Wayne Calloway, the PepsiCo CEO who led much of its explosive growth in the 1980s used to say about change, “The best time to fix the roof is when the sun is shining.”
The sun might not be shining much longer on the global economy. As stock market declines, Brexit and China tariff worries may signal an end to our near-decade-long burst of economic growth, today’s organizations must get prepared to manage in and through a downturn. Given current labor challenges and the difficulties many organizations are facing in recruiting and retaining talent to meet their needs, the time is now to plan for talent strategies that will allow companies to maintain a competitive edge during and following a recession.
At the conclusion of the Great Recession in June 2009, the U.S. unemployment rate stood at 9.5 percent and growing, according to the Bureau of Labor Statistics
(BLS). Fast forward a decade later and BLS data show the U.S. unemployment rate at under 4 percent. Of an estimated 5.7 million
jobs available, only about 1.5 million
people are seeking work. Compare that to 2009 levels where there were 66 unemployed people for every 10 jobs available.
It’s clear the talent environment of 2019 is very different from that of the Great Recession. In 2008, organizations were fat with many layers of workers. In today’s environment, organizations are operating in a historically lean manner. Employees have been in their roles 30 percent, on average, longer than just a few years ago, their skills are diminishing in light of market changes and many are struggling in a more complex, technologically-driven organization. While the level of layoffs seen in 2008 may not occur in the next downturn, businesses will need to make adjustments and employees will be impacted. Now is the time for organizations to prepare their talent strategies for what’s next.
With predictions for a near-term recession sounding more loudly, businesses may feel the pressure will be reduced in terms of attracting and retaining employees. But a recession will only serve to reinforce the need to find or develop talent with scarce skillsets that will help organizations weather the storm.
Those companies that will likely win in a downturn are those that are on the offense, not the defense. They are committed to developing a talent pipeline and retaining key employees during troubling times.
Some company executives are already beginning to consider pre-emptive workforce reductions to maintain profits through an anticipated recession. Consider that Tesla
just announced it will shed about 3,000 jobs, a 7 percent reduction of its workforce in order to achieve profit goals. In November 2018, General Motors announced 14,000 strategic layoffs while Verizon cut 10,400 employees from its payroll.
Talent strategies for a downturn
Those companies that will likely win in a downturn are those that are on the offense, not the defense. They are committed to developing a talent pipeline and retaining key employees during troubling times. To make sure you have the right talent in place to not only survive but thrive in a recession, consider these 12 action steps.
- Evaluate work options. In order to use the economic slowdown to their advantage, businesses must necessarily focus on improving employee experience. That may include where and how they work. Will employees generate better results if they work together in one location or at multiple locations? What role can virtual tools play in connecting teams and increasing collaboration? These are key elements in constructing a culture that works in a downturn.
- Focus on agility. In a slowing economy, it’s important that organizations re-prioritize initiatives and meet short- and long-term objectives. Embracing contingent work forms through the use of contractors or flex teams will allow companies to act with more agility. Doing so will allow businesses to respond quickly to headcount adjustments.
- Hire hybrid workers. With fewer resources to leverage in a recession, identify your hybrid workers, employees with skills that crossover various fields. Doing so will mean a shift in the way you recruit, hire and manage employees.
- Review compensation policies. As the economic expansion winds down, review compensation policies and consider adopting those weighted toward variable compensation designed to reward employees based on company performance, rather than permanent raises. Differentiate compensation aggressively for the most valued skills.
- Prepare to leverage the gig economy. Invest now in recruiting a pipeline of on-demand workers that can fill talent gaps or supplement your workforce in case of layoffs. Leveraging the gig economy will be a critical strategy for many companies as they look to fill skill gaps in an ever-changing business environment. A recent study from Upwork and the Freelancers Union found that one out of every three American workers freelances. According to Intuit, the number of freelancers in the U.S. is expected to increase to 43 percent of the total workforce by 2020. Make sure to design strategies and processes to incorporate them into teams and business units.
- Hire for an ecosystem mindset. Rather than seek out employees with traditional linear thinking, recruit those who possess the mindset you need to innovate in and through a recession. Look for people, for example, who are team builders, problem solvers and great mentors. Consider leveraging public marketplaces and other online talent pools to build a blended workforce platform.
- Recruit for scarce skills. Unlike past recessions, this next downturn is likely to increase the need for hiring talent with scarce skills. Plan now to hire the right talent by performing an assessment of current skill sets and needs. Grant Thornton’s e-book, “Gap to map: Win the talent game with skills mapping,” outlines a skills mapping action plan and the 10 skills that will be most in demand.
- Upskill across all levels. Organizations that invest in upskilling create a better place to work. But leaders should avoid the temptation to upskill only top performers or laggards. Companies who reap the benefits of upskilling do so by providing training that touches all employees. Results come from engagement that applies to everyone. In a downturn, it’s important to retain the valuable experience and institutional knowledge long-standing employees possess. These are the very employees who crave new skills and experiences. Make sure to focus training and development on in-demand skills development that cannot easily be purchased in the labor market.
- Automate work. As they face a looming downturn, some organizations will likely double-down on ensuring their employees will work with more agility resulting in greater productivity. Consider investing in automation and incorporating artificial intelligence and other technologies to streamline work, eliminating the need for increased hiring.
- Increase employee engagement. During economic downturns, organizations must do more with less. As a result, businesses will look to empower managers to guide their teams to increased performance, productivity and innovation. Rather than once-a-year performance reviews, managers will continue to be encouraged to provide consistent, forward-looking feedback to employees.
- Fill skills gaps. The talent gaps that exist today won’t be going away anytime soon. Recession or not, organizations will continue to focus on upskilling talent. The downturn may provide the impetus for organizations to embrace the concept of “encore careers,” welcoming back people who exited the workforce and want back in.
- Cultivate a healthy, sustainable culture now. Periods of economic contraction create instability and insecurity for employees, prompting attrition and increased turnover. Invest the time now to build a healthy culture that leverages employee engagement. As you prepare for a downturn, make sure your organization has a clear vision of the unique culture you seek to build in order to fuel business growth both pre- and post-recession. Make sure you develop a communication strategy that effectively leverages employee engagement, demonstrate the values and behaviors you want employees to emulate and incorporate your core values in your people decisions like hiring, terminating, promoting and developing. Ensure that all leaders and managers understand their role in building and leading a healthy culture and provide them with necessary training.
The winners of the next downturn are laying bold plans now to turn recessionary times to their advantage. Assessing talent needs not just for today but for the months ahead, developing an employee value proposition that will work for the long haul and mapping out a comprehensive talent strategy will help ensure your organization will have a competitive edge when the downturn turns into an upturn.