The year 2023, for the SaaS scale-up ecosystem, has been nothing short of a rollercoaster, especially when it comes to recruiting. To make sense of the present, one must journey back to the events that set the stage.

1. The market shift

The startup world was hit hard in late 2022 – a deep, unmistakable shift in the economic winds. Startups raised a mere 4.2 billion euros in H1 2023, a steep 49% drop from H1 2022. How did we get there?

In May 2022, Sequoia Capital released a memo titled “Adapting to Endure”. It urged startups to pivot towards sustainability and profitability, reflecting the industry’s evolving sentiment after the fundraising environment was strongly impacted by central banks hiking rates around the world. The memo, publicly released in June 2022, resonated across the industry. Then came the layoffs. 

The US was first, with Europe and France not far behind. The dynamics shifted quickly. Hiring plans were revised, and recruiting teams were reduced to their bare minimum. The peak in the US was reached in January 2023 (see graph from layoff tracker Layoff.fyi)

France’s response was more measured, reflecting its distinct labor market dynamics (and mandatory 3-month notice period). Only in May 2023 did we hear the first deterioration in numbers (though insiders had been feeling it since February) in a report by Numeum titled “The job market in French startups deteriorates for the first time since the beginning of the year.” The study observed, “The startups that were laying off workers increased by 50% versus the previous month.” Companies quickly adapted to the new market rule: let’s forget growth at all costs and focus on profitability. Applied to recruiting, this means no more recruiting like crazy just for the sake of hitting the target. Let’s take our time and make sure we hire the right person. 

At the same time, the rise of Generative AI offered substantial promises of productivity gains and opened up new questions: Would AI streamline operations, making companies leaner and more efficient? Would they ever need to hire as many people as before? 

The last major element in the equation is the question of remote work. Where should we hire? What should be our remote work policies? France mostly decided to go with “Let’s all get back to the office”. While countries like the U.S., UK, and Canada had embraced remote work, averaging over 1.5 remote work days per employee per week, France lagged, averaging only 0.6 days. 

And these radical and rapid changes created a new world of recruiting.

2. The new world of recruiting

After almost a decade of a candidate-driven market, power seemed to get back into the hands of companies. 

Ashby’s 2023 Trends Report highlighted a paradox: while applications per role doubled, recruiter productivity took a hit, declining from 5.6 hires per recruiter per quarter to 4.6. How the heck could it be possible? Power back to companies, right?

Well, it’s not that simple. First, employee engagement has been on a steady decline over the past two years. After reaching a peak in 2020, there had been a consistent dip, hitting 32% in 2022 and only slightly recovering to 34% in mid-2023, after a Gallup study. The reasons were multifaceted (including the question of remote work). Disengagement implied lower productivity and additional recruiting needs. 

On the other end, with the market’s volatility, employees cling to their jobs, hesitant to take the risk of changing companies. So, while the pool of applicants grows, securing top-tier talent becomes harder. 

There’s also an AI effect to the increase in applications, with lots of applicants using AI to generate personalized applications automatically and save time. 

Companies that need to adapt to the changing environment started revamping their hiring processes and re-assessing their Applicant Tracking Systems. The focus shifted from merely filling roles to ensuring those roles were filled with the right talent.

3. What do we do with this? How should we approach hiring?

It’s hard to make predictions in such an uncertain market. At the same time, not being able to make predictions is pretty significant in itself:  We can expect that companies will rely more on on-demand talent (RPOs for recruiting, contractors, freelancers, consulting firms, etc.) until they have more visibility. 

While the current recruiting climate might appear overwhelmingly company-driven, it’s essential for businesses to remain vigilant. Rapid market fluctuations could tilt the balance in favor of candidates sooner than anticipated. To navigate this, companies must prioritize genuine engagement with potential hires, avoiding the temptation to undercut offers, as this can quickly tarnish their reputation.

All companies also need to adopt the new operating system when it comes to recruiting. Not “more” but “better”, even if it takes longer. Companies will still need to grow a healthy pipeline and keep on nurturing their best prospective candidates because it now takes more energy to convince one person.  

Then: assessment. 

While it might require more time and resources upfront, ensuring a fit between the candidate and the role will be more important than ever. The main target no longer is talent velocity (how fast we’re able to hit our recruiting targets) to talent density (how can we reach our business targets with the smallest amount possible of high-quality people). 

Ashby’s report shows that companies spend ~50% more time interviewing for one hire compared to a year ago, and we can expect this will remain high. 

Building and maintaining direct relationships with potential candidates is also vital. In an era where AI-driven content will become more and more abundant, it will become harder to be the signal among the noise. Companies should keep on working on building unique differentiators and their employer brand.

Last but not least, the role of recruiting professionals should be more strategic than ever. Instead of viewing them as mere executors of a hiring plan, they should be integrated as strategic advisors, equipped to not just fill positions but to attract top-tier talent. Smart companies will involve their recruiting team in the strategic decisions and empower them to take more time if it means hiring a better candidate. They should also be empowered to work on longer-term projects, strengthening employer branding and nurturing prospective candidates.