How Can I Evaluate Employers To Avoid The Risk Of Layoffs For My Next Role?

In recent months, the tech industry has seen a surge in layoffs, creating concern and uncertainty among professionals in the field. As many companies scale back or restructure, it’s crucial to understand the underlying reasons behind this shift and how you, as a job seeker or employee, can evaluate potential employers to avoid risky situations.

The tech industry, while often exciting and lucrative, has always been known for its volatility. Companies are constantly innovating, solving complex problems, and operating under pressure from venture capitalists (VCs) who expect rapid growth. This cycle of boom and bust—where companies secure massive funding one year and face layoffs the next—has been part of the industry's DNA for some time.

In recent years, we’ve seen record-breaking amounts of VC funding flow into startups. These companies, many still working on refining their business models, received praise and high valuations from the media. Unfortunately, this often leads to unrealistic expectations, both from investors and the companies themselves. When the economy shifts, as it often does, or when growth targets aren't met, companies that once seemed invincible can quickly be forced to cut back.

However, this doesn’t mean the entire tech industry is doomed. There are companies that have strong fundamentals, are not beholden to the demands of high-risk growth, and are built to withstand market fluctuations. For those navigating the job market during uncertain times, the key to minimizing risk is to carefully evaluate potential employers.

Here are some key factors to consider when assessing a company’s stability and long-term viability:

1. What are your hiring plans for the next 3-6 months and what are you trying to achieve? Is there a contingency plan in place if those goals/targets are not met?

2. Is this a net-new role for the company or a replacement search?

3. How is this role material to the future direction of the company & core product/area of focus?

4. What is your current cash position?

5. What is your estimated run rate and burn rate? How recently was this calculated?

6. How does high inflation impact your business and what steps are you taking to adjust for this?

7. How transparent is the leadership team? How often are key business metrics being shared with the broader organization?

8. How many hires has the company made over the past 2 years? How many layoffs has the company made? Can you explain why the lay-offs were necessary?

9. What steps did or would your company take before laying people off?

10. What are some of your big bets or opportunities this year? What would be the implications of failing to capitalize on them?

11. How have the market fluctuations influenced your total rewards strategy? Any specific examples you can share?

12. Can you achieve profitability without additional funding rounds? Can you achieve profitability with the team you currently have in place?

13. What were your major goals for the past 12 months and where did you actually end up?

14. Does your company typically run lean and hire for current needs, or do you hire for anticipated needs due to growth plans?

15. What are the ultimate business goals for this company? Is it to rapidly scale into a market leader? To achieve stability and profitability and earn market share over time? Maybe an exit acquisition by a bigger firm? Something else?

While the company might not answer all these questions, you’ll still get more information by asking than if you didn’t.  Don’t forget to do your own investigating online using tools like Crunchbase, Glassdoor and other databases that publicly share information about VC funding, revenue, compensation, and hiring trends. If you find red flags, ask for clarification.

Remember - in a job search, you are in control. You’re evaluating companies as much as they’re evaluating you. If a company holds their cards too close to the chest for your liking, you can simply move along. As a leader your need to make informed decisions should be seen as a positive, after all you are investing your most precious asset, you career and time.

Finally, and perhaps the most important advice of all: Figure out what YOU really want and need. Just because the tech industry is sometimes risky doesn’t mean you should stay away. For many of us it’s the exact opposite - being at the forefront of an industry is where we need to be to feel happy and fulfilled. If your goal is to maximize learning and growth, this is the place. How the tech industry operates isn’t inherently good or bad; it’s all related to your goals and risk tolerances. By understanding what you want, you can make sure you end up at that destination.