Many leaders want employees back in the office, despite the success of remote work and the challenge of replacing top performers who exited during the pandemic.
Amid frustrations with the traditional hiring model, tech founders & execs are ramping up hiring plans, embracing freelancers, and adopting a new model of 'blended teams.'
Despite cautions from top VCs to not fundraise in the next 24 months, most founders & execs still plan to raise in the next year.
Over the past few months, the most overused adjective of the pandemic has returned. It seems like no word has been used more to describe the challenges that tech founders and executives face today.
While valuations and fundraising fall as economic uncertainty spreads, the talent market remains incredibly tight. Workers are quitting and planning to quit in record numbers. That’s caused tech founders and executives to adapt to new financial realities while still finding ways to hire the talent they need to not just survive, but thrive.
To better understand how tech leaders are adapting at this crucial moment, A.Team and MassChallenge partnered on our inaugural Tech Work Report, surveying 581 tech founders and executives (C-Suite or department leaders) based in the United States. Respondents were all surveyed in July 2022 through the MassChallenge network of founders, experts, and partners.
Read on to dive into the results, and if you'd like to download the report, get it here:
- The Great Resignation has made a real impact: 44% of tech founders & execs say that a significant number of their top performers have exited due to the Great Resignation.
- They’re frustrated with the traditional recruitment model: 67% agree that the traditional recruitment process is broken and needs an overhaul.
- Bringing on top product & engineering talent remains a challenge: 62% say it takes 4 months or more to hire top product and engineering talent on average.
- Long-standing requirements for hiring are changing: 80% say they’re willing to hire someone without a college degree for any role.
The blended workforce & a return to the office
- Integrated “blended” teams of full-time employees and independent workers have become the norm: 73% of tech companies now have integrated teams of freelancers and FTEs.
- Tech founders & execs see independent talent as a key tool amidst economic uncertainty and remote work: 71% agree that bringing on freelancers or independent workers gives their business greater agility during times of economic uncertainty, and 70% say that remote work has made them more likely to bring on freelancers.
- A flexible work model gets results, but many are planning to return to the office: 62% believe shifting to a more flexible work model during the pandemic has increased employee productivity, but 37% say they intend to work from the office more over the next year. Amongst more mature Series B, C, D, E and public companies, that number jumps to 55%.
Downturn strategy & challenges
- Despite cautions from top VCs to not fundraise in the next 24 months, most still plan to try: 60% expect to fundraise in the next 12 months, and 78% plan to fundraise in the next 18 months.
- They’re doing so with greater concern for the long-term health of their company: 57% are more concerned about the long-term health and viability of their organization compared to 6 months ago. Only 10% were less concerned.
- Two years into the pandemic, leaders are concerned about themselves and their employees: 72% of tech founders & execs are concerned about the mental health of their employees, and 62% are concerned about their own mental health.
Part I: “The traditional recruitment model is broken”
Since the Great Resignation began last spring, it’s been a source of fascination in tech, which has seen the highest resignation rates among all industries.
Many predicted the quit rate would return to normal once a wave of layoffs began this April, but the latest labor report shows no signs of The Great Resignation slowing down. In fact, 40% of workers plan to quit in the next 6 months, per a new McKinsey study released in July.
The impact has been substantial, with 44% of tech founders & execs saying that a significant number of top performers exited due to the Great Resignation. (Amongst Series B, C, D, E, and public companies, that figure jumps to 53%).
This departure of top talent may be why—contrary to the popular media narrative created by recent rounds of layoffs—hiring plans are on the rise, particularly at more mature companies.
Forty-five percent of respondents said that their hiring plans have increased over the last 6 months. For founders & executives at the Series B to public company stage, that number jumps to 59%, as shown in the chart below.
With roles to fill and top performers to replace in a competitive talent market, tech leaders are growing frustrated with the traditional recruitment process for hiring full-time employees. Sixty-seven percent of respondents believe the traditional recruitment process is broken and needs an overhaul—primarily because it’s too long and expensive.
This is particularly true when it comes to product and engineering talent. Sixty-two percent of tech founders & execs say it takes 4 months or more to fill new product and engineering roles, on average.
Respondents also rated product and engineering as the hardest role to fill. However, tech leaders are also prioritizing other key functions across their organizations.
A majority of respondents identified important hires in other departments, with marketing (17%) and HR (14%) earning a significant share. This is a sign of how pervasive the impact of the Great Resignation has been. It seems like every hire is critical and challenging to fill.
Marketing teams, for example, face an increasingly complex and competitive digital landscape that requires a special blend of creativity and technical expertise. And given how dramatically work has changed since the pandemic began, great HR talent has never been more important. They play a key role in keeping employees happy and productive amidst a shift to remote work, and retaining and attracting top talent amidst the Great Resignation.
Founders and tech leaders are also becoming more flexible in their criteria for great talent. In April, Elon Musk made headlines by saying that a college degree isn’t required for a job at Tesla, and our respondents agree; 80% said they’re willing to hire a candidate without a degree if they have the right skills and experience.
In turn, they’re increasingly investing in formal career growth and upskilling programs:
87% say having a formal career growth and upskilling program is important to their employees.
41% have increased their investment in tech upskilling programs in the past year.
This is crucial, as McKinsey’s analysis found that a lack of career development was the top factor driving workers to quit in the last year.
Part II: The workforce of the future is “blended”
The Great Resignation has spawned a major new workforce trend that we wanted to study: the growing pool of highly skilled freelancers and independent workers.
