by Ishpreet Khanuja
In 2024, after massive layoffs experienced in the tech sector that worsened into the summer months, inflation followed that increased business costs and reduced profit margins for businesses across the board. Access to investment was even lower with companies buckling down to try to preserve their cash flow in anticipation of future dry spells. This defensive approach is not unfounded; based on the predictions made by Export Development Canada last fall, the worst is not behind us yet. Due to slumping global demand for products and services, global growth is expected to rise in 2025 by only 3% net, while Canada’s anticipated growth is a mere 1.6%. But while the larger, concerning picture adjusts and readjusts in context, what does this mean for the startup founders and their employees?
On a recent episode of our podcast Tech Uncensored, we discussed the challenges faced by humans on all sides of this economic turmoil with Glenn Nishimura, founder of Nishimura Consulting, an experienced HR advisor and mentor for early and growth-stage startups and scaleups across North America, Asia and Europe. With over 20 years in employee relations, workforce planning and talent management experience, Nishimura has been instrumental in helping startups build and optimize their teams, culture and people operations.
Impact of 2024 on Organizational Culture
“The last two years have really tested startups on how strong, resilient and well-ingrained their cultures are,” acknowledges Nishimura. “It is easy to say that your culture is working when your MMR (Monthly Recurring Revenue) is rising steadily, and you have dozens of applicants for every job posting. But when your business is suffering, ultimately it will be your culture that either saves you or sinks you.”
Over the last few years, startup culture has come to mean a lot of things—fast-paced environments, close-knit teams, and challenging but ultimately rewarding work. However, operating under the pressure of deteriorating market conditions in the last two years has revealed gaps in how founders understand the role of company culture and what it takes to build a sustainable one. Despite the rise in popularity of more engaging team-building efforts, building an environment of trust within the team takes a lot more time and sincerity, and the ability to lead with transparency.
“Whether it is telling the team that you have had yet another bad quarter or have had to fire a handful of employees, many founders tend to shy away from doing anything that makes them look mean, or incompetent,” reveals Nishimura. “Ultimately this silence and inaction can be seen as a lack of courage by your team and will ultimately having a detrimental impact on trust and relationships.”
This will also impact future relationships as well, as reputation is informed by the experiences of past and current employees. Early-stage startups largely depend on referrals to attract top talent and the echoes of unpleasant and sudden layoffs have followed even the most influential and sought-after companies long after the event itself. However, in building a resilient company, making tough choices consistently is par for the course and doing so with grace and compassion is a skill every founder must cultivate sooner or later.
How to Do the Right Thing the Right Way
“These are people, and your decision is going to have a profound impact on their livelihood and the lives of their families,” notes Nishimura. “But if you have exhausted all other avenues, and this is the right business decision for your company to survive, do the layoffs quickly, compassionately and do them yourself.” Additionally, to not catch people unaware, he recommends transparency about financials as a regular practice among teams regardless of how well the quarter has performed.
When deciding whether to implement layoffs, Nishimura suggests conducting a thorough analysis of your team’s financial goals and strategic objectives based on your OKRs (Objectives and Key Results) while being cognizant of the current situation and considering the needs of your organization moving forward.
While there are ways to let people go with the respect they deserve, the process is inherently difficult for both employees and founders. To deal with the repercussions of such a choice, Nishimura warns, “If you’re going to cut, cut deep and cut once—even one person laid off for business or economic reasons from your company signals to everyone else that their jobs are now in jeopardy. That fear and anxiety can have a detrimental impact. Harvard Business Review revealed that performance can drop 20% for the employees who remain after layoffs. The bottom line here: the fewer times you have to lay people off, even if it’s a larger number each time, the better for everyone.”
Founders Need Support Systems Too
Making difficult choices one after the other while trying to do the right things for your business and doing right by your employees can be an exhausting and dehumanizing experience. To make space for what must be done, founders forget that their energy and emotional capacity are finite resources, ones that need constant replenishment and care. So how does one spot patterns of burnout during it?
One doesn’t. Leaning on your community for support and asking for their help in spotting changes in behaviour patterns (withdrawal, alcohol consumption, changes in temperament, etc.) is the only way to catch early signs of stress and find ways to constructively cope with the toll of being a founder at such a time.
If a business has co-founders, Nishimura recommends, “I would strongly suggest that you draft a co-founder relationship agreement, spelling out what everyone is obligated to do when something of consequence happens—interpersonal conflicts, big decisions that impact the company, when one of the founders is in need of help. How co-founders respect and support each other, especially during really difficult times, is equally as important to the company’s success as how each of them functions leading their own functional areas.”
What it Means to be an Employee Today
“A lot of the shine that’s been associated with working with startups has worn off a bit,” reflects Nishimura. “This was one driver behind why we saw so many startup employees jump to the corporate sector after being let go. Obviously, it’s not as fast-paced. It’s not as small or as nimble. But it’s regular work, it’s relatively stable with a steady paycheck, and that’s huge these days.”
He admits this concerns him when considering the future of the innovation sector in Canada for professionals who are having early career experiences of being let go from startups. He recounts, “One common theme that emerged from all the conversations that I had with laid-off employees is they felt disposable. Many were disillusioned because the so-called awesome culture they were sold and were initially attracted to never materialized. Oftentimes they were treated with disrespect when they were let go, without any compassion, gratitude or help with finding a new job. Some of them deserved severance, but they never got it. Others were promised reference letters that they never received.”
In this economy, however, being fair can be a luxury most startups struggle to afford, especially when letting go of people is a financially driven choice in the first place. In such cases, Nishimura asks founders to expand their understanding of fair compensation. “Compensation isn’t everything,” he claims. “Cash isn’t king anymore; it is no longer a level-playing field. It’s not just about who pays top dollar, who covers massage therapy, or even who is offering generous equity. It is about intangibles like a positive reputation, a sense of belonging, and feeling trusted and respected. Those are more valuable than money. If you can offer those things along with a decent pay package, you can punch above your weight and offer something very attractive and compete with startups that have much deeper pockets.”
This change is a consequence of a parallel one in workforce composition. We asked Nishimura about how Gen Z entering the workplace has caused some post-pandemic shifts in the power dynamics that have traditionally existed between employees and management.
“The generational shift is driving differences in perspective around the world,” he says. “Many people are just reconsidering what is really important to them. We’ve been talking about work-life balance for decades and people have always argued over whether it’s even a valid concept. Never before have I seen younger generations place such emphasis on it to let it drive everything. It’s going to change our perspectives around work for sure. And it’s going to be very interesting to watch.”
Nishimura adds how the effect can also be seen in cultures that have valued work over all other aspects of life for years, drawing examples from his own experiences with the Japanese perspective on what a career journey should look like. He thinks this shift also has the potential to expand to how accepting we are of unconventional career paths in recruitment, as more young professionals are embracing a more holistic, fulfilling way of approaching work.
What will 2025 Bring for Startup Founders?
Nishimura expects that while the economic climate should improve relatively, hiring will take time to reach the same levels pre-2024. His advice to all startups is to engage in workplace planning before they resume hiring from the attractive talent pool that is looking for work currently.
He states, “Regardless of what funding stage you’re at, I want you to ask yourself: Is this role important now? Can we bring on an independent contractor and not hire full-time? Or can AI help us somehow? The overall goal for 2025 for many startups will be to run leaner and be more efficient and agile without increasing too much in size or in structure.”
Catch the full conversation between Glenn Nishimura and Altitude Accelerator’s Hessie Jones here.
Altitude Accelerator is now accepting applications for Investor Readiness program. If you’re ready to take your business to the next level, please find out more.
