Silicon Valley exec predicts companies will ‘overcut’ during recession

'Businesses are going to realize they'll fail to catch up'

Silicon Valley exec predicts companies will ‘overcut’ during recession

Business leaders have been fearing a recession for the past six months, announcing massive layoffs and hiring freezes to prepare for the seemingly inevitable.

However, they may have gone too far, according to Danny Wen, co-founder and managing director at Quarry Ventures, as well as head of strategic partnerships at Findem, a tech firm in Silicon Valley.

“After overhiring, companies took drastic actions to cut people and now they’re probably going to overcut,” Wen told HRD. “Business are going to realize they’ll fail to catch up in terms of delivering outcomes from a product standpoint. So, just as quickly as people were cut, I feel like it's going to roar back just as quickly.”

Wen goes so far as to predict that the pendulum will swing all the way back to the height of the Great Resignation, when companies scrambled to hire talent in the midst of a highly competitive labor market. With the scales tipped in favor of employees, employers will have to bend over backward yet again by offering increased benefits and perks, higher compensation, unprecedented flexibility and plenty of opportunities for career advancement.

The best way to meet the needs of employees and candidates, especially in a remote and hybrid world, will be to rely upon HR technology. The Hackett Group’s research proves how key HR tech will be: HR headcounts have dropped by 0.4%, but workloads increased by 9.3% in 2022. All the indicators point to companies’ tech dependence accelerating into the future.

“Talent leaders in HR need to be proactive,” Wen says. “They need to be able to forecast ahead of time and have the right resources to take action when it's time to go back to kind of a steady state or even proactively growing their teams again.”

Wen gives more HR tech predictions for 2023 in the latest episode of HRD America Talk.

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