The once-reliable labour market is on uncertain ground. Are you ready for what lies ahead?
Employers have struggled to fill unfilled positions for nearly two years, and some companies are still experiencing labour shortages. However, when the risk of an economic slump increases, the pendulum shifts.
Layoffs have already become a regular occurrence in the United States, with increasing numbers of employers issuing pink slips. Startups in Europe and Southeast Asia have recently let off hundreds of staff. While most of the losses have occurred in the technology business, which grew significantly during the pandemic, employment cuts are also being made in financial services, automakers, real estate industries, and other sectors.
5 Steps Employers Should Take in a Slowing Economy
Employers will be forced to make difficult decisions as the global economy weakens. What should they do to avert layoffs? How can they reduce the harm done to their employer brands if they are forced to lay off employees? With hiring slowing, should organisations keep their talent acquisition teams? The following are five steps employers should take as the economy slows.
1. Don’t rush through layoffs without exploring alternatives.
When you let go of employees, you lose some of your most precious assets, including personnel with extensive understanding of your company, market intelligence, and customer relationships. In fact, researchers who examined every company on the New York Stock Exchange from 1980 to 2016 discovered that employers who postponed layoffs as long as possible saw higher stock returns two years later than identical companies who laid off employees early on.
“People who leave take years of experience, relationships, and customer value with them,” says Josh Bersin, worldwide industry analyst and Josh Bersin Academy dean.
A hurried layoff may leave you regretting your decision, especially if the economy recovers fast and the labour market tightens again.
Exhaust all options, including asking personnel to accept wage cuts, implementing furloughs, or reducing benefits.
“The global economy is very volatile, and it’s difficult to predict what’s going to happen,” says Matt Alder, presenter of The Recruiting Future Podcast. “Companies need to think very carefully about laying off people because hiring people back may be difficult.”
2. Create an employee mobility program.
Even during a slump, certain elements of your firm may continue to grow. Redeploying staff can reduce the need for layoffs.
“Understanding the skills that your workforce already has,” Matt argues, is something businesses should be doing now. Should we hire this many people? Can we shift people around internally? Can we re-skill people?
During the pandemic, Verizon implemented a huge employee retraining and redeployment initiative, saving over 20,000 jobs. Verizon recognised an opportunity to redeploy employees who had been working at Verizon stores that had been shut down due to the pandemic. The company provided these employees with digital skills training, allowing them to shift into telesales and customer support roles.
Consider creating an internal talent marketplace that catalogues your employees’ talents and competencies and links them to internal job openings. This will make it easier for your talent acquisition teams and hiring managers to identify internal candidates for open positions, potentially preventing those employees from losing their jobs.
3. Handle layoffs properly.
While there is no such thing as a joyful layoff, there are ways to make the experience as positive as possible for individuals who have been let go. Carrying out job cuts intelligently is a decent thing to do, and it can also help protect your employer’s brand.
There is a lot at stake. Witness the tremendous outcry against businesses for firing off employees via Zoom or for outing them and sharing their personal details on social networking networks.
It is critical to be upfront in your interactions, to empathise with laid-off employees, and to provide them with as much assistance as possible.
“The more generous you can be, the better,” he explains. “Good severance benefits, good reference programs, and alumni links all help to alleviate the agony. Remember that everyone you let go of is a human being with a family, a profession, and a network of relationships. You want them to be brand ambassadors and recognise that your company is doing good for them, regardless of the financial challenges you may be facing.”
Airbnb has been lauded for handling the layoff of one-quarter of its employees in May 2020. Among the things Airbnb did right: CEO Brian Chesky wrote a public statement to employees explaining how he made his choice and assuring departing staff that it was not their fault.
The corporation took steps to assist departing employees in finding new positions, directing its recruiters to serve as an outplacement team. Airbnb also established an “Alumni Talent Directory” where laid-off employees may make their resumes and work samples available to prospective employers.
“They created one of the first layoff lists, which has now become common practice in tech,” Lars Schmidt, founder of human resources consultancy firm Amplify, told Charter. “If you want a blueprint for how to [conduct a layoff] thoughtfully, looking back to how Airbnb executed theirs in 2020 is a great example.”
4. Keep the remaining staff engaged.
According to researchers, employees who remain at a company experience a 41% loss in job satisfaction and a 20% decline in job performance after a layoff. Some people sense survivor guilt or are concerned that their own jobs are in jeopardy.
Reduced salaries give “existing employees a sense of doom or worry that ‘maybe the management team isn’t telling us something,'” claims Josh.
According to Darren Kimball, CEO of outplacement service GetFive, surviving employees should be reassured that their positions are safe. A management expert, Susan Heathfield, believes that showing surviving employees that they are appreciated is critical. One approach to accomplish this is to have discussions regarding their professional progression.
“Start by identifying the additional training, resources, and support each employee feels they need,” she says, “and then make sure you provide it.”
5. Get your talent acquisition team to work
During previous downturns, firms were ready to eliminate their recruiting staff. However, doing so may limit your capacity to compete for talent as the labour market tightens.
Talent acquisition teams can immediately prepare your organisation for an economic recovery. A halt in hiring allows recruiters to focus on essential tasks, including developing company branding, cultivating relationships with potential job seekers, and refining recruitment tools and processes.
“Most organisations haven’t been able to catch a breath in the past 18 months,” says Canvas global head of talent acquisition Amy Schultz. “You want to retain and develop your talent team and continue to improve your processes and experience.”
According to Matt, laying off recruiters is a “historic mistake that companies have made every single time there’s been a downturn.” Employers are “not focused on what acquisition teams can do during those quiet times” in terms of strengthening the employer brand and implementing better technologies. This is a time to do so because businesses will benefit greatly when conditions improve and businesses resume growth.
Final thoughts.
During difficult circumstances, it is natural for businesses to make rapid judgements to save money and stay afloat.
However, especially when dealing with human capital, it is critical to pause and consider the long-term ramifications of your actions.
“All the indicators show that we’re heading towards some kind of recession, but what if all that changes in six months’ time?” Matt says. “Companies need to consider how volatile things are and ensure that they’re putting long-term strategies in place.”
