Tech boom to bust: Recruiters among hardest hit by coronavirus layoffs
After years of cutthroat competition for tech talent, hiring specialists face mass layoffs, as an industry built on growth focuses on survival.
Even before the layoffs were official, Cassie Chao was nervous for her team of technical recruiters at San Francisco travel startup Sonder.
As Silicon Valley rekindled its infatuation with hyper-growth during the unicorn era, recruiters like Chao were there to feed the insatiable hunger for talent. Competition to hire the best programmers, app developers and data analysts fueled an arms race in employee perks that transformed daily life in San Francisco and other tech hubs.
But COVID-19 layoffs and hiring freezes have brought it all crashing down. And once again, recruiters are right in the middle of the action.
"My team actually was the hardest hit in the entire company," said Chao, one of the few to survive a 400-person layoff at Sonder that included about 80% of the recruiting team. "It's painful."
Technical recruiting — or talent "sourcing," as it's often called in Silicon Valley — is up there with sales, marketing, business development and other professional services that are often first to go when executives must cut costs. And in recent weeks, hundreds of technical recruiters have been laid off at tech companies including Sonder, ZipRecruiter, TripActions, Compass and Khoros. Tech headhunting firms including Los Angeles-based Ejento have been wiped out.
But if there's a certain inevitability to cutting recruiters when you're no longer recruiting, there's also a deeper shift. An industry built on growth is now focused on survival. And as recruiters know better than anyone, people are usually a company's biggest investment. "The one cost they can get rid of most easily is payroll," said Julia Pollak, a labor economist at job listing site ZipRecruiter.
When cash starts to dry up, companies scrambling to cover unavoidable expenses like monthly rents and existing vendor contracts are often quick to turn to hiring and related roles, she said. That's especially true with a sudden shock like a pandemic.
"Companies have never seen anything like this," Pollak said. "Never in their wildest dreams would they have expected revenues to fall to zero."
ZipRecruiter learned that lesson firsthand. The company, based in Santa Monica, laid off 39% of its workforce last week in a cost-saving move that affected more than 490 people. While a small fraction were furloughed, Pollak said it's hard for any business to know how long the uncertainty will last during what some have deemed "the great cessation": an unprecedented foray into what happens to jobs and the economy if entire states or countries shut down.
At first, Pollak said, the COVID-19 outbreak in China looked like it might mostly hurt manufacturing businesses with supply chains overseas. But now, after ravaging the hospitality and travel sectors, the U.S. tech sector is among the industries feeling the broader effects of financial markets in suspended free fall. Even hospitals and schools, usually recession-proof industries, are faced with job cuts while they try to keep up with surging demand, she said.
"We've wiped out years of job gains in just weeks," Pollak said. "This shock is going to lead to a very broad pullback in hiring for several months. In the meanwhile, having a director of talent recruitment, they're not going to have much work the next few months."
Still, Chao has found some reasons for optimism. She did what any good recruiter would do after the layoffs hit her team at Sonder, asking her vast network, in a candid LinkedIn post, for help finding former members of her team new jobs. Within a few days, recruiters from Amazon, Facebook, DoorDash and several other companies jumped in to offer up open positions, softening the whiplash.
"This is my first time going through this, ever," said Chao, who previously worked in recruiting at Uber and Palantir. She said the downturn has been so severe that Sonder had to rescind a few job offers — another odd inversion of her usual work. "The nature of my job is to find people opportunities," she said.
For those in her field, the opportunities haven't totally dried up. Some technical recruiters who had been working in hard-hit sectors like travel will be reshuffled into companies in fast-growing fields like goods delivery, remote work or cybersecurity.
Vinayak Ranade's Boston recruiting tech firm Drafted has already seen that cycle play out with workers who land on his company's weekly Layoff List. Some quickly find themselves approached by opportunistic headhunters paying close attention to who becomes available amid the turmoil.
"Recruiters all operate in really tight networks," Ranade said. "There's kind of a secret underground recruiter network that exists across most cities. There's like millions of private Slack channels."
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So far, Pollak said, ZipRecruiter has tracked the biggest hiring increases in job listings for front-line service jobs like warehousing (up 700%) and in-store shoppers (up 294%). Ecommerce specialists are among the white-collar workers suddenly seeing more opportunities.
Though the future is murky, and hiring processes are increasingly automated, Pollak noted that recruiters have historically been among the first to bounce back during economic recoveries.
"They're going to have a really, really important job in the comeback," Pollak said. "There's a huge opportunity in that industry if they sit tight for a couple of months."