How our startup made it through 2 recessions without relying on layoffs

Entrepreneurs deploying capital often face two major challenges: operating at scale and navigating unforeseen market conditions. And often, when the market winds change and growth sputters to a crawl, startups and public companies alike resort to sweeping layoffs to avoid burning through capital.

According to Crunchbase, nearly 45,000 tech employees have been laid off so far this year. In the past few months, notable companies such as Glossier, Go Puff, Klarna and Netflix have cut staff, and many more internet-based companies have paused to “reevaluate hiring.”

At HackerEarth, we have moved successfully through two recessionary cycles without ever relying on job cuts. In 10 years, we have found that a sustainable approach to hiring and undertaking experimental projects helped us navigate the currents of uncertain market conditions.

Here is how we did it:

Operated at a safe following distance

To stay lean, we maintain a set of goals and best practices that allows us to ebb and flow with the changing market and avoid acting on a dime. At any given time, our staff portfolio operates at about 90% of what we consider ideal. Think of this like the distance you have to maintain between you and the car in front of you when you’re driving on the highway. If we staff our teams to fit 100% of our needs (following too closely), then there is a domino effect when the market changes rapidly, causing internal “accidents.”

However, if we operate at a “safe following distance,” we have time to react without causing major disruptions to our employees. We maintain this by planning for our hires proactively to address current and future challenges as opposed to hiring reactively for a short-term fix.

This “safe following distance” not only allows us to react to changes quickly, it also leads to greater efficiency per employee. When you are staffed just a little below the ideal capacity, people get more opportunities to go beyond their defined goals. If done well, this tension results in greater efficiency and growth for the whole team.

Built a stronger culture to ensure we met product goals

Operating 10% below our ideal means that it is necessary to lean on culture to fill the gap. When we hire, we prioritize candidates with diverse and flexible skill sets who can adapt to changing requirements. This ensures that our team is able to work on multiple projects, which helps mitigate siloed thinking and behaviors.

As a management team, we make decisions together and own the collective responsibility of the choices we make. Joint decision-making happens when you have transparency and open communication channels. We share as much as we can with our teams. In our organization, an L1 employee probably has 99% of the visibility that a C-level executive does.

The best way to create an open communication culture is to focus on creating horizontal communication channels and empowering the middle-management layer to take key decisions. We are laser-focused on building employee trust and loyalty as a part of our talent retention strategy. According to SHRM, employees are 23% more likely to offer solutions at work when they have trust in their employer. Anecdotally, we have found this to be true.

Used a no-person-left-alone approach toward hard situations

When you hear that we have managed to avoid any layoffs, you might assume that it is because our business was relatively insulated from economic pressure and we were never forced to make big adjustments to survive. We wish that were the case.

In 10 years, there have been two instances where we had to get seriously creative to find ways to constrict the budget without impacting our people. The first was a decision to close a line of business. Instead of terminating the roles on that team, we doubled down on our other value propositions and transferred the affected employees to new roles within the company.

This is where we used our philosophy of building versatile teams and integrating flexibility into our culture to our advantage. The fact that we were not at full capacity in either of the teams let us easily absorb people from one team to another without affecting our budget significantly.

During the height of the pandemic, we struggled again. We were reeling from immediate changes to how and where we work, and were adjusting to our new reality. We brainstormed and modeled the best course of action to mitigate the most risk, and ultimately decided that the right thing to do was to take a pay cut in order to avoid layoffs. This was a collective decision, where every person in the team felt that it was better for all to take a small pay cut than to lose some of our colleagues.

We made this decision by looking at the long term and adjusting accordingly. What would happen when business picked up again? What if we couldn’t rehire? Through the pandemic, we relied on open communication and regularly shared the “why” behind our actions with our employees.

Prioritized sustainable growth over mindless expansion

In our business, sustainable does not necessarily mean conservative. We focus on taking calculated risks with measured returns. This does not mean that we do not go after ambitious ideas, but we do so with a crafted approach.

We understand that getting uncomfortable is necessary to see real growth. No matter how outlandish or impossible an initiative may seem, we always take it on in a way that is very frugal at first and focus on getting to a state where we can be reasonably confident of success.

This means that for most of our experiments, we are not allocating too many resources at once. We embrace failure knowing that if and when it does happen, the people and resources designated to champion the project can be reassigned to other endeavors.

We don’t know if our approach to minimizing layoffs is the secret sauce, but in 10 years we have found that the pillars we built our business around have continued to serve us. We approach hiring very meticulously, hire only when we need to and maintain a lean team to give us a buffer when things go wrong.

We stay true to our founders’ mindset and know that at the end of the day, sometimes the right thing to do is take a pay cut. Finally, we bake trust into our culture and take care to measure and improve employee loyalty so we can stay in the game for the long haul.