How To

June 23, 2023

How to hire during a downturn

For startups that are still recruiting staff, but are looking to do so in a considered (and cash-savvy) way, read on for tips

We’ve just come out of a bull market — where cash was aplenty and companies were hiring like crazy. But a new, less stable economic environment requires a new approach to doing business. For companies that are still hiring, they must do so with discipline. 

“Ultimately, companies are gambling with people's livelihoods when offering them jobs, so should only hire when certain that the role will be required by the business not just in the short term, but for the foreseeable future,” says Dagmara Aldridge, chief people and culture officer at Zumo, a cryptocurrency wallet and exchange app. 

In our Startup Life newsletter, Dagmara gives her top tips for hiring during a downturn.

Identify which roles you actually need to hire for

Firstly, look at business-critical roles — those that either unlock growth (eg. engineering hires if you want to ship more features) or are required by regulators (eg. a money laundering reporting officer is a role that every regulated business must now have).


Next, look at roles linked to volume and revenue. At Zumo, we hire customer support agents or onboarding analysts only once we have new clients, as the increase in volume of queries will be directly linked to that client growth.

Finally, consider the span of control of the business and decide whether you need additional hires to have sufficient oversight for the work that's being done. These are typically your middle management roles and they're linked to team size.

Consider your finances

Hiring is expensive, so don't hire someone that you might have to make redundant in six months because you can’t afford them. Work with your finance team on how the hire is going to impact your burn rate and whether you can afford it before new investment comes through, or when you generate revenue.

If you are backfilling — filling in a position left by an employee who has moved to another role, is on a leave of absence or quit their job — consider the following questions before hiring again:

  • Is the role still needed?
  • Is there anyone else in the team you can promote or grow into this role and backfill the more junior position
  • Whether the role is covered by your core skill set (in which case hire in-house) or if it requires an ancillary skill set — in which case consider freelancing, contractors and outsourcing instead of hiring.
  • For jobs like customer support and onboarding that have seasonal peaks and troughs, can we multi-skill team members to do those jobs instead of hiring full-time people?

Don’t compromise on quality; the cost of a bad hire can be enormous

Look for people with the right attitude and mindset, rather than industry experience or length of service. Knowledge can be acquired; attitude can be hard to change. When interviewing candidates, I look for:

  • Growth mindset. I ask them whether they are motivated by approval or mastery, and whether they are more focused on what they are good at, or where they can develop.
  • Ability to deal with uncertainty and change. Startups can be unpredictable: can the candidate remain motivated and productive while there is little clarity at times?
  • Value alignment: I ask candidates to share three values that drive their personal and professional choices. I am wary if they simply repeat Zumo's values: I am not looking for an exact match but for affinity and opportunity to enrich our existing culture.

Hire using internal HR teams first

Hiring methods change when you have to be mindful of every penny. Start by looking through your existing networks for candidates that might be suitable and involving your team to ask for referrals (you could launch a referral programme to incentivise your existing staff, which costs a fraction of a recruiter). Then, you can assess whether you need help from an external recruitment agency.

Also, make use of your board members and advisors. We sometimes ask ours to interview candidates for certain skill sets they're more familiar with, or to help us write and review technical tests for particular roles, like development engineers.

Be transparent

Candidates should always be made aware that there are risks associated with joining a startup, even during prosperous economic times. Most startups rely on investment to exist — if they don’t deliver on business commitments, there’s a chance they might not raise future funding.

We once had to withdraw an offer to a candidate, as our investment didn't come through and we didn’t know at the time how long it would be before it did. The candidate was understandably angry, but I told them that in all good conscience we couldn't hire them as we didn't have certainty that we could keep them beyond three months. The candidate emailed me a week later saying that, while it was disappointing, they appreciated the honesty and that they'd be willing to work with us in the future, once we had certainty of funding. Honesty pays off.

On the subject of... Hiring in a downturn

🤝🏽 Downturn Survival Guide. The second episode of our podcast mini-series discusses how to maintain morale and engagement of startup employees — despite mass layoffs and sharp pivots to profitability.


🧊 Hiring freeze. Your company has announced a hiring freeze — what happens to your hiring managers?

✂️ Cut salaries or cut people? Tech companies instinctively plan layoffs when things get tough, but they could hold on to their people and reduce their salaries instead.

Miriam Partington

Miriam Partington is a reporter at Sifted. She covers the DACH region and the future of work, and coauthors Startup Life , a weekly newsletter on what it takes to build a startup. Follow her on Twitter and LinkedIn