Tech firms are setting themselves up for problems by not following the Steve Jobs playbook for responding to an economic downturn.

Companies across the tech industry have started freezing hiring or laying off employees, including Alphabet, Microsoft, Meta, Oracle, Shopify, Tesla, and others. According to Business Insider’s Sawdah Bhaimiya, that strategy is a mistake that will come back to haunt those companies.

Bhaimiya makes the case that each layoff tarnishes a company’s reputation and brand and will hurt its ability to attract top talent down the road.

“Every time I see a notice in the news that such and such technology company has cut X percentage of their workforce, I don’t forget that,” Danny Allen, chief technology officer at software firm Veeam, told Bhaimiya. “So you’re sending a message that also has a brand impact that you don’t necessarily want to be associated with.

“Employees remember and people looking for jobs remember how organizations acted during the economic downturn.”

Allen went on to expound on the two specific ways layoffs hurt a company:

“One is simply the loss of innovation, cutting resources,” said Allen. “You’re cutting your investment in future technology, that’s number one. Number two, when you cut 10% of your workforce, you’re sending the message to your employees that we care more about money than we do about you.

“And employees have a long memory, so if you’re cutting people that uncertainty is very disconcerting.”

How Steve Jobs and Apple Thought Different

Interestingly, Steve Jobs had a very different approach to dealing with an economic downturn, arguably one far worse than the current downturn.

“We’ve had one of these before, when the dot-com bubble burst,” Jobs said. “What I told our company was that we were just going to invest our way through the downturn, that we weren’t going to lay off people, that we’d taken a tremendous amount of effort to get them into Apple in the first place — the last thing we were going to do is lay them off. And we were going to keep funding. In fact we were going to up our R&D budget so that we would be ahead of our competitors when the downturn was over. And that’s exactly what we did. And it worked. And that’s exactly what we’ll do this time.”

Jobs’ approach is the very opposite of what current companies are doing and directly addresses the two issues Allen raises:

• Rather than risking innovation by losing some of its best people, Apple doubled down, intent on innovating through the downturn rather than simply trying to weather it and pick up innovation afterward.
• Jobs reiterated the value he and the company placed on the people who worked there. As Jobs said, Apple had put forth a tremendous amount of effort getting the people it had. Why lose them over a temporary downturn?

It’s safe to say Jobs’ approach is a significant factor in Apple being where it is today. The company’s innovation continued unabated, and its employees felt respected and valued, confident the company had their backs.

Today’s tech companies should take note…or pay the price later.