Aidi — Tech Winter

For November, we will discuss the continued layoffs in the ecosystem, proffering solutions on what founders can do in the face of this event. We will also look into the 90% ROW slash for Nigerian Telcom companies, recent events at Aidi and great opportunities for founders. Let's get started;

1. What ‘Tech Winter’ can teach us about layoffs, frugality and managing people

It is no news that some tech companies had to either reduce the salaries of their staff or layoff specific percentages of their workforce. The layoffs and hiring freeze in technology have been referred to as ‘tech winter’. There are even some predictions that this will continue as a global recession looms on the horizon. 

The question is then - what is behind this recent layoff trend? Simply put, the layoffs are a result of macroeconomic factors such as inflation, rising interest rates and a probability of a recession (customers are reducing their spending). These elements together produce smaller profits for businesses and a slowdown in funding as the profitability of companies in times like this is unclear to investors. Another factor in this mix is the effect of the Covid-19 pandemic. With changes and surges in the behaviour of consumers, companies went on a hiring spree hoping that the trend will continue post-pandemic. This was, however, not the case and so these companies became overstaffed. Moreso, the recent market conditions have also contributed to this, making it hard for startups to fundraise at the moment

Layoffs aren’t pleasant and can be hard to do, but are needed for survival and growth. In the wake of this, companies may be able to manage resources with a lean workforce but are susceptible to experiencing increased turnover as employees may begin to quit to avoid being laid off. Surviving employees are likely to experience increased workload and stress, having to juggle the responsibilities of others who have been let go. In all, it isn’t the best experience for both founders and employees. What should founders do in situations like this, and what lessons should they glean from startups who have handled this in a calculated manner, ensuring that both surviving and laid-off employees are still prioritized in the wake of such an event?

In this  HBR 2009 article, founders are advised to provide predictability in the face of layoffs. They opine that ‘when a stressful event can be predicted, the absence of a stressful event can also be predicted; thus a person knows when he or she need not maintain a state of vigilance or anxiety’. When founders give their employees as much information as they can give on what will happen to them (as individuals, their work groups and the company itself) and the timeframe for this, it will aid them to prepare to a verify large extent for the inevitable and they will suffer less. Moreso, they can relax in the absence of such information. For example, detailed information on the factors and conditions influencing layoffs can be shared with all staff either through a company-wide memo or during a town hall meeting. Transparency on severance packages and the efforts the company will make to aid them during the period can also be fully stated. The article emphasized that ‘The effort that people are willing to expend and the anger and anxiety that they suffer are shaped by the difference between what they expect and what they get’. Still on the topic of predictability, it is important to build an open, rewarding culture where employees are treated as key decision-makers and are regarded as an important part of the business. In the face of incidents like this, people that will be let go are more likely to understand the conditions and might not be quick to label the business and the founder as they already know over time, that the founder would have done everything possible to protect their jobs. This will not always be the case, but the chances are likely. 

A perfect example of this is the Advanced Micro Devices Layoff in 1986. Prior to the downturn in the computer industry during this period (largely due to the absence of customer satisfaction) the company boasted of a no-layoff policy and was popular for stressing respect for employees of lower hierarchy and for extravagant employee rewards. When the downsizing began with popular companies like National Semiconductor Corporation,  Wang Laboratories, Hewlett-Packard Company, and the Digital Equipment Corporation laying off a large number of people, Advanced Micro Devices soon followed suit with 920 people dismissed, even after trying all it could to prevent this from happening. The reactions from the dismissed group were disproportionate as were other employee-centred companies like HP compared to others who had a track record of dismissing staff as soon as the first signs of bad, hard times were sighted.

In managing layoffs, the next thing to focus on is to increase understanding between you and your workers. It is known that people will react negatively in the face of pressure and negative news, however increasing understanding by explaining why and how will go a long way.  The why explains why you have to take the action and how details the effect it will have. Effective communication is the one tool to bridge understanding. As was in the case of AMD, the CEO knew it was up to him to ensure that the people understood the reality and implications of what was to come. It is recorded that he presented bank statements to his staff to let them know about the company’s dire financial situation. While you may not take this approach, you can have meetings with those affected to ascertain how you can help them after they leave, to discuss severance packages, etc. 

A more recent case of how to handle layoffs can be seen in the Stripe vs Twitter situation. One prepared employees adequately, providing a generous severance package that will help them survive pending when they get another offer and the other was the opposite. 

There are other alternatives to cutting your workforce. They include; hiring freezes, reassignment of surplus workers, and pay cuts for managers, among others. Another effective alternative will be changing products made or sold like Rom Corp did and never had to cut back on their workforce for 15 years. 

Lastly, in the face of this event, frugality is of immense importance. To learn more about what this means and how you can adopt this practice, read this blog post we made recently on the subject matter. 

2. The 90% slash for Telcom companies

So you know that telecom companies who want to install underground internet cables and other equipment in Nigeria are mandated to pay a certain tax called the ‘right-of-way fee’ to the state government to be able to do this. 

Recently, the Nigerian government has announced that telecom operators looking to deploy broadband infrastructure in green areas (places where there is no telecommunications equipment) will now have to pay ₦14.50 per meter instead of the usual #145. This will begin on December 1st 2022 and will last for the next 2 years. This is to meet the National broadband 2020- 2025 plan aimed at increasing internet speed and lowering costs in the country. Prior high charges of #4,000 to #8,000 proved to be an obstacle to investment in the sector. 

However, after the harmonisation at the Nigerian Governors Forum in 2020, operators were required to pay #45 per metre to lay fibre cable anywhere in the country. So this recent slash reduces the fee by 90%. Hopefully, this will help improve internet penetration in remote areas, aiding the use of technology in these places.

3. Inside Aidi

• Aidi recently completed its S22 Accelerator Program made up of over 30+ startups and founders, culminating with a Demo Day. If you missed the live pitch, you can watch the replay on Youtube. To apply for upcoming cohorts, signup on the website and get started. 
• Grey launched its virtual card to enable you to make payments online directly from your USD balance. Learn how to create yours and how it works on their blog 

4. Opportunities

• African startups solving pressing problems through innovation are invited to apply for the TechBridge accelerator programme, which provides US$200,000 in funding and other support. Applications are open until December 15th. Apply here
• UNDP and FCMB are inviting Agritech startups, Agri-business entrepreneurs, engineers, innovators, and tech solution enthusiasts across Nigeria to participate in its AgroHack Challenge. 50 innovators will be selected for the pre-incubation phase and the top 25 will be selected to proceed to the incubation stage. These 25 startups will receive USD 30,000 of equity-free funding, incubation support for 3 months & other exciting benefits. Apply on the agrohack website.

We’re a bit early but…Merry Christmas!