When the world economy dips into a recession, everyone feels its effects. Even staffing companies are seemingly insulated from its volatility.
That’s because every company relies on internal resources as much as external ones to stay productive and meet new business demands.
A downturn in the economic environment affects all of your staffers, from entry-level to executive-level or management consultants, who need to be paid less for their services and offered new incentives to remain loyal and motivated.
In this blog post, you’ll learn how an economic downturn can impact your staffing company in ways that go beyond the obvious salary cuts and hiring freezes.
You’ll discover practical tips on how to keep your team members engaged and motivated during such times.
Businesses are struggling with skill shortages
Skills shortages are a common and painful part of recessions. They are exacerbated by the low growth rates experienced since the 2008 financial crisis and the weak global demand for skills.
The current economic climate has exacerbated the problem and the issue is particularly acute in the digital sector, which is experiencing a chronic lack of qualified engineers, software developers, and data scientists.
This shortage is expected to persist into the next few years and the short supply of skilled workers is expected to hamper businesses’ ability to innovate and grow.
This shortage is expected to persist into the next few years and the short supply of skilled workers is expected to hamper businesses’ ability to innovate and grow. Moreover, understaffed companies are likely to experience higher levels of stress and burnout, as employees are likely to work longer hours to cover for absent colleagues or be more likely to leave the company.
Uncertainty fueling long-term digital transformation
Uncertainty can have a significant impact on a company’s transformation initiatives. Companies that are experiencing economic instability may hesitate to invest in long-term initiatives such as digital transformation for fear of the uncertain future.
When the market is in a period of transition, it is normal for businesses to experience uncertainty and volatility, which can be challenging for transformation initiatives.
New initiatives require long-term investments that may not be budgeted for during a downturn. As a result, a company may choose to invest in short-term initiatives that provide a profit boost but do not contribute to the organization’s overall transformation efforts.
In the worst-case scenario, a downturn can delay transformation initiatives because the organization is unable to make long-term investments in the face of uncertain short-term financial outcomes. This can result in delayed transformation outcomes and a company stuck in an evolutionary rut.
Job Demand and Supply
When times are tough, businesses are likely to seek ways to reduce costs, including cutting the number of staffers. During a down economy, the demand for employees decreases, and the supply increases. This means that companies can now hire lower-cost workers, such as recent college graduates and older employees who have recently retired.
The hiring of lower-cost workers could also occur if companies are seeking cost cuts but have run out of budget for rehiring former employees. These cost cuts are likely to negatively impact the company’s ability to meet both current and future requirements.
Shortage of labor could also occur during a downturn, especially in the service industry. When the demand for certain services such as nurses and daycare workers decreases during a downturn, the supply increases and the demand for employees in those industries decreases.
This could result in a shortage of staff in certain industries such as healthcare, finance, education, clean energy, and hospitality.
Shortage of labor
The job market is expected to remain tight for the rest of the year and even into 2020. Businesses are likely to be reluctant to hire new staff because of the uncertain economic climate.
In addition, lower-cost workers who were hired during the downturn could be re-hired and they don’t necessarily want to leave their current employers. The shortage of workers expected in certain industries could also lead to longer hiring processes.
As a result, businesses will not be able to hire the optimal staff members and this could result in delayed transformation, increased operational inefficiency, and reduced customer satisfaction.
Strategies to improve the workforce
Here are a few strategies that you can use to improve the workforce and retain your current staff members:
- Offer flexible working hours. Many businesses are moving towards more flexible work arrangements, such as a gig economy or a hybrid work model, where employees work a set number of hours per week, have a set number of days off per month, or have a set number of weeks off per year.
- During a down economy, employees might value the flexibility offered by these work arrangements.
- Offer stock options or share grants. These incentives let your employees choose how to receive their earnings rather than accepting a fixed salary.
- This could help you retain talent in your organization who may have been tempted by better-paid opportunities or who have a family to support.
- Make sure that your benefits are competitive. Make sure that your generous benefits are comparable to, or better than, the competition’s.
- Offer training and development to your employees. This is a good way to keep your employees engaged and up-to-date.
- Invest in employee growth opportunities. This is one of the best ways to retain your current employees and make sure that they have the training and resources they need to succeed.
Conclusion
Financial uncertainty is a fact of life in the business world. When the economy sours, salaries are cut and job postings decrease.
This can be especially difficult for staffing companies, as they rely on new business as well as the internal resources of their own employees to stay productive and meet new demands.
In this blog post, you’ll discover how an economic downturn will impact your staffing company in ways that go beyond the obvious salary cuts and hiring freezes. You’ll discover practical tips on how to keep your team members engaged and motivated during such times.