A Bloomberg analysis found that one-third of the growth in the labor force over the past two years has come from the self-employed. A recent Upwork study revealed that 36% of all workers now freelance, with 53% of those workers offering in-demand skills like computer programming and IT.
McKinsey’s July examination of The Great Resignation identified a key persona—“the do-it-yourselfer”—of highly skilled individuals who have left traditional full-time employment in the prime of their careers in search of autonomy and a sense of purpose in their work.
Similarly, recent research by A.Team found that highly skilled tech workers say they have greater job satisfaction, financial opportunities, and work-life balance when working independently.
How are tech founders & executives taking advantage of this growing talent pool? How are they restructuring their organizations to balance immediate needs with long-term growth? And how might that trend continue into the future, particularly as tech leaders face pressure to reduce fixed costs and overhead while accelerating innovation?
The initial feedback is clear: Freelancers are increasingly attractive to tech founders & execs in times of economic uncertainty. Nearly half our respondents (42%) said freelancers or independent workers make up over one-quarter of their total workforce.
We expect this figure to grow in the future for two key reasons: the growing pool of highly skilled freelance tech talent, and the flexibility that comes with bringing on an independent workforce in times of economic uncertainty and remote work.
Over two-thirds of tech founders & execs (71%) claim that economic uncertainty has made them more likely to bring on freelancers or independent workers. The same number also believes that doing so gives their business greater agility.
This approach allows companies to quickly bring on specialized talent who can address the most important initiatives. It also helps execs protect their existing teams from experiencing layoffs.
In the past, freelance workers often handled repetitive, outsourced tasks in isolation. Today, though, they’re being integrated into blended teams with full-time employees—73% of respondents said they have integrated teams of full-time and independent workers. An additional 11% plan to do so soon.
As remote work gained popularity during the pandemic, it’s become a lot easier to build blended teams. Many teams now operate out of the cloud, not a conference room.
Seventy percent agreed that a switch to remote work has made them more likely to add freelancers or independent workers to their teams.
Remote work appears likely to continue. Of the tech founders & execs we surveyed, 62% think shifting to a more flexible work model during the pandemic has increased employee productivity. Only 13% disagree with that statement.
However, that flexible work model may eventually mean more time in the office. Overall, 37% plan to ask employees to work in the office more over the next 12 months.
But among more mature Series B, C, D, E, and public companies, 55% plan to ask employees to work in the office more.
Fifty-six percent of that cohort—and 53% of respondents overall—say that an economic downturn would make it easier to require employees to return to the office.
Part III: Downturn Strategy & Concerns
It was the memo heard ‘round the world. In May, Sequoia Capital released a 52-page memo to its portfolio companies warning of the downturn ahead and the “crucible moment” they would face.
Their advice was quickly echoed across the tech landscape: cut costs, reduce burn, become profitable if you can, and prepare for fundraising to cool off for another 24 months.
We wanted to know, how are tech founders & execs reacting since then? Are they pushing fundraising plans off to 2024? Are they prioritizing cost-cutting and reduced burn over all else?
Despite those warnings, leaders remain focused on fundraising and growth. Few are looking to wait until 2024. In fact, 60% plan to fundraise in the next 12 months, and 78% plan to fundraise in the next 18 months.
When asked to rank their top priorities, revenue growth was the most popular choice at 43%, followed by fundraising (22%). Reducing burn rate and achieving profitability was a distant third (14%).
However, the majority of tech founders & execs are pursuing growth with greater concern for consistency and stability. Fifty-seven percent told us they’re more concerned about the long-term health and viability of their organization compared to 6 months ago.
Additionally, they’re worried about their employees and themselves: 72% of tech founders & execs say they’re concerned about the mental health of their employees, and 62% say they’re concerned about their own mental health.
They’re similarly focused on reducing stress and managing motivation—63% worry about employee burnout, and 59% expressed concern about their own burnout.
While this is an “unprecedented” time of uncertainty, it’s also one of opportunity.
Economic downturns are when the most dramatic evolutions—and opportunities—in the market occur. Behaviors transform. Strategies shift. The 2008 recession, for instance, gave birth to a generation of SaaS companies that went from upstart challengers to category kings. These companies found ways to nimbly adapt to the needs of enterprises suddenly willing to rethink outdated ways of operating. The same could be said about companies like Airbnb and Warby Parker that pioneered a new consumer experience.
Amidst so much uncertainty, there’s been a lot of advice to “wait and see,” but there’s a window of opportunity to seize.
Tech founders & execs have often succeeded by thinking creatively and disrupting the status quo. This time is no different—and our research depicts a generation of tech leaders already willing to apply that mindset to their workforce and org structure. The prevalence of remote work, independent tech talent, and blended teams of freelancers and full-time employees would have seemed fantastical a few years ago, but it’s now what many tech founders, execs, and workers want.
This trend is only likely to accelerate, with bumps along the way. As they change how they hire and embrace new talent pools of skilled independent workers, founders will have to keep rethinking the way they form, manage, and optimize teams. They’ll also have to answer new questions that arise around benefits, mental health, and compensation.
If history has taught us anything, though, it’s that tech leaders ready to embrace change will likely gain a key advantage over the competition. As the tech landscape evolves, we look forward to tracking the impact of new trends and work models in future studies.
In these unprecedented times, we hope you follow along.
For the complete methodology, please download the full report.
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