One of my pet peeves in HR is the “overuse” of hiring freezes. All too often, senior managers respond to a minor budget crisis by immediately putting on a hiring freeze. In some companies the freeze seems to be a predictable practice that is repeated once or twice a year, often with negative consequences. As a recruiter, freezes have a direct impact because, during a freeze, even if a “Michael Jordan” walks in the door, you would have to send him away! It makes no sense. Are Employees Costs Or Revenue Generators? There are two basic ways to look at employees. One is as cost items (an accounting expense), where the fewer you have the better. But the second and best way to look at employees is as revenue generators. In this case, the fewer employees you have in revenue generating positions, the lower your overall profit will be. Vacancies (caused by freezes) may end up turning hiring freezes that were designed to reduce costs into revenue-reducing efforts. There are many other unintended consequences of unnecessary “hiring freezes” and quite a few reasons to avoid using them. Reasons Why Hiring Freezes May Be Bad For Business
- They weaken managers by not forcing them to confront low performers. It gives managers an excuse not to make tough people decisions.
- There is no evidence that hiring freezes actually save money. “Headcount” employees are often just replaced with consultants, temps, and other “off the book” spending.
- It sends a message to analysts, potential applicants and employees that our firm is not in a growth mode. Long or frequent “pauses” in recruiting may also send a stronger message that the company is in trouble.
- Within a single company, some businesses are usually growing, while others are shrinking. By freezing jobs in the growth divisions you punish top-performing divisions and impact their ability to continue to grow.
- When people leave the firm (during a freeze) their position goes unfilled. This means that other employees must now do double duty because replacements can’t be hired. This can cause frustration and additional turnover. It may also impact quality and send a message to the customers that the company is slipping.
- Managers may be reluctant to rid the firm of their low-performing employees because they fear they will not be able to re-fill those positions if a freeze is on.
- Most freezes are really not true freezes. They don’t really “stop” hiring, they just slow up requisition approvals and make them painful. A large amount of a manager’s time is wasted “getting around” the freeze. It can also give managers a bad taste for hiring of any kind, which may result in managers not devoting as much time to hiring when they are going through the regular process.
- Top talent may become available during the freeze and they may end up at a competitor. In a war for talent, waiting means that the top candidates will not still be around when the “thaw” occurs.
- Freezes have a tendency to force managers to hire “a bunch” of people early in the fiscal year (whether they are needed then or not) in order to avoid losing the positions in an all too predictable year-end hiring freeze.
- They can force managers to make rush decisions during the hiring process in order to avoid a possible upcoming freeze.
- They give managers another chance to “blame” HR or top management for not being able to hire people. Managers need to be given the “freedom” to succeed (or fail) through their own decision making.
- It sends a message to your competitors that you are weak. This may cause them to increase their efforts to recruit away your employees.
- Freezes frustrate and “idle” recruiters. The best get rusty and become out-of-touch with candidate needs. Having idle recruiters is a waste of money and it can also foster turnover among those recruiters that love “action.”
- Freezes may cause employees to hesitate before making referrals because a freeze may keep their referrals from getting hired.
The Recommended Approach To Freezes A better way to approach to freezes is to educate managers about the different options they have for cutting costs and increasing revenues.
- When it is important to slow down expenditures it is often better to do it through budget control (controlling dollars), rather than through a hiring freeze or headcount tracking.
- Managers should be encouraged to fire low-performing employees periodic basis.
- Managers need to develop plans to transfer people from low return areas to those with higher return.
- You might offer short-term incentives to employees for increasing productivity or for reducing costs.
- If a manager decides to use a hiring freeze, they should limit the freeze to non-key positions. Otherwise a vacancy can cause a significant loss in revenue and negate the projected cost savings from the hiring freeze.
- If freezes are used, metrics should be tracked to see if overall costs are actually reduced by the freeze.
Use tough times as an opportunity to access your manager’s ability to make good people decisions. Fire those who can’t increase revenue and cut costs by using a variety of tools in addition to just freezing hiring.