Layoffs, high costs and missed opportunities: the effects of A poor scaling strategy

By Lee Frame 

It’s safe to say that the world of business is in a transitional period. Recession worries, continuous news of layoffs, and a return to the workplace have all changed the ways businesses are operating as well as their plans for the future.

No businesses are feeling the pressure more than those whose scaling practices may not have been properly planned. But why is this?

Industry giants

Over the last year, we’ve sadly seen huge amounts of layoffs across a lot of industries. From tech giants like Dell and Microsoft to prolific e-commerce platforms like Farfetch, these are just a few of the heavy hitters who we’ve seen majorly downsize their operations, with a large part of the reason being how these businesses handled their scalability during the pandemic.

Tech companies saw a huge boom during this period as businesses provided their employees with the equipment and software required to work from home, requiring them to hire swathes of new employees in order to cope with the demand. That wasn’t a problem while the sales kept pouring in; however, as the pandemic drew to a close and the world came back to some form of normality, all of a sudden the huge cost of all the extra staff was no longer justifiable.

Returning to the workplace

It’s not just larger tech companies that will have made some additional hires during the pandemic, though. Plenty of companies of all sizes will have been expanding while working from home, continuing to grow in an environment that meant they didn’t have to worry about the physical space they have available.

As the world went back to normal, however, company heads had to account for these extra staff upon the return to the office, meaning the costs associated with no longer being fully remote are even higher with the need for more desk space. Many businesses that had an office space before the pandemic hit were locked into their leases, so those who over-hired during the essentially two-year period of home working would be forced to either let staff go or break their lease, having to choose between a huge loss in finances or morale.

Hybrid Working

Even now, when we’re firmly in the age of hybrid working, the importance of proper scaling cannot be understated. Expanding and upgrading your workspace in accordance with your current number of employees and how many you plan to have in the future has always been a huge, complex step for any business, but now the costs involved with moving to a larger office have become much harder to justify.

Many businesses are operating with 2-3 work-from-home days a week, so balancing the cost of the move against how much use the office will actually get has become a huge part of many expansion strategies. The danger here, though, is that businesses will delay expanding to their detriment, preventing them from reaching their full potential while they deliberate on when exactly they should make the leap. Hybrid working can certainly make knowing when to expand your business extremely difficult, but at a certain point, the things you’re missing by not taking the next step will outweigh the costs involved with doing it.