| 6 min read |
Businesses are facing much economic uncertainty ahead in 2023. An overwhelming majority of CEOs anticipate a recession over the next 12 months, and some firms such as Bank of America predict that more than a half million in the U.S. will lose their jobs next year, leading to an unemployment rate of 5.5%. The OECD forecasts that this rate will also rise steadily in Europe through 2023.
At the same time, the labor market is still competitive and businesses are struggling with skills shortages. Some sectors are expected to continue to add jobs in the years ahead. When it comes to workforce management, we are now swimming in uncharted waters.
For example, the Randstad Sourceright 2022 Global In-demand Skills research shows that roles in cybersecurity, big data, AI, customer service, sales, financial management and others will remain important to many businesses despite recent downsizing. This is because, even with a likely recession ahead, companies must continue innovating, transforming and providing exceptional customer experiences if their businesses are to thrive in more competitive environments. We will most likely see many of those affected by layoffs in the tech sector be redeployed to legacy businesses that are just starting their digitization efforts.
Even for those already on this journey, the downturn economy may be forcing a reckoning around headcount. This doesn’t mean companies can afford to bleed talent. The reason is simple: halting the transformation process now would mean stopping short of fulfilling long-term ambitions and giving competitors an edge. Talent leaders will still be pressed to ensure access to in-demand skills throughout the economic cycle. This means focusing on retention, and building and maintaining the employer brand. The social contract and trust you have built with your workforce can be easily damaged, but are not easily gained.
During leaner economic times, talent leaders must also consider the impact of reskilling and upskilling as a way to acquire the competencies their organizations need without having to add headcount. This will be especially critical for those facing hiring freezes. By assessing available skills adjacent to those that are unfilled, employers can quickly address gaps through both formalized training and microlearning.
While digital, customer-facing and financial management skills will remain in high demand, others skills will become less relevant over the next year. For example, Zillow recently announced it is conducting layoffs, but is also hiring more tech roles to continue driving its digital journey. And as consumers expect more innovation and accountability from businesses, how employers step up to meet these demands will affect their ability to hire the people they need and their brand reputation overall. As a result, forward-thinking companies are currently looking for ways to map skills, amp up internal mobility initiatives and provide support to displaced workers.
It’s clear that business environments will be increasingly complex, and human capital leaders will need to effectively manage conflicting — and likely evolving — needs. So how can you turn this moment of potential crisis into an opportunity for gains?
focus on what’s sustainable
During the past two years, HR executives have been central to many organizations’ ability to survive during the pandemic. Tackling one crisis after another — from flexible working arrangements, to keeping everyone safe, tending to employee well-being and staffing the organization in an extreme talent shortage — they are not only left feeling burned out, but were also left with very little time and capacity to focus on long-term HR strategies.
With hiring demand slowing overall and safety protocols in place, now is finally the time for talent leaders to reset and focus on initiatives that will not only lift their businesses during an economic downturn, but also help them build a sustainable workforce that sets them on a course for future growth.
To do this, prioritize these four fundamental workforce strategies:
1. Keep your business moving forward with retention and internal mobility strategies.
Looking at internal talent is more critical than ever. Establish a well-defined skills taxonomy to thoroughly identify internal competencies, gaps, potential for reskilling and upskilling, and employee aspirations.
2. Protect your brand and your people.
People’s expectations of their employers and the companies they do business with have changed for good following the pandemic. How you treat talent — whether you’re onboarding, developing or offboarding them — will matter even more during challenging times, like an economic recession.
3. Right-size your workforce, but do so with care.
Build and develop an agile workforce — including contingent talent, redeployed professionals and an internal pipeline — that will meet business needs of today and the future. When dealing with redundancies, focusing on the employee experience is critical to your ability to attract and retain talent today and long-term.
4. Use talent, workforce and external market data to help drive your future.
Develop a more effective model for predicting talent demand. Use robust data competencies to uncover meaningful and actionable workforce insights and drive smarter decisions. Create a stronger link between resource planning and market-leading indicators for your business.
Moving forward with these initiatives requires considerable budgeting for time and resources, but with belt-tightening expected in the months ahead, how can you justify such undertaking now? A strong business case and active lobbying for such strategic initiatives will be key to winning buy-in, but supporting evidence is also essential. This leads to key starting points every company should consider.
build an insights-based foundation
Businesses are overwhelmed by information overload; it’s why data scientists and engineers are among the most in-demand skills. HR especially is inundated by all kinds of internal and external data, addressing everything from time to fill to compensation to supply chain. The challenge of extracting relevant and usable insights in support of business decisions is a significant challenge.
Doing so, however, provides a better comprehension of the labor and skills supply, the level of competition for specific skills and the time to acquire them. Companies historically have attempted to incorporate this type of insights in their forecasting, but today’s market data aggregators provide much more granularity than before, enabling HR organizations to achieve more accuracy and drive value in their endeavors.
To optimize your data practices, consider these initial measures:
- Integrate internal and market data streams to provide a holistic and useful blueprint on which your strategy is built.
- Take inventory of existing skills clusters and map their potential to fill in-demand roles within the business.
- Leverage predictive analytics when considering headcount reductions to ensure availability of resources when future business opportunities arise.
- Make use of historical workforce data to provide context around workforce needs, employee engagement and brand building exercises.
These measures help identify existing and forecasted skills gaps, provide guidance on reskilling and upskilling paths and facilitate decision-making on whether to buy, borrow or build competencies. The upshot of having this capability is its usefulness during both times of attrition and hypergrowth.
In a downturn economy, companies are ready to redeploy underutilized resources, and when demand rises, they can use labor market supply data to influence demand planning. This results in better outcomes and actionable plans.
create a sustainable plan of action
Having insight is not enough. Using it to uplift workforce strategies is the end game, and doing this requires actions that are sustainable throughout the economic cycles. During these lean times, it’s much too easy to put off initiatives that don’t offer immediate returns and instead focus on immediate gratification, such as a reduction in force or halting hiring across the board.
Such short-term reasoning is the equivalent of a fast-food meal: satisfying but harmful to the overall health of the organization, and a habit that is difficult to change.
A more sustainable approach drives durable cost savings and efficiencies. Initiatives such as talent pooling, learning and development, internal mobility and employer brand building should be ongoing investments even during economic slowdowns.
Why? These initiatives create organizational agility that is essential to addressing any contingency during times of uber-uncertainty, which we are seeing today.
These investments will require HR to better catalog and fulfill future labor needs. This is why both predictive and prescriptive analytics will be key to optimizing workforce spend and budgeting. It’s also why thorough skills taxonomies are so critical to the long-term success of such expenditures.
Every HR organization will have its own mandate for now, and if that means tending to workforce reductions and halting investments, then these actions should be conducted with the greatest care. How you treat people continues to matter. What talent leaders must focus on is preserving programs that deliver the greatest value over time. Taking a deeper dive to explore return on investment — including soft benefits that are not often captured in conventional ROI exercises — will yield results that truly drive organizational value.
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