My admittedly naive opinion is that the current generation of CEOs have decided to define a company's growth by headcount rather than revenue or profit.
They don't put enough consideration into whether they need more people. They adopt the Project Manager mindset of thinking 9 women can produce a baby in 1 month if they work together.
Just because 20 engineers produced a product that created a product that produces $100M ARR doesn't mean that 100 engineers will produce a product that produces $500M ARR.
"Overhired" is not always the best way to describe "hired with intentions to do things while capital was cheap". I saw a bunch of startups and larger that really did intend to build things. When hard times hit, some shut down. Some cancelled any lofty project that wasn't already committing to their bottom line.
So the solution is, "never hire headcount to work on a project that might not be financially viable in a recession"? Help me see another solution here.
Because they seem to think that saving money offers more value to shareholders than creating additional value. I'm not sure they know how to offer new value.