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The human brain is really, really good at seeing patterns. Whether you’re a basketball fan screaming that a player has the “hot hand” or an HR pro noticing a layoff trend, when we notice a pattern, we want it to mean something. While science suggests a series of successful shots won’t guarantee a player sinks the next basket, HR professionals who are worried about the impending recession likely can stand to learn from patterns in layoffs.
It’s probably not coincidental, Dan Kaplan, senior client partner at Korn Ferry, told HR Brew, that multiple companies have elected to lay off between 5% and 7% of their staff in recent reductions in force. “Trimming” headcount, Kaplan said, can set the company up to survive turbulent economic times without compromising the company’s ability to innovate or create new products.
Catch up. Since the beginning of the year, major companies in tech and media including PayPal, Google, Spotify, Vox, DotDash, and HarperCollins have initiated layoffs of between 5% and 7% of their staff. Though no layoff is easy—cuts of any scope mean people lose their livelihoods and, in some cases, access to benefits such as healthcare—these percentages are a far cry from the deep cuts seen during the 2020 recession, where 15% job loss occurred, Kaplan said.
“The numbers [may] seem shocking in terms of the overall headcount, but on a percentage basis, not as much,” Kaplan said of this go-around.
Why 5%–7%? When we spoke to Kaplan last summer, he predicted that HR departments would think twice before they “cut until [they] hit bone.” That’s because many did just that when Covid hit in the spring of 2020, and some faced challenges scaling back up amid the tight labor market of 2021.
The latest, modest cuts suggest to Kaplan that HR and other decision-makers are taking a “surgical” approach to downsizing.
While most CEOs are bracing for a recession this year, they predict it will be a relatively short one; according to the Conference Board, 60% of US CEOs expect the economy to pick back up between late 2023 and mid 2024. Kaplan’s clients apparently anticipate an economic rebound by Q3. With that in mind, he said, leaders are looking to weather the storm, but are also aware that “at some point, the lights are gonna turn back on,” and they need to be prepared for that eventuality.
“It was hard and expensive to attract this talent,” Kaplan pointed out. “Everyone is trying to figure out how [can] you…just trim fat [and] keep your business as optimized as you can?”—SV