Navigating the paradox of tech layoffs combined with tech skills shortages: HR strategies for success

On the one hand…

Since the beginning of 2023, 513 tech companies have axed around 150,000 employees according to tracker website Layoffs.fyi.

The tech industry increased its layoffs by 649% in 2022 compared to 2021, the highest rate since the dot-com bubble more than a few decades ago, according to The Challenger Report.

Tech giants including Amazon, Facebook parent company Meta, Microsoft, Google, IBM, SAP, and Salesforce have announced job cuts since 2022.

Simultaneously, on the other hand…

According to a Gartner survey of around 18,000 employees conducted in November and December 2022, 86 percent of CIOs reported more competition for qualified candidates, and 73 percent worried about IT talent attrition.

According to the Korn Ferry Institute, the United States can expect to lose $162 billion by 2030 due to skills shortages in various sectors. Likewise, China could face a loss in revenue by 2030 due to the same problem.

The tech market in the UK is facing a similar situation. By 2030, Great Britain will fail to realize almost 9% of the technology, media, and telecommunications sector’s potential revenue due to the IT talent gap.

Sweden is expected to have a shortage of 70,000 IT specialists in the tech sector by 2024 according to a report produced by Swedish IT & Telecom Industries.

In Finland, 66% of all open positions are in IT, while a study published earlier last year reported that at least 95% of Finnish IT companies have planned to recruit from outside Finland.

When mass tech layoffs and skills shortages collide, it can feel like a perfect storm of chaos in the tech industry. Companies are left reeling from losing valuable talent and struggling to find new hires with the right skills to fill the gaps. It’s a situation that can leave tech employees stuck between a rock and a hard place: laid off and searching for new opportunities yet competing with other skilled workers for the same jobs. It’s a real tornado of talent that can leave everyone feeling shell-shocked. This blog post explores the relationship between mass tech layoffs and tech skills shortages, how they can co-occur, and how HR leaders can prepare for this.

But let’s start at the beginning. Have we not weathered a similar storm some time ago?

As the world shifted to digital during the pandemic, tech companies were in high demand and went on a hiring frenzy. However, with economic uncertainty looming, they’ve decided to dial it back and cut costs. Layoffs is a drop in the ocean financially for big tech companies, but the impact is real for those faced with job loss. Perhaps this is the perfect time for these companies to review their strategies and reinvest in securing their future with roles that have the greatest positive impact. It’s a correction of the hiring spree that took place over the last two years, and while it may seem like the worst layoff the tech sector has seen, it’s far from it.

Ask Baby Boomers and Gen X about the worst layoffs they’ve experienced and they’ll probably mention the dot-com crash of the early 2000s. During this time, the tech sector shed a quarter of its workers, and IT jobs fell by 5%. Then, the global financial crisis in 2008 saw the workforce contract by 6%. In 2011, a hiring boom kicked off that lasted more than a decade, adding more than 3 million jobs and making up for the dot-com crash and then some.

The biggest hiring occurred after the pandemic began to meet growing demand for e-commerce. What we’re seeing today is likely just a correction of the hiring frenzy rather than a bubble popping.

While mass layoffs are not an ideal solution, it’s good to hear that those laid off are getting snapped up by other companies, even beyond big tech, in as little as three months. There’s a shift in where talent is needed, which may be a good thing. The only thing one must know is how to weather this storm. And that’s what we will discuss below.

The technology industry is highly volatile, and businesses within this industry can experience rapid changes in demand for talent, leading to the challenge of balancing a qualified workforce and economic realities. This issue is complicated when firms need to consider laying off employees due to cost-cutting measures. However, with proper strategies and planning, businesses can prepare for these challenges while minimizing their negative impact. Let’s discuss three key strategies that human resources (HR) can utilize to prepare for skills shortages and tech layoffs: workforce planning, upskilling and reskilling, and HR forecasting.

In today’s technology-driven economy, skills become outdated quickly, and businesses must continually upskill, reskill, and cross-skill their employees to remain competitive. HR departments should create a culture of continuous learning and development within their organizations by providing employees with access to training programs and other educational resources, including courses, workshops, and seminars. These allow employees to keep their skills up to date and relevant. By investing in employee development, businesses can minimize the impact of potential layoffs while ensuring their staff members remain competitive in the job market.

Our solution: HRForecast’s upskilling use cases can help you develop a culture of continuous learning and growth. Click here to learn more and start investing in your workforce today to see the benefits for years to come!

Workforce planning is a critical HR strategy that allows businesses to identify and address talent gaps within their organization. It involves examining a business’s current and future needs and developing a plan to ensure the company has the necessary skills and expertise to meet them. This approach can help businesses avoid skills shortages and layoffs by ensuring they have the right people in the right roles at the right time.

To effectively engage in workforce planning, HR departments must comprehensively analyze the company’s current workforce, identify areas where skills gaps may exist, and create a plan to close those gaps. This plan should include strategies for recruiting new talent, cross-training existing employees, and upskilling and reskilling staff members. Workforce planning also requires close collaboration between HR and business leaders to ensure the company’s goals and objectives align with talent management strategies.

Our solution: Take your workforce planning to the next level. Check out HRForecast’s strategic workforce planning use cases and learn how to optimize your workforce for success. Click here to explore the possibilities.