Switching jobs can be an exciting opportunity to further your career and gain new experiences. Still, it's important to consider the potential risks before making a move, especially in technical leadership positions. With the current economic uncertainty, it's more important than ever to consider whether now is the right time to switch jobs. In this article, we'll explore why now may not be the best time to change jobs, as well as some strategies you can use to mitigate these risks if a great opportunity arises.
The key risks are:
- Layoffs and redundancies
- Changing investment landscape
- Increased expectations
The key mitigation approaches are:
- Do your diligence during the interview process on the company's financial health
- Ensure you are hired for high-value projects and not "nice to have"
- Negotiate the resources you expect
- Stay put and seek new challenges
Layoffs and Redundancies
We're living in uncertain economic times as 2023 arrives, with many companies facing financial challenges.
Some companies may not be profitable or may have little hope of becoming profitable in the near future. This should be a major red flag when considering a new job, as it may indicate that the company is struggling to generate revenue or control costs.
This can lead to layoffs and redundancies, and if you are on a probation period in a new job, you may be at higher risk of being let go for the sole reason of "last in, first out". The last people to join are the first to be considered to be let go. Being at a company for a short time means you've had less time to build relationships and show your value increasing your risk.
It doesn't matter whether you work for a small startup, a pre-IPO company or a large public company – economic uncertainty can affect businesses of all sizes. Even large, well-established companies may be more vulnerable to layoffs and restructuring during economic uncertainty to appease shareholders.
Changing Investment Landscape
With interest rates on the rise, investors will be more selective in where they allocate their capital. Whenever interest rates rise, the return on investment investors expect from startups or companies increases as well, given safer and more reliable investment options become available. VCs rely on funding from wealthy backers that they then use to make investments, so there is a knock-on effect here. As a result, some companies will struggle to secure funding or achieve attractive valuations in their future funding rounds.
This has implications for the valuation of employee stock options (a part of your remuneration) and whether the company can still operate at all, to name a few considerations.
Companies usually aim to have 18-24 months of runway when they raise money, which means they have a set amount of time to achieve profitability before raising more funding.
Suppose a company has been around only a few years, has recently raised money but is not profitable, or has a high cash burn rate. In that case, it may never have had experience raising money in the type of economic environment we're in now, where profitability and sustainable growth trump "growth at all costs". Not only that, but you could join the company now, and the problems might only be obvious 6+ months from now if the company recently raised money and is currently flush with cash (and using it to hire).
If you are considering taking on a leadership role at a new company, now may not be the best time to make a move. High expectations will be placed on you to succeed, and the business may be struggling with cash flow and profitability, which could limit your ability to make the hires and secure the resources you need to be successful.
This is not about shying away from hard work and is a judgement call you will need to make.
It's important to carefully evaluate whether you have the skills and resources you need to succeed in the new role under consideration and whether the company is a good fit for your long-term career goals. The risk increases if you still need to gain key skills or more experience to succeed in the new role as opposed to bringing everything with you.
This sounds like obvious advice, but when companies hire for a new position, they sometimes see only a surface-level problem that needs solving. In cases like this, they don't truly know what they want nor what's required for that new person to succeed unless you talk with them and dig into it. Better that you figure that out before you make the switch.
Mitigate the Risks of Switching Jobs in Uncertain Economic Times
Good opportunities can come up at any time. Am I saying you should be closed off from them? Absolutely not! Just take a few extra preparation steps.
To mitigate the risks of switching jobs in uncertain economic times, it's essential to do your diligence and spend extra time in the interview process to understand how the business operates.
This can help you to make an informed decision about whether the company is a good fit for your goals and needs.
Some strategies you can use include:
Do Your Diligence on the Company's Financial Health
During the interview process, asking the right questions is essential to better understand the company and its financial health. Some people call this the "reverse interview", and you should use this time well.
I've included some things you should find out below. Not all companies will share this information with you depending on the role they are hiring for, but you should judge whether it's important to you. If they withhold this information, ask yourself why that might be. It could be a red flag.
Try to form questions using the below prompts in your own words and work them into the conversation in a natural way (also do your own research on their website etc.):
- How does the company make money?
- Who are your customers? (are they "blue chip", recession-proof customers with high purchasing power who will still buy your products in tougher times?)
- Is the company profitable now, or does it have a clear plan to become profitable soon?
- How much cash do they have in the bank?
- How recently did they raise money?
- What problems do they have?
- Why are they hiring?
- What do they expect me to achieve, and by when? (not just role responsibilities)
By asking these questions, you can get a better sense of the company's strengths and weaknesses, and whether they can provide the support, environment and resources you need to succeed.
Ensure You Are Hired for High-Value Projects and Not "Nice to Have"
When considering a new job, it's vital to ensure that you are being hired to drive something of high value to the business. This helps reduce the risk of being let go if the company needs to downsize, as they are more likely to prioritize positions that are critical to the business.
It's also a good idea to focus on projects that already have traction and are generating revenue rather than taking on new types of research and development that may not have the same level of immediate impact.
If the company is unprofitable and doesn't have product market fit, it needs results quickly in a new direction rather than building on what they have already.
Don't shy away from this challenge if you can make a difference. Just ensure you know the situation you are walking into, especially in this environment, as investors will have little patience for companies like this.
Negotiate the Resources You Expect
If you are considering a leadership role at a new company, it's crucial to ensure you have the resources you need to succeed. Joining a company as a leader is of no use if you can't resource a team to be effective.
This includes financial resources for new hires and things like support staff, tools and technology, and training and development opportunities.
If the company is struggling with cash flow and profitability, it may be unable to provide the level of resources you need to succeed or may simply not know and thus not budget for it.
It's essential to be upfront about your needs and expectations during the interview process and be willing to walk away if the company cannot provide what you need. Take the time to review what they already have in terms of team members, etc.
Budgets are often set way in advance, so you can't assume that you will have the ability to change them once you've joined if there is a mismatch in resource expectations. However, reviewing budgets as part of your hiring might be possible if your position is senior enough that investors have sight of it.
Stay Put but Seek New Challenges
That's right, stay put in your current job.
With everyone else I've said in this article, it's important to reflect on your current company in terms of the risks I've outlined above.
If the company you're at is already strong, consider using all of the "career capital" you've built, including the track record of delivering value and the relationships to seek new challenges where you are by having a frank conversation with your manager. Spend some time thinking through possible things you could take on at your current company before the discussion.
You might find this is the least risky and high payoff thing to do in an uncertain economic environment. When you join a new company and start a new role, some of the time your reputation and track record go to zero and your influence drops and needs to be rebuilt, which likely isn't true in your current role (use your judgement on which way this goes for you).
Switching jobs can be a rewarding and exciting, but it's important to be mindful of the risks, especially during uncertain economic times. You can de-risk your job search and make a smart career move by doing your diligence, focusing on high-value projects, and negotiating for the resources you need. While there are no guarantees, taking these steps can help to increase your chances of success and ensure that you are happy and fulfilled in your new role if that's the route you take. Consider also that your best option might be to stay put in your current role and apply the same strategies.