Intro.

Since 1999 I’ve worked as a talent advisor, and part of my role has included sourcing top talent for companies. Throughout my twenty one years, thankfully, the majority have been buoyant. However, I’ve also worked through some challenging times. The horrific events of September the 11th, in 2001. The global financial crash in 2007. More recently Brexit, and currently the Covid-19 pandemic. All have caused economic uncertainty, resulting in knock on affects to all businesses. One of the affects for mine is, during a downturn, there’s a drop in the number of companies hiring. And therefore engaging our recruitment or executive search services.

This may not be the biggest revelation. However, what I’ve found previously is many are surprised that even during a downturn, we remain busy. I’m sure this is true of all recruitment firms.

The “Holy Grail” for recruiters is having good quality recruitment briefs, and access to good quality candidates, to match the two. When the number of job opportunities decrease, what may surprise you is that recruiters remain busy registering new active candidates. And of course, even during uncertain times, there’s always companies that thrive. As a result these businesses snap up the talent others have let go. Or indeed those open to a career move, due to concerns about their current company’s financial stability.

Now, as an owner whose business thrives on the constant pursuit of the above mentioned Holy Grail, I may be shooting myself in the foot. However, in this post I’ll try to provide you with insight into why talent should be the last, not the first, cost reduction you make.

Preparing your business for a downturn

When preparing your business for a downturn, the first mistake lots of business leaders make is leaving it until the downturn is about to bite. Or it already has. Inevitably this leaves little or no time to plan. As a result, knee jerk decisions are made to “cut the cloth accordingly”. Some will later prove costly mistakes.

As touched on in a previous post, what’s your business strategy, recessions are simply part of the economic cycle. On average, the economic cycle lasts approximately 4.7 years. During the cycle, the economy is in a growth phase for on average  3.2 years. Therefore, the average recession lasts 1.5 years. Whether the Covid-19 pandemic causes a local or global recession or not, remains to be seen. However, it’s worth noting that according to Forbes, in October 2018 a recession was  overdue by 4.7 years.

Once we understand the economic life cycle, businesses leaders can, and should, plan ahead. Better still, maintaining regular business health checks keeps your business in peak condition at all times. And therefore, allows you to react to market changes swiftly. Taking advantages of the opportunities, and the challenges, of the economic cycle.

So, having touched on the economic life cycle, and the importance of maintaining optimum business health at all times, if you haven’t, there are many ways to prepare your business for a recession. More often than not, these will serve you better in the long run, than reducing costs by making redundancies, and losing valuable talent.

“We had to make some redundancies, but we were just clearing out the deadwood”

Why talent should be the last, not first, cost reduction you make

Over the years, following a downturn, or when speaking to companies in the recovery phase from a decline for another reason, I’ve often heard words to the effect of…

“We had to make some redundancies, but we were just clearing out the deadwood.”

Whether this true, said to save face, attempt to explain or excuse their redundancies, it’s wrong on many levels.

I’ve already mentioned the Holy Grail for recruitment businesses. I’m sure each business has their own. However, all businesses share the same common goal of being profitable. One of the most important ways to maximise any businesses profitability, is through productivity and efficiency.

In a downturn, reducing costs or cutting your cloth accordingly makes perfect sense. Carrying deadwood at any time does not. After all, as most business leaders agree, a company is only as good as it’s people. And that’s one of the reasons why talent should be the last, not first, cost reduction you make, to reduce your business costs in a downturn.

Recruiting & on-boarding talent is one of the biggest investments businesses make

We understand that recruiting and on-boarding talent is one of the biggest investments businesses make. We also know that talent acquisition is cited, by the majority of business leaders as their company’s biggest challenge. Additionally, it’s become increasingly apparent that lots of businesses underestimate the true cost of the talent attraction, acquisition and on-boarding process.

In it’s most simplistic form, business is about ensuring a company generates more income than it’s outgoings. The result is the businesses profit or loss. When looking to reduce business costs, the simple way could be to look at the income and expenditure, and cut the biggest costs. As is more common than not, one of the biggest outgoings of a company is staff. Inevitably, cutting this cost will reduce a company’s outgoings. But only looking at headline costs doesn’t always give an indication of the true savings, or potential additional costs.

There’s many ways to reduce costs & improve sustainable business performance. Read our case study on how we helped an under performing business return to profit 

This is evident when companies look to reduce their recruitment costs, and only look at the headline costs of outsourcing their recruitment. Does the reduction in costs of outsourcing their talent attraction and acquisition to an agency, save them more money in the long run, than bringing it in-house?

This often depends on the size of the business, and their strategy to bring recruitment in-house. Without a dedicated recruitment function, the skills and investment in recruitment tools, bringing recruitment in-house often costs more than outsourcing it. Productivity is reduced whilst line mangers spend time trying to fill vacant positions. Both as an effect of the position being vacant, and also the manager spending time trying to fill it. That’s not to mention, whether their ability to attract and acquire the best talent, and retain them long term, provides a better return on investment than using a recruitment expert.

Talent is a companys biggest asset

A company is only as good as its people. That’s why talent is a company’s biggest asset. The fact is recruiting and on-boarding talent is expensive. Irrespective of whether their talent attraction and acquisition strategy is in-house or outsourced.

The true cost of recruiting and on-boarding talent is not the headline costs on a balance sheet. In fact, one of the best ways of reducing business costs is talent retention. So, when preparing your business for an economic downturn your talent should be the last, not first, cost reduction you make.

As mentioned above, a downturn is part of the economic life cycle. A recession also lasts