In the current global scenario, layoffs are primarily caused by the ongoing recession, which has decreased consumers’ needs for its services and applications and has been further exacerbated by the war between Ukraine and Russia. With profits on the decline and organisational costs on the rise, the variable cost of a company must be minimised. This is evident from the recent layoffs that have materialised across companies such as Twitter, Meta, Byjus, Amazon that belong to different sectors in Industry.

The workforce in the company is significantly considered as the variable factor of production. So in times of recession and slow growth, the workers are targeted first. Many might also blame the lenient employment rules for the same.

However, apart from HR rules in every business, one cannot deny the role of arbitrariness and complications in the economy for the current massive layoffs. With an impending probable recession that can materialise anytime soon, employers can be cut some slack.

If employers’ woes and reasoning are to be scrutinised, macroeconomic indicators play a major role in determining the rationale behind the massive layoffs.

What is a Startup?

What makes a startup a startup? Is it about tech, the culture or the talented people? Is it about the business idea and the projections or simply just a factor of the right timing? There’s no clear answer, but if there’s one defining quality in common at early stage startups, it is a perceived lack of time to get things done. In fact, that’s why many founders might say “From Day 0” when describing the vision or their journey. Time is so precious that the work had begun even before

A great Startup is usually a blend of the following:

An idea that is exciting, effective, and feasible at the same time.
Resourceful managers who have the knack for bringing the best out of each employee.
Ability to anticipate future trends and quickly adapt to the rapidly changing business environment.
Experienced mentors who can with their wisdom guide the team through tough times.
The tact to handle tough customers with genuinity, patience, and care.
A mindset that chases purpose before profit.

Startups Fail mainly due to the following reasons:

Quitting too early in the process; lack of persistence.
Running out of money or resources to feed into the system.
A wrong notion about the market: incorrect pricing, too slow on pick up, late execution, etc.
Fear of taking risks or changing according to the changing times.

According to the Harvard Business Review there are key strategies and tactics that a startup CEOs should use to prepare for and survive a recession:

Startup Heads need to plan to survive on the capital they have. Only spend money to make to your product or service better or to drive new sales. Scale back on new initiatives, prioritising only those that have a near-term chance of success.
Proactively embrace existing customers: A recession is a perfect opportunity for a CEO to strengthen relationships with their biggest and important customers. In a B2B business visit customers to maintain strong ties making them feel important. In a B2C business introduce reward programmes to make customers feel appreciated.
Maintain Close ties with Employees both senior and freshers: If employees start to doubt the viability of their company, they will turn towards larger firms in the market that can pay more in current income and benefits. In order to control this trend, entrepreneurs need to spend time with their best employees in order to understand their mindset. Employees always assume their equity stake is based on the last round of funding, so down rounds can cause employee agony. Losing key talent will severely impact the company. Managing and maintaining momentum is critical both in terms of retaining the top talent and recruiting new talent.

Startups like e2eHiring Pvt Ltd have adopted an approach that promotes end-to-end recruitment and retainment of talent. Job seekers and recruiters are offered AI solutions that can assist in selecting the best talent in a short period of time through assessments, mock interviews and training programmes that reduce the time and cost of hiring in the period of recession.

Monuranjan Borgohain CEO, e2eHiring Pvt Ltd. asserts that work culture is the most important determinant of employee retention in any startup. Employees are aware of their market value, and most will stay with a startup if they are compensated well and feel they are making a difference and rewarded for their efforts. Focus on culture and communication is key to a company’s uniqueness and value proposition.

So, to ensure that startups can emerge out of recession and fluctuations in the market there is a need to conserve cash, give more attention to current customers, investors, employees, and enable an employee client friendly work culture.