“I hope all the money we invest will go into the company,” a well-known entrepreneur and now owner of a large venture capital firm said when we were seeking our first round of funding. We felt a touch insulted to start with, but got where he was coming from when he shared the horror stories of where some of his investments had been channeled.

“We don’t want founders to worry about their finances. Hence, we ensure they get market salaries as soon as we come in. We want them to focus on scaling the business and eliminate any personal distractions,” a VC partner told us on his investment philosophy.

One bootstrapped entrepreneur said, “We were 50-odd people when Covid hit, and we had zero billing the next month. We said we would hold on to our staff without any salary cuts as long as we could. Luckily, in six months, the business bounced back, and we were glad we absorbed the initial business shocks.”

“I have been using my old car for the last seven years, and my partners and I needed a bit of motivation for all the hard work we put in so far,” quipped an entrepreneur, who bought a BMW X3 and two Fortuners as soon as the start up received a ₹6-crore series A funding.

These are different perspectives in different contexts depending on whose money it is. If this is how VCs and founders react in the startup world, how should we decipher the pressures on CEOs of large enterprises?

The stakeholders

Between Amazon, Meta, Google, Microsoft and Salesforce, nearly 60,000 jobs were slashed recently. The total savings, as estimated on these, is supposed to be around $9 billion per year, and at average earnings multiple of 15x gives them all a market cap of about $135 billion. Much of the prestigious IPs were built by their employees, and these marquee brands have been aspirational employers for most tech talent. In terms of their balance sheet, they carry abundant cash, and their latest profits still are greater than the turnover of many fortune 500 companies. Some of them still have their founders at the helm who still wield significant power at the board level. This clearly shows that Wall Street is the most important ecosystem to be satisfied. All their stock prices have seen significant jumps in the last month or so, vindicating their decision to cut headcounts. One can still argue that the number of people they have laid off is still a fraction of what they scaled up in the post-pandemic hiring rush.

Greenbacks calling

In the US, 1,035 companies fired 1,58,951 tech employees in 2022, and so far, in 2023, 173 employers have offloaded 56,570, according to Layoffs.fyi. One would expect Indian IT engineers to feel the market is attractive here in India, where the open IT jobs in January 2023 still exceeded 1,10,000. Not really. One shouldn’t be surprised to know that there were 42,000 people listed in online portals from India whose first preferred job location is the US. Despite the uncertainties surrounding visas and immigration to the US, the dollar delta over Indian salaries still dominates the job and country choices. How else do you explain the annual campus salary announcements around IIT engineers in crores every year in spite of the job being domiciled on foreign soil?

Mercenary employees

With all the layoffs and the fear of more, one would imagine that tech employees would be more moderate during their job expectations or would prefer to wait and watch their next moves. But as of January, the IT engineers were still expecting a 50 per cent hike for any job change. Moreover, less than 70 per cent of them accepted the offers they negotiated, indicating their preference to accept a much higher financial offer. The argument made is that the additional compensation delta can only mitigate the risk associated with the job change. Most of us know that 95 per cent of startups fail. However, even today, most software engineers don’t hesitate to join a funded startup as the financial benefits like salary, joining bonus, and early vesting ESOP options make up for the risk they are undertaking.

Brand Risk Mitigation

Enterprises, too, have found the hack around laying off and re-attracting employees. Many startups in India that laid off their employees during the onset of the pandemic successfully scaled up their headcounts when the demand came back. Some of them are laying off again in recent times. One might wonder how they could attract talent again if they have a reputation for laying off during distress. History has taught us that some of the large Fortune 500 brands have used layoffs when faced with headwinds and displayed the Great Places to Work tag while hiring their next generation of workforce. While rating their employer as a Great Place to Work, most employees mainly list the perk and benefits as the reasons. The employers know it only costs a few dollars more to attract their next set of employees.

The Goldfish

Did you notice many laid-off employees were not bitter about their employers as they posed their last day pictures on social media with their employer’s logo in the background? One can say they got a better severance or got even better jobs elsewhere to be that happy. Ever wondered how an employee and manager relationship could be after retaining the employee with a 100 per cent hike due to a competing offer?

It serves well for both the employer and the employee to have a goldfish memory to make fresh beginnings in new contexts. One thing we know is that the financial context of the employer and the employee dictates our narrative of our work preferences.