Talent Shortage and the Recession

 

“Between a rock and a hard place, you will always be my tree.

You never were a sycamore, never quite an evergreen.

To me, you are simply Willow.”

from What I Can’t Speak Clearly by Alex Cheasty

 

The R-word is top of mind. According to the traditional definition—two consecutive quarters of negative gross domestic product—the US entered a recession this summer. A more sophisticated analysis taking other factors into account leads many economists to forecast a global recession for 2023.

And that means that businesses are turning to the usual responses: Capital investments are postponed. Operating costs are constrained. And, perhaps most importantly, headcount is reduced. It’s a tried-and-true response to an economic downturn: trim the sails, batten down the hatches, and wait until the storm passes.

However, the headlines are confusing: According to Challenger, October saw the highest number of job cuts announced in a single month since February 2021, when 34,531 job cuts were recorded. It is the sixth time this year that cuts were higher in 2022 than in the corresponding month a year earlier.

So far this year, employers announced plans to cut 243,338 jobs, which is down 16% from the 288,043 cuts announced in the first nine months of 2021. It is the lowest recorded January-October total since Challenger began tracking monthly job cut announcements in 1993. 

And the US economy added 261,000 jobs in October alone, and the unemployment rate only rose from 3.5% to 3.7%, according to the latest monthly employment snapshot from the Bureau of Labor Statistics released last week.

But not only the statistics are inconsistent. Most economists believe this recession will be fundamentally different than any that have come before. And it is putting businesses between a rock and a hard place.

As LHH concludes, “for perhaps the first time ever, the world’s business organizations will be forced to endure declining economic growth while also trying to somehow manage a pre-existing global skills shortage.

What it means is that all the traditional strategies that business organizations have used in the past to weather recessionary storms will be of little value. This is a new type of economic crisis, and new approaches will be needed to ensure survival.”

The skilled talent shortage is ever-present. Rand Europe estimated that a shortage of skilled workers in digital industries will cost the 14 largest economies in the G20 a staggering $11.5 trillion in lost GDP growth by 2030.

During the COVID-19 pandemic, another fundamentally new experience for all companies, and as restrictions shut down business-as-usual, companies responded with several strategies, some that worked and others that did not; some that were new and innovative and others that reflected the tried-and-true:

• Layoffs.

• Hiring Freezes.

• Work from home.

• Taxpayer-funded support programs.

• Furloughs – temporary, non-permanent layoffs.

• Contracting.

Some of those, especially some of the more innovative ideas, provide a blueprint for what to do now as we expect a recession. Because the often indiscriminate action of layoffs deprives companies of much-needed talent. Especially when that talent is now necessary to:

• Make the product portfolio recession-proof.

• Identify and implement additional channels to market.

• Lead a sales-driven turn-around.

• Enter new markets to spark new growth.

…and so many more steps that help companies navigate the choppy economic waters.

And at the same time, that does not stop companies from taking those steps. But there is an alternative to ‘all or nothing’: Fractional executives bring those much-needed talents at less than the cost of a full-time hire. They are indeed the perfect alternative, the one that can get a company out from "between a rock and a hard place."

Fractional executives already experienced broader recognition and a boost in opportunities during the 2008 financial crisis. The pandemic resulted in yet wider acceptance of remote, part-time work. And last year, when demand was high and the skilled labor market was tight, fractional executives provided an additional talent pool that companies tapped into.

Overall, the future of talent management and, with it, the success of companies will hinge on the ability to be more tactical and selective around layoffs. Some employers are showing us the way to this new kind of thinking by embedding a number of key strategies in the core of their talent management functions.

1. Building and sustaining a true internal talent mobility strategy.

2. Embracing the gig economy and new employment formats.

3. Becoming a strategic player in external recruitment.

4. Maintaining a strong alumni network to bring back top talent.

5. Re-recruiting your employees through active learning and development support.

  

Talk to us about your strategies, especially around new employment formats.

__________________

LHH - How to prepare if a talent shortage and recession collide

Challenger – October 2022 Job Cuts Report

Photo by the author