Get all your news in one place.
100’s of premium titles.
One app.
Start reading
Fortune
Fortune
Amber Burton

How determine the right number of employees to hire to avoid layoffs

Businessman carrying box with personal belongings (Credit: Getty Images)

Good morning!

An earnest apology for overhiring and subsequent layoffs has become a common refrain among tech executives as of late. From Patrick Collison at Stripe to Mark Zuckerberg at Meta, Silicon Valley executives bemoan the “tough” position of righting the ship after onboarding too many people during growth periods. Salesforce joined this CEO cluster last week, announcing it will lay off as much as 10% of its staff in the coming weeks. The reason: “We hired too many people,” wrote CEO Marc Benioff in a note to employees. 

It’s a trend that smaller tech companies and firms outside the tech sector hope to avoid. That’s especially true for many consumer-facing businesses, which haven't been as sensitive to rising interest rates and are still focused on growth and hiring. 

But companies can prioritize talent growth without becoming the next Meta, Amazon, or Salesforce. The antidote is talent forecasting that’s centered on filling critical skills gaps. Thanh Nguyen, CEO and founder of compensation benchmarking firm OpenComp, suggests starting by taking inventory of the talent already within the walls of your organization. In a tight labor market, companies that are in growth mode are often quick to hire as many people as possible, almost in an effort to hoard talent. It’s better to assess the skills already in the employee pool and tap existing inventory.

“It helps the organization grow without having to try to look for that individual or that skill externally,” Nguyen tells Fortune. “See if you can leverage, optimize, and cross-pollinate.”

Beyond simply overhiring, some executives are now finding themselves unable to justify the spend on labor costs and don’t see the immediate payoff. Benioff, for instance, complained about the lack of productivity among new hires. But Nguyen likes to remind leaders that it takes an investment of time and resources to transform new hires into star players within the organization and that companies should slow down hiring sprees to ensure talent is well onboarded.

“It takes a certain amount of time to ramp and onboard an employee to a new organization. It's not a function of that individual being a top performer, middle performer, or low performer. It takes a level of education, adoption, wherewithal, and training,” says Nguyen. Employers could prevent a great deal of heartache by more proactively investing in onboarding programs. 

Though Nguyen recognizes that many corporations now announcing layoffs were facing pressure to grow at a rapid clip and meet consumer demands, hiring at such breakneck speed ironically decelerates a company's operations.

“When you hire that many people, it's like a snake swallowing a horse. It really paralyzes [a company] because it's not as nimble anymore,” he says. 

It’s also important that companies clearly outline why they’re hiring for a particular role. Jonathan Reynolds, CEO of Titus Talent Strategies, says hiring people without fully fleshed-out objectives, achievements, and expectations often results in disappointment for leaders and new hires.

“When things shift in the economy, you don't want to have an army of people who don’t know what they're trying to reach for to help the company move forward,” he says. “[Because then] you’re forced to do this big, sweeping layoff because you're over headcount and over budget.”

One final word of advice: Make use of talent mapping. Reynolds encourages employers to look at the “group photograph” of their ideal org chart in three years.

Amber Burton
amber.burton@fortune.com
@amberbburton

Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.