Forget what you’ve learned about recruiting from previous recessions.
In the past, economic downturns have been times to find talented applicants among the casualties of layoffs. But this year, many companies are so vested in keeping their employees on the payroll that missing work and showing up to the office drunk might not even cost an employee their job.
The shift is the result of labor hoarding – keeping employees on at a time when companies would normally lay them off, such as during a recession or when profits are down. While there have been some high-profile announcements of layoffs in recent weeks, economists say labor hoarding is so widespread that if we have a recession, it may be less painful than usual because working people will continue to spend money.
If you're wondering why employers are so skittish about losing employees, you can blame it on the pandemic, says Chris Corde, global talent executive with consulting firm Korn Ferry. Companies learned that cautionary layoffs often end up being more expensive than holding onto their talent, Chris writes. For the last two years, recruiters have struggled to fill vacant positions by tempting prospects with sky-high salaries and costly benefits. Widespread layoffs in a recession could lead to another talent shortage — and more money spent recruiting, training, and rebuilding when the economy roars back to life.
Laying off employees during a downturn can also hurt a company’s future recruitment efforts. What if you need to recruit those same people six months from now? asks Albert Fong, head of product marketing for software development company Subskribe. “People have long memories, and preemptive or knee-jerk headcount reductions can ultimately come back and haunt you and your brand,” Albert writes.
While labor hoarding may be good for the economy, it creates unique challenges for recruiters and talent development professionals. Here are six ways labor hoarding is changing the talent game.
1. Recruiting candidates may get even harder
Fewer people switch jobs during a recession. Employees simply aren’t as willing to go looking for greener pastures during uncertain economic times. If layoffs don’t force them out, recruiters will continue to have a smaller talent pool to choose from when filling key positions.
That means recruiters may have to dig deeper to find talent in places where other companies aren’t looking. They also may have to work harder to convince prospects to apply for a new job during a period of economic uncertainty, making their branding efforts more important than usual. Talent acquisition professionals may also need to experiment with other ways to attract applicants such as having fewer job requirements and easing the application process.
2. DEI goals may be more difficult to meet
If recruiters are having a tough time filling positions, it stands to reason that their diversity, equity, and inclusion targets may also become elusive.
Most job seekers want to work for organizations with a diverse workforce, a Stanford Graduate School of Business study found. To keep attracting diverse candidates, recruiters may need to become more vocal about the organization’s achievements in the DEI space.
3. The best candidates may come from within
If you want the best talent for your organization, external recruiting is only part of the solution, says Paul Chapman, sales director at IT company Endava. Recruiters will also have to look for talent inside of the organization who can take on new roles. “Any talent shortage can only be resolved by people learning and growing, upskilling and diversifying,” Paul adds.
There's also a financial incentive to hiring from within. LinkedIn’s 2022 Workplace Learning report found that 79% of learning and development (L&D) professionals said it is less expensive to reskill a current employee, or give them the skills and training they need for a different position, than to hire a new one.
One company that has leaned into the idea of hiring from within is Marriott International. The hospitality giant has a 12-18 month program called the Global Voyage Leadership Development program for employees who want training to move to such departments as accounting, culinary, event management, and human resources. The program has helped to fill 55% of leadership positions in the company’s Australian market with internal candidates.
4. Upskilling and reskilling will become more critical
It’s one thing to see why internal recruiting must be part of your overall talent acquisition strategy. It’s another to make sure employees in your organization have been trained and have the skills needed for key roles. That’s where the value of having an internal mobility program comes in.
Such a program ensures that employees have the training and guidance they need to improve their skills and attain new roles within the company. A culture of developing talent must exist at all levels of the organization and not just where there is a talent shortage, points out Harmony Baird, senior enterprise accounts director for recruiting firm Manpowergroup.
“I’ve noticed a lot of companies are investing in reskilling non-IT workers for in-demand careers in software engineering and data analytics but what about upskilling existing mid-senior level technical employees to keep their skills relevant?” Harmony says.
5. Learning and development can increase loyalty and engagement
There is another benefit to upskilling and reskilling employees so they can do their jobs better and take on more senior level positions. Companies that promote from within and have high internal mobility have higher retention rates. In fact, employees stay almost twice as long at companies with high internal mobility as they do with companies with low internal mobility.
An employee’s chances of staying with a company at the two-year mark is 75% if they’ve made an internal move in the organization, compared to only 56 percent if they haven’t made an internal move, according to LinkedIn’s Global Talent Trends report. On top of that, employees who believe their skills aren’t valued by their employer are 10 times more likely to be looking for a new job.
By giving employees growth opportunities such as training, stretch assignments, mentorship, and job shadowing, employers can let them know there is a path for advancement. Organizations that have mentorship programs have 20% lower turnover than companies that don’t. “As many of us prepare for a recession, investing in growing the skills of both emerging talent plus existing will be key in creating trust and loyalty during uncertain times,” Harmony adds.
6. Talent development can give external recruitment a boost
Labor hoarding may keep employees on the payroll, but some talent professionals argue for doing even more. For example, Alec Rahman-Jones, managing director of talent acquisition company Phaidon International, says companies should not just hoard employees, but rather they should continue hiring because companies that hire consistently fare the best.
Recruiters looking for talent in a tight market can differentiate their companies by pointing to learning and development efforts taking place within the organization. Applicants want to go to organizations where they believe they have a future to advance. They also want to learn. In fact, 76% of Gen Z employees believe learning is the key to a successful career, according to LinkedIn’s Workplace Learning report.
By putting a spotlight on a culture of learning and pointing out how the organization nurtures its employees, you might convince a sought-after candidate to jump ship.
Final thoughts
An economic downturn can impact an organization from top to bottom, but it doesn’t have to lead to layoffs. Instead, organizations can invest in the learning and development of current talent, not only creating a more skilled and engaged workforce, but improving their brand and strengthening their recruitment position for years to come.
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Topics: Recruiting strategy
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