Why hiring, not firing, is key in Q4
A recent PwC survey of business leaders showed 63% have changed or are changing processes to address labour shortages. This is up from 56% in a January 2022 survey. The survey also revealed that 83% are focused on their growth strategy rather than recession. To activate growth strategies, having the right talent within the business will be key to execution throughout Q4.
Hiring instead of firing
Although some businesses are preparing for an economic downturn, this isn’t currently affecting the rate of hiring at major companies. In previous years, many firms faced lay-offs and hiring freezes due to the pandemic, but now many high-paying businesses are ramping up.
- L'Oréal aims to have 25,000 global enrolments across its 2022 L’Oreal for Youth programme.
- Deloitte announced plans for 6,000 new UK hires, including 5,000 new auditors over the next five years. This comes after the firm hired 500 apprentices in the last financial year.
- John Lewis & Partners intends to hire 10,000 staff over the 2022 festive period.
In September 2022, City AM reported that Deloitte plans to recruit 3,500 new consultants in a £220m hiring spree. This will increase the size of its consulting workforce by 40% over the next five years, from 7,500 to around 11,000 by 2027. The hires are to include:
- 725 app and web designers
- digital consultants
- cloud and machine learning engineers.
PwC has around 328,000 employees around the world, up from 295,000 at the end of 2021. The firm is believed to be ahead of pace with its target set last year to hire 100,000 additional professionals by 2026.
The big four typically don’t tend to suffer badly in economic downturns since most of their work is government regulated.
Although Meta and Google are rumoured to be implementing recruitment freezes, in reality, most big tech companies are continuing to hire. This is true for contractors and for specific business-critical roles. Office for National Statistics (ONS) figures showed that the tech sector increased its employment by 56,000 in Q2 of 2022. This is one of the biggest quarterly rises in recent years. Many sectors are likely to expand their tech teams over the next 12 months, with education, healthcare, and technology leading the way.
Freeze first. Think later
One size doesn’t fit all and when it comes to a recession, as downturns don’t hit all industries, geographies, and companies the same way and at the same time. At the first hints of an economic downturn, a common reaction by a company is to implement a hiring freeze. This is something many organisations implemented in the 2008 recession, subsequent downturns, and during the COVID-19 pandemic. It appears lessons have been learned and freezing recruitment isn’t the best course of action.
The problem with hiring freezes
A blanket hiring freeze hinders expansion in growing business units. Within most large businesses, even during challenging times, some departments grow, others shrink. By freezing hiring “across the board,” businesses negatively impact their fast-growth areas and their ability to grow. For global companies, some locations may grow despite the downturn, and a company-wide freeze will threaten a multinationals’ competitive position.
At the first hints of a recruitment freeze, hiring managers may rush to hire. In this panic to beat a freeze, they may recruit low-quality candidates to avoid losing their positions permanently. And even when freezes are in place, HR and manager time is wasted trying to "get around" freezes and justifying an exception.
Future recruitment challenges
Long-term freezes may weaken future recruiting capability resulting in recruiter and talent acquisition layoffs. Not paying attention to the talent and skills market, employer brand and candidate expectations will limit future recruiting capabilities once the upturn begins.
A false sense of security
A common workaround by hiring managers can be ‘not counted as headcount’ recruitment which, for a business, may be more expensive. Hiring freezes won’t save money when budgeted “headcount employees” are replaced with consultants, contractors, freelancers, and interns. They can end up being more expensive than regular employees.
A reduction in sales or revenue
Revenue-generating staff are sometimes seen as “expense items” rather than contributing assets. When these positions go unfilled, there is a lost opportunity to generate revenue. Forward-thinking businesses may choose to exempt these roles from a hiring freeze.
Employee morale and motivation
Before the COVID-19 pandemic, in 2019, burnout touched almost 50% of the workforce. Hiring freezes can exacerbate these pressures with 40% saying that workplace stress would be reduced if employers hired more people. Understaffing frustrates top performers as they realise there are fewer opportunities for promotions, salary increases, or bonuses. They may seek new opportunities, or competitors may headhunt them.
Freezes are loved by competitors as they know a business is struggling. This can trigger a recruitment drive as they increase their efforts to recruit your top talent and entice potential candidates.
Hiring freezes impact stock prices, which are likely to already be lower. A freeze sends a message to shareholders and stakeholders that the business is not in a growth mode or facing trouble. This could further damage stock values. At these times, PR and corporate communications need to minimise negative publicity about hiring freezes.
It appears that in late 2022, companies are adopting a more conservative approach in the form of job cuts and hiring freezes. Coming out of the pandemic, there was a huge demand for workers. Firms that furloughed staff and consequently made them redundant needed to recruit again. Companies desperately sought out candidates and aggressively hired.
Taking a longer-term view towards hiring amidst recessionary fears will provide more durable results. Economic cycles come and go, but the need for skills is continual. Companies that understand this will continue to invest in their workforce, even during challenging times, so they can win market share despite revenues being down.