As we all know the economic landscape is ever-changing, and business leaders must continuously adapt to survive. Additionally, to succeed in the long term, managers must learn to anticipate upcoming challenges, including economic instability.
While economic experts may disagree on when or if a recession will occur, companies that want to prosper must be prepared for that eventuality. Effective talent management will not only see you through the hard times but will position you for success when the market rebounds.
understanding the impact of a recession on the labour force
According to Merriam-Webster, a recession refers to periods of reduced economic activity. Most financial analysts define it even further as two quarters in a row of economic decline, with one or more of the following results:
- decreased demand for goods and services
- increased unemployment rate
- reduced value of stocks and corporate equity
- lowered interest rates
Unfortunately, the interdependency of the above factors helps sustain recessions. Workers who have been laid off or gone too long without a cost-of-living increase often restrict their spending. This, in turn, affects business profit and growth, resulting in stock decline. It becomes an infinite loop.
While talent management is a critical component of any business plan, it's more challenging in a tight economy. You must balance employing enough people to meet quotas while keeping HR costs within budget. In addition, you need to retain and attract high-demand talent — those select individuals who help your business stand out among competitors.
Businesses may unintentionally hurt themselves by instinctively responding to recessions with layoffs or hiring freezes. Instead, creating dynamic solutions can help offset the impact of a recession. To do that, leaders and HR managers need to understand a recession's effect on the job market fully.
economic downturns and employment rates
The cyclical nature of the global economy includes periods of recession and expansion. Historically, unemployment rates rise and fall in correlation with these phases: dramatic upswings followed by slow declines.
Recessions often appear immediately after a low unemployment rate as the economy begins to swing back on itself. As the recession hits, unemployment rates spike and then gradually revert to former levels over the recovery period. It's easy to get caught up in recession panic, but a wholesale layoff or employee hiring freeze may intensify the downturn. Instead, evaluate employment decisions carefully to ensure quick recovery and future growth.
challenges to talent acquisition and retention during a recession
While it makes sense to support your workforce by providing incentives, cost of living raises and development opportunities, these actions may go against your instincts. After all, your departmental budget may get slashed, demand for products or services may decline and cash reserves may shrink.
How do you argue the need for a new, possibly expensive employee at a time when market shares are declining? You can forge through a recession using proactive rather than reactive talent management solutions.
strategic workforce planning
To make smart decisions involving your workforce, you need accurate information. In fact, the more data you gather, the better your chances of finding a solution appropriate to your company and the current economic market.
assessing current workforce
You can't prepare for a recession if your workforce is already struggling, whether it's not having the right skills or lacking people in key roles. To help determine where your challenges lie, analyse and track people data and HR metrics, such as:
- labour costs
- employee capacity
- productivity output
- overtime hours
- employee turnover
- absenteeism rate
- employee satisfaction
In addition to gathering employment data, you'll need an up-to-date skills inventory. Knowing what skills you have on hand and which ones are lacking offers guidance when recruiting or, if necessary, reducing your staff. Any employee cut is significant and represents a loss of skills.
aligning workforce to meet goals
Once you have a thorough knowledge of your workforce assets, you can more easily determine if those assets can help meet company goals throughout the recession and beyond. Because every business model is unique, your human capital design should be equally distinct to your business.
If your company has a strong footprint in a market not easily affected by a recession and plenty of cash reserves, you may continue to aim for steady growth with hopes of a rapid gain once the recession ends. For you, this may be the perfect time to find high-demand talent.
Perhaps your goal is simply to remain steady throughout the recession, keeping your workforce intact with plans to grow once the economy stabilises. Finally, you may need to adjust your workforce quickly to stay afloat. However, you mustn't cause lasting harm by losing the driving force behind your business: your employees.
identifying key roles and critical skills for business continuity
During your initial workforce assessment, you should have identified critical roles, key skills and a minimum number of employees necessary to run your business successfully. Losing critical employees or becoming so understaffed you can't meet demand can quickly demoralise your workforce and alienate customers.
Remember, your goal is not just to survive a recession but to come out the other side ready to grow. A significant staff reduction can leave you at a disadvantage because you must recruit and train before you can again compete in the market.
flexible talent management practices
As many business leaders have found, cutting costs by reducing staff is not the most practical way of staying within budget during a recession nor does it create a favourable employer brand. According to research by McKinsey & Company, traditional workforce reduction methods produce fewer savings than digital and analytical solutions. Furthermore, why try for a temporary margin reduction when you can obtain long-term improvement?
Therefore, help your workers increase productivity through supportive software and digital tools. Analyse worker and product data to streamline processes and fine-tune worker capacity management.
Remember the importance of communication, especially when the market is tight. You need an ongoing dialog from leaders to employees and in the reverse direction as well. This helps reduce uncertainty, as uncertainty breeds stress, whether it's among managers or floor workers. It's a smart business practice to share challenges with your workers; they may come up with solutions you have missed.
flexible work arrangements
While flexible staffing is always a dependable approach to talent management, it's extremely valuable during a recession. Contingent staff, such as contract hires and freelancers, can provide the necessary support to meet quotas without taking on permanent workers. This increased resilience lets you quickly adapt to market demand.
Contingent hiring of in-demand or specialised talent provides two advantages: letting you trial a new employee or gain the services of a consultant for a predetermined length of time. This is especially useful for a short-term project, such as hiring an IT contractor to help with a digital transformation or a professional process manager to improve workflow.
Finally, consider working with a staffing agency for increased scalability. The ability to access talent immediately can help you capitalise on new opportunities while minimising risk during downtimes.
cross-training and upskilling employees to enhance versatility
Using your current employees to fill gaps is another way to strengthen resilience without exceeding the budget. Reliable, efficient employees are invaluable at all skill levels. Allowing your workforce to do cross-training and upskilling lets you retain good workers while meeting the demands of your current business model.
Your skills inventory can help you find candidates for openings within your current workforce and show which skills are lacking. Keep workers engaged during periods of low product demand by focusing on training and development. This strategy also helps ensure your workforce is ready to meet the needs of increased market growth once the recession draws to a close. By providing your workers with the skills to meet future demands, whether increased production quotas or technological advancements, you help maintain their value as an asset.
leveraging technology for remote collaboration and productivity
Consider cost-cutting tools that rely on digital and technology advances to help combat low yields due to a slowing market.
- Switching manual processes to digital can eliminate materials costs and increase worker productivity.
- Video conferencing and online trade shows reduce transportation and per diem costs.
- Project boards help improve workflow, lessening the time spent on meetings and ensuring communication between participants. Managers can assign tasks, and workers receive notifications, all in real time.
- Automating tasks through chatbots and Voice over Internet Protocol (VoIP) systems can improve communication between your business and its customers and let you reskill workers to a more productive job.
get started on your talent management plan
Recession is not an unexpected event but a recurring part of the global economic cycle. Financial analysts and market strategists may be unable to predict a recession's exact timing. However, you can prepare for changes in market demand and labour fluctuations. Planning scenarios lets you determine how and when to react to specific triggers, ensuring you meet challenges head-on and work together as a team. Effective talent management means being ready for the future — whether it's a recession or an economic boom.