Is your workforce strategy ready for economic uncertainty?
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null Is your workforce strategy ready for economic uncertainty?
Is your workforce strategy ready for economic uncertainty?
Organisations are bracing for an uncertain future.
The economic after-effects of the coronavirus pandemic, coupled with the continued conflict in Ukraine has ‘ushered in skyrocketing inflation, a rapid normalisation of monetary policies and started a low-growth, low-investment era’, according to the World Economic Forum.
The impact on organisations is already being felt across the globe.
In their most recent ‘State of the Workplace Report’, the Society for Human Resource Management named inflation as the ‘biggest challenge and fastest-growing concern’ for HR professionals in 2023.
But in spite of what some are seeing as a ‘gloomy’ start to the year, a level of relative - albeit contained - optimism persists.
56% of executives surveyed in a recent Everest Group webinar stated they were ‘somewhat’ or ‘highly’ optimistic when describing their business growth outlook for 2023.
Similarly, in their survey of global CEOs, KPMG found that although many anticipate a recession, the majority remain optimistic regarding the global economy over the next three years, with 85% of executives ‘confident’ about their organisational growth during this period.
It’s evident that this is a recession with a difference. A post-pandemic boom, digital transformation and widespread skills mismatches have laid a very different foundation; one in which there are two job openings for every individual currently unemployed.
Here at Hays, we’ve weathered our fair share of economic cycles, partnering with our clients and customers to build the workforce strategies that have enabled them to survive the storm. In this latest blog, we combine industry insights and deep market expertise to offer our take on what this economic uncertainty means for your workforce strategy.
We still need to source high-quality skills
Reports of mass layoffs and hiring freezes in ‘big tech’ companies including Google, Meta and Apple sent shock waves across the world of work.
But as we advise our customers in the months ahead, we see the state of hiring as more complex than simply halting or reducing the volume of workers. Matthew Dickason, CEO of Enterprise Solutions at Hays, offered his thoughts in his latest ‘Dickason Debrief’:
“The COVID-19 pandemic prompted a frenzy for many workforce strategies, with companies investing heavily in their capacity to meet the surge in demand. Populations increased dramatically, with a preference for permanent staff. Organisations are now tapering their hiring strategies with some moving back towards their pre-pandemic populations”.
The reality is closer to a form of workforce correction, as organisations compensate for the surge in activity during the peak of the pandemic, realigning their scope and scaling back investments in ‘moonshot’ projects.
A narrow focus on cutting jobs and maintaining productivity will be detrimental not only in terms of pursuing growth but will also impact the morale of a workforce that has endured enormous socio-economic upheaval over the last few years.
Organisations should remain agile in their approach towards hiring, ‘since it’s unclear whether companies will need to shrink their workforce, add new skills, or do both’.
You’ll need to turn the taps on your workforce strategy
During previous periods of economic uncertainty, contingent workers have often been the first to face layoffs.
But this recession is expected to be quieter, slower and longer, with employers ‘hoarding’ labour after their recent struggles to recruit. Unemployment is expected to remain low, with the OECD forecasting a small rise from the current 5.17% of the labour market without work. We’re seeing this first-hand across the Hays network, with industries such as Technology, Life Sciences and Finance reporting an increase in both job openings and compensation.
What’s more, the coronavirus pandemic highlighted the value of non-permanent workers: skilled, flexible and accessible contractors enabled organisations to mitigate skills gaps, maintain project delivery and react to fluctuations in demand.
With the global gig economy posting an estimated $5.4 trillion in revenue during the peak of the pandemic, leveraging contingent labour will be vital in the face of an increasingly uncertain economic outlook. Forward-thinking organisations are already mixing the ‘taps’ of their workforce strategy, flexing across multiple supply options in order to leverage the benefits offered by both permanent and non-permanent employees.
Cutting back on costs, not expertise
While employment rates are expected to remain relatively stable, that is not to say that organisations won’t be searching for opportunities to identify cost efficiencies in their workforce strategy, particularly in the contingent labour category where a greater number of variables impact the terms – and cost – of service delivery.
- Visibility: People analytics are a key component in reducing workforce spend. Real-time market insights including salary benchmarking per role and supply/demand forecasting across industries and skillsets enables organisations to identify the right people, at the right time and - crucially - at the right cost.
- Location: Organisations are broadening the parameters of their search for skills, and significant cost savings can be achieved with a considered mix of nearshoring and offshoring. Europe, for example, has a ‘rich availability of expertise’, with the regions offering excellent opportunities to leverage the wage arbitrage of repositioning teams and migrating functions, according to EMEA Managing Director Jon Mannall.
- Variety: Organisations could take this opportunity to diversify their suppliers, with increased competition ensuring the greatest value and performance.
Our latest report, ‘Identifying cost efficiencies in a challenging economic climate’ explores 12 levers available to organisations eager to secure significant cost savings, including tenure discounting, off-contract spend and rate card management. Discover all twelve strategies here.
Facing financial uncertainty, together
Surrounded by so many uncertainties, some companies may resort to cutting back on their workforce spend in a bid to achieve short-term cost savings.
But this is an economic climate unlike anything we have seen before. Organisations will need to balance flexibility, cost and risk to build a workforce strategy that can flex to an ever-changing environment. After all, ‘economic cycles come and go, but the need for talent is never ending’.
Speak to the team at Hays today and discover how we can support your strategic ambitions.
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