Turning Economic Challenges into Employment Opportunities

For the first time in recent memory, we are experiencing a simultaneous softening of the economy and significant labor scarcity. With the consumer price index rising at twice the rate as hourly earnings, potential employees are seeking stability – but not necessarily through employers. More people are willing to dip into their savings and stay unemployed longer in order to find the right job.

What does this situation mean for employers?

hrQ Corporate Vice President Brian Wilkerson warned employers in his recent 2022 Q2 Economic Insight Webinar to not be fooled by the current economic milieu; we should not expect rising inflation and declining consumer spending to resolve labor challenges. Whether or not we are technically in an economic recession, he suggested that organizations use the current environment as an opportunity to reassess and revamp labor strategies in order to attract and retain talent and meet operational needs.

“The truth is we are going to continue to see declines in spending and challenges in the labor force. That’s unlike how most companies think about recessions and recession planning, Mr. Wilkerson said. “I’ve heard people say in the past three months, ‘I’m not too worried because if we go into a downturn, salaries are going to go down, and we’re going to be able to get people again.’ Don’t believe that.”

Instead, he advised organizations to prepare for an economic downturn by taking the following steps:

• Rethink your labor strategy. Organizations should take a disciplined approach to understand what the composition of their labor force should be and develop their “people supply chains” accordingly. Looking strategically at how and from where you source talent can make a big difference. When can you rely on in-house resources, and when should you use a contingent labor force? In the coming year, workforces will increasingly be comprised of different combinations of insourced and outsourced talent. Developing a flexible and cost-effective labor strategy should be a priority.
• Consider labor automation. There is no better time than the present to look at automation. During the pandemic, large industries faced with staffing shortages were forced to automate processes. Now, the return on investment for automation makes sense for many organizations, and this trend is likely to continue. Automation should be integrated into your people supply chain strategy.
• Optimize your supply chains. The supply of goods is tied to the supply of people to produce them and vice versa. Balancing your sourcing among onshore, nearshore and offshore resources – for both goods and people – can help you optimize across supply chains. Analyzing the best ways to do this can be tricky, however, so consider getting outside help.
• Define your employment brand and value proposition. A strong employment brand can help organizations attract people more easily and engender loyalty and engagement, regardless of the state of the economy. But, during the current downturn, people are willing to stay unemployed until they find the right fit, and this trend is expected to continue. Talent is increasingly making decisions about where to work based on an organization’s value delivery. To attract and keep the right people, clearly define who you are and what you deliver for employees – and then work to actually deliver on the brand you create.
• Get better at recession planning. Just-in-Time planning no longer works in this economic environment. Companies need to 1) more quickly and effectively predict needs in the short- and intermediate-term, 2) have more flexibility in their systems to respond to downturns and 3) do all of this without disrupting their cost structures. This recession is different than previous ones; organizations can’t simply lay people off now and then increase salaries to bring them back later. With the unusual duality of a labor shortage coupled with an economic downturn, organizations should “up their game” in prediction and response planning using data and advanced analytical tools.
• Use culture to drive engagement and productivity. How has your organizational culture changed during the pandemic? Is your productivity where you want it to be? Don’t fall into the trap of thinking workers will flock back during this downturn. Instead, motivate your teams to be more productive and design your labor force to complement the culture you have built.

Ultimately, opportunity abounds, even in this current economic situation, Mr. Wilkerson said. We were due for a reexamination of labor strategy, and, now, organizations have the chance to reconfigure their workforces in ways that are better for them and better for people.

Now is the time for organizations to rethink what they want to be from a culture and brand perspective. They have the opportunity to redefine who they are and create a work environment that capitalizes on the strengths of diversity and different generations coming into the workforce. They can be more innovative, more oriented to the world as it is today and better prepared to face its many challenges.

Most importantly, we as organizations have the opportunity to increase our resilience so we can thrive in the future.

Learn more in our new blog series, “Preparing to Thrive: Building Real Agility for the Road Ahead.”

Carisue Bench, Senior Vice President, hrQ
Carisue is a senior strategist and organizational transformation leader. She’s spent the last 20 years in various leadership capacities where she partnered with complex organizations to define value propositions, go-to-market strategies, and operational and human capital governance models. Carisue excels as an engaging people leader, facilitator and coach that fosters trusted relationships with key internal and external stakeholders.