and streaming subsidiaries, Amazon-owned Twitch CEO Dan Clancy?wrote ?that “it [had] become clear that [the] organization is still meaningfully larger than it needs to be given the size of [the] business.”
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Indeed, a?Washington Post?analysis?found ?that half of the 48 layoff memos it analyzed mentioned overhiring or growing too fast as a reason for the reduction in staff.
Yet before the pandemic-era job boom, overhiring was rarely if ever mentioned during company layoff announcements, says Wayne Cascio, management professor at the University of Colorado, Denver. In the late ‘90s and early 2000s, downsizings were typically announced by companies that were in bad shape financially, reporting a couple of years of net losses before letting some of their workforce go. After the Great Recession, in the years between 2010 and 2019, companies didn’t talk about overhiring, he says, because the recovery was slow, prompting employers to hire at a steady but measured pace.
Now, as companies have been cutting costs and rapidly slashing headcount, the“‘we overhired, we gotta get rid of people,’ [approach has] become a lot more accepted,'' he says.
That’s having an impact on employee confidence in their current employer, according to Glassdoor’s Zhao. For instance, in one medical company review titled “Good pay, low pay, crashing company,” a reviewer complained the company “squandered covid profits on questionable acquisitions and overhiring.” The software engineer rated it a 3, and would not recommend it to potential hires.
In addition, Zhao notes, human resources, media and telecommunications have all been fields plagued by layoffs and claims of overhiring. They’re also the top three fields with the highest decrease of employee confidence in March, with month-over-month decreases ranging from 9 to 11%.
On the flip side, employee confidence is highest and has held up the best in fields that offer stability, like government, public administration, healthcare and education.
“In today's context,” says Zhao, “it seems like job security is something that employees care a lot about.”
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