Managing Recruiting During an Economic Downturn

A key question in every recruiting manager's mind these days is "how will recruiting and talent management be impacted by the economic downturn?"

Periodic economic downturns quite often negatively impact the recruiting function through hiring freezes and dramatic budget cuts in recruiting as organizations seek to "contain costs." However, this economic downturn is different. Traditionally, when the economic cycle peaks and starts its cycle downwards, everything related to business and recruiting declines; events are consistent and relatively predictable.

Instead of recruiting heading straight down, it will be volatile. The demand for talent management services will go radically down, then back up again in short spurts, and then down again. This volatility will require more planning than ever before from the recruiting function. Instead of planning for one consistent, long, downward spiral with associated layoffs and hiring freezes, organizations will need to prepare for spurts of growth and continuous hiring in some areas while layoffs occur in others. Some might call these actions "right-sizing" the workforce, but that would imply that organizations are much better at forecasting and workforce planning than most actually are.

There are several reasons why hiring will continue:
The volatility in credit markets
Globalization
The need by organizations to continually innovate


The first and perhaps most important cause of volatility will be the chaotic availability of credit and capital. The continued uncertainty related to financial markets will cause oscillations or "spurts" during which capital will be easier and then harder to get. This volatility will cause firms to grow and to hire in spurts.

A second cause of volatility is globalization. In a truly global business world, there will almost always be some degree of economic growth in emerging economies scattered around the world. Because many major US companies now book a majority of their revenues abroad, pressure to keep corporate functions fully staffed will continue despite possible layoffs in production and client service groups.

A third reason volatility will plague the recruiting function is relentless consumer demand for new innovative products. Despite the downturn, consumer demand remains high. When negative news erupts, those in Western societies go shopping!

Because the rate of innovation among competitive firms is unlikely to slowdown, firms will still need to rapidly innovate in their products and business processes. The demand for relentless innovation will continuously alter the skills needed by a firm at any particular point in time. Firms will need to learn how to continuously hire workers with new skills, while simultaneously releasing workers with obsolete skills with surgical precision. Truly strategic firms see economic downturns as an opportunity, in part because it's now faster and cheaper to "buy" talent rather than to "develop" existing talent.

*Ref: Dr. John Sullivan