March 24 , 2019

Happy New Year to Recruiters, Now Prepare for the Downturn

If you work in recruiting and you are not personally worried about an upcoming downturn, realize that many others are thinking about it. For example, recent data from Google now reveals that searches for the word “recession” are at their highest level since the last recession ended (November 2009). And the number of current factors that could cause a downturn from Brexit to tariff wars are too numerous to mention. Technically the U.S. hasn’t had a recession in nearly 10 years; the law of probability alone suggests that one is on the horizon.

Although I don’t know anyone (including myself) who has special powers to precisely predict when a downturn will occur, I do know that any business function that wants to be strategic must be forward-looking, and that includes planning for the worst. If you have been in this field for more than a decade, you already realize that recruiting almost always undergoes dramatic budget cuts and headcount reductions. So, if you want to minimize dramatic budget cuts and maintain your personal job security, start preparing for the inevitable downturn today.

It’s Your Choice … Be Prepared or Suffer the Embarrassment of Appearing Surprised

Almost every strategy and the recruiting tool that is currently used must “shift” when the unemployment rate rises and the power shifts away from the candidate and back to the employer. Even if you don’t know precisely when a downturn will occur, there are multiple benefits tied to preparing for one in advance with a “downturn in recruiting plan.” Those benefits gained from shifting your strategies and tools with the changing economy include:

  • Planning makes you look strategic — The mere process of planning ahead, forecasting, and having an alternative “plan B” will impress both HR and corporate executives. In a fast-changing volatile world, being forward-looking and preparing for dramatic change are becoming essential characteristics.
  • Forecasting gives you lead time to prepare — Put more of an emphasis on forecasting when you expect a major change in the business or economic environment. The mere process of developing a plan forces you to begin to forecast. In order to accurately forecast, recruiting leaders will need to identify and then track the telltale signs or precursors for a downturn. Those precursors often include the business growth rate at your own firm and your volume of applications per job. Externally, recruiting needs to begin tracking and forecasting regional unemployment rates, employee quit rates, and layoffs and hiring rates at other firms in your industry.
  • Sourcing becomes easier when unemployment rates are higher — more qualified individuals are available due to layoffs, high unemployment, and hiring freezes. Shift your sourcing approach and primarily target the cheaper and easier-to-hire “active prospect.” With a higher percentage of applicants desperate for a job, you can reduce your more expensive direct sourcing and focus on active approaches like job boards and career fairs, which will become much more effective during a downturn.
  • A reduced hiring volume will allow your recruiters to focus on quality — As the downturn slows business growth and employee turnover at your firm, the number of open reqs will likely drop dramatically. Initially, that lower volume of requisitions will allow your recruiters to spend more time on top candidates and improve their candidate experience. Unfortunately, if hiring volume shrinks too much, budget pressures will force recruiting leaders to demonstrate the ROI of direct sourcing.
  • The types of jobs being targeted will narrow — in addition to a lower volume of openings, as business priorities change, the types of jobs that you fill will also likely change. So, recruiting will have to change its priorities with an increased emphasis on revenue-generating jobs and away from overhead jobs during a down economy. In order to gain a competitive advantage, at many firms the limited hiring that will occur will be focused on new technology and AI-type jobs. However, at other firms that don’t have the budget for new technology, physical labor jobs will remain dominant.
  • Candidate assessment and closing are much easier when applicants are unemployed— Shifting to primarily targeting active jobseekers, your time to fill becomes less important. And as the power shifts away from the candidate, you can take more time and be pickier in your assessments because you have many more applicants to choose from. Selling them also become easier because candidates will begin focusing more on simply having a job or job security rather than on pay and benefits.
  • An opportunity to hire top recruiters — Lower hiring volumes and HR layoffs will mean that it will be much easier to find trained and experienced recruiters. Take advantage of this opportunity by releasing your weak or mediocre recruiters and replacing them with a superstar or two.

Challenges Within a Downturn That Can’t Be Ignored

Within the recruiting function, there are of course several negative possibilities that you need to plan for. They include:

  • Vendor reliability becomes a major issue that most will ignore — If you ignore all of the other bits of advice in this article, don’t ignore this one. In a major economic downturn, both corporate budgets for buying new HR technology and venture capitalist dollars for funding HR startups literally dry up. If your vendors go away, you will not be able to maintain operations and you might not be able to recover “your data” from them. So don’t trust verbal assurances; have your vendors prove their viability and data security.
  • Job security for individual recruiters — During significant economic downturns, recruiter job security becomes problematic. If you want to improve your chances of staying on as a recruiter at your current firm, demonstrate the quality of hire (i.e. your new hires perform significantly better than others do) of your new hires. You can improve your job security at any firm by becoming an expert in data-driven decision-making, quantifying in dollars the impacts of great recruiting, and evaluating new recruiting technologies. Learn one other high-impact HR or business area as a backup next job at your firm.
  • Recruiting will have to excel at hiring a higher percentage of contingent workers — During tough economic times, it’s important for any firm to be able to rapidly cut costs by reducing labor costs. This often means “releasing” employees, which can be expensive. And as a result, it becomes more important to increase the percentage of your workers that can be more easily “released” because they are contingent workers. This means replacing some vacancies with contingent workers and converting some traditional “permanent” jobs to a contract basis. Unfortunately, corporate recruiting doesn’t usually excel at recruiting contingent workers, especially when their percentage of the workforce might rise to over 40 percent of the workforce.
  • The threat of dramatic budget cuts requires a strong business case — Most COOs and CFOs have a fixed mindset on the premise that recruiting and retention are no longer important during business downturns. As a result, work with the CFO’s office to “dollarize” the economic impact of great recruiting so that your impacts can be unambiguously compared to those of marketing, finance, or supply chain. Next, study where you’re recruiting budget cuts occurred at your firm during the last downturn. Then target your business case to maintaining funding in those previously cut areas of recruiting. Assume that total RPOs will be considered as a low-cost option by your executives, so prepare your case against it.
  • Be prepared for dramatic cuts in HR technology budgets — Unfortunately, during a downturn, executives seldom want to invest in any new technologies within an overhead function. So if you’re planning on buying some new technology, either speed up the process or drop the idea if you don’t think there will be money to support the implementation and operation over time.
  • Fight any attempt to institute a complete hiring freeze — Once your CFO believes that your business is about to enter a downturn, they frequently take the knee-jerk reaction of instituting a corporate-wide hiring freeze. Across-the-board freezes make no sense because in any firm, there are business units that are growing while others are shrinking, and as a result, only a “selected” spot freeze on hiring makes more sense. Hiring freezes also cause managers to retain weak employees out of fear they won’t be able to refill their position. Other firms will be actively releasing top talent during downturns; a complete freeze also prevents you from “cherry picking” from this rarely available pool of top talent.

Final Thoughts

Better to be over prepared them than overconfident. The proper time to begin planning for a downturn and to begin worrying about your job security is today. There is almost no downturn preparation investment that doesn’t have a high ROI for your firm and yourself. Even if you’re not convinced to take action now, whenever you hear the rising multitude of “downturn warnings” from your colleagues and in the press remember you were warned here to plan ahead.

Author’s Note: If this article stimulated your thinking and provided you with actionable tips, follow or connect with me on LinkedIn, subscribe to the ERE Daily, and hear me and others speak at ERE’s April event in San Diego on “recruiting in a candidate-driven market.”

As seen on ERE Media on 1/7/2019.

About Dr John Sullivan

Dr John Sullivan is an internationally known HR thought-leader from the Silicon Valley who specializes in providing bold and high business impact; strategic Talent Management solutions to large corporations.

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