5 Steps Employers Need to Take in a Slowing Economy
The once rock-solid labor market is on shaky ground. Are you ready for what’s ahead?
For nearly two years, filling open positions has been a major struggle for employers, and some companies are still facing labor shortages. But as the likelihood that we’re heading into an economic slowdown grows, the pendulum is shifting.
Layoffs have already become a daily affair in the U.S. with a growing number of companies handing out pink slips. In Europe and Southeast Asia, startups have let go of thousands of employees in recent weeks. While many of the cuts so far have been in the tech industry, which expanded rapidly during the pandemic, job reductions are making their way to financial services companies, automakers, real estate firms, and other sectors.
The weakening global economy means employers will be facing big decisions. What can they do to avoid layoffs? If they’re forced to let go workers, how can they minimize the damage to their employer brands? With hiring slowing down, should companies hold on to their talent acquisition teams? The following are five steps employers should take as the economy stutters.
1. Don’t rush into layoffs without considering alternatives
When you let go workers, you lose some of your most valuable assets, individuals who have a deep knowledge of your business, market intelligence, and ties to your customers. In fact, researchers who looked at every company on the New York Stock Exchange from 1980 to 2016 found that employers that delayed layoffs as long as possible witnessed higher stock returns, two years later, than similar companies that let go workers early on.
“People who leave take years of experience, relationships, and customer value with them,” says Josh Bersin, global industry analyst and dean of the Josh Bersin Academy.
A hasty layoff could leave you regretting your move especially if the economy bounces back quickly and the labor market tightens again.
Exhaust alternatives, whether that means asking employees to take pay cuts, instituting furloughs, or cutting back on benefits.
“The global economy is very volatile, and it’s difficult to predict what’s going to happen,” says Matt Alder, the producer and host of The Recruiting Future Podcast. “Companies need to think very carefully about laying off people because it may be that hiring people back is a very difficult thing to do.”
2. Set up an employee mobility program
Even during a downturn, there might be parts of your business that continue to grow. By redeploying workers, you can minimize the need for layoffs.
“Understanding the skills that your workforce already has,” Matt says, “is something that companies should be doing now. Do we need to hire this many people? Can we move people around internally? Can we reskill people?”
During the pandemic, Verizon embarked on a massive employee retraining and redeployment program that ultimately saved nearly 20,000 jobs. Verizon saw an opportunity to redeploy workers who had been working in Verizon stores that were shut down as a result of the pandemic. The company offered these staffers training in digital skills and, as a result, they were able to transition to jobs in areas like telesales and customer service.
Consider setting up an internal talent marketplace that catalogs the skills and competencies of your workers and matches them with internal job openings. Doing that will make it easier for your talent acquisition teams and hiring managers to spot internal candidates for open positions and possibly spare those workers from losing their jobs.
3. Handle layoffs the right way
While there’s no such thing as a happy layoff, there are ways to create the best possible experience for those who’ve been let go. Carrying out job cuts thoughtfully is the humane thing to do and it can also mitigate possible damage to your employer brand.
There’s a lot at stake. Witness the fierce backlash against companies for laying workers off over Zoom or for outing them and sharing their personal information on social media networks.
It’s important to be transparent in your communications, show empathy for laid-off employees, and provide them with as much help as possible.
“The more generous you can be, the better,” Josh says. “Good severance packages, good reference programs, and alumni connections are all ways to ease the pain. Remember that every person you let go is a human being with a family, career, and lots of connections. You want them to be a brand ambassador and understand that your company is doing good things for them, despite the financial issues you may face.”
Airbnb has been praised for its handling of the layoff of one quarter of its staff in May of 2020. Among the things Airbnb did right: CEO Brian Chesky sent a public message to employees that detailed how he made his decision and told workers who were leaving that it was not their fault.
The company took steps to help departing staffers find new jobs, directing its recruiters to act as an outplacement team. Airbnb also created an “Alumni Talent Directory” where laid-off employees could choose to make their resumes and work samples accessible to potential employers.
“They created one of the first layoff lists, which has now become common practice in tech,” Lars Schmidt, the founder of human resources consulting firm Amplify, said in an interview with Charter. “If you want a blueprint for how to [conduct a layoff] in a thoughtful way, looking back to how Airbnb executed theirs in 2020 is a great example.”
4. Keep remaining employees engaged
Researchers have found that after a layoff, employees who remain at a company experience a 41% drop in job satisfaction and a 20% decline in job performance. Some experience survivor’s guilt or worry their own jobs are in danger.
Layoffs give “existing employees a sense of doom or worry that ‘maybe the management team isn’t telling us something,’” Josh says.
Assuming their jobs are safe, provide surviving staffers with reassurance that this is the case, advises Darren Kimball, the CEO of outplacement firm GetFive. Susan Heathfield, a management consultant, says it’s important to show remaining employees that they’re valued. One way to do that is by having discussions about their career development.
“Start by identifying the additional training, resources, and support each employee feels they need,” Susan says, “and then make sure you provide it.”
5. Put your talent acquisition team to work
During past downturns, employers have been quick to let go of their recruiting teams. But doing that could hinder your ability to compete for talent when the job market tightens.
There’s work talent acquisition teams can be doing now to best position your company for an economic rebound. A slowdown in hiring frees up time for recruiters to focus on important initiatives such as improving employer branding, nurturing relationships with future job candidates, and refining recruiting systems and processes.
“Most organizations haven’t been able to catch a breath in the past 18 months,” says Amy Schultz, global head of talent acquisition at Canva. “You want to retain and develop your talent team and continue to improve your processes and experience.”
Laying off recruiters is, Matt says, a “historic mistake that companies have made every single time there’s been a downturn.” Employers are “not focused on what acquisition teams can do during those quiet times,” he adds, “in terms of building the employer brand and getting better technology in place. This is the opportunity to do that, because when things turn up again and companies return to growth, they’ll reap the benefits massively.”
Final thoughts
During tough times, it’s natural for companies to make quick decisions to preserve cash and stay afloat.
But especially when it comes to human capital, it’s important to pause and think about the lasting consequences of your actions.
“All the indicators show that we’re heading toward some kind of recession, but what if all that changes in six months’ time?” Matt says. “Companies need to consider how volatile things are and make sure that they’re putting long-term strategies in place.”
To receive blog posts like this one straight in your inbox, subscribe to the blog newsletter.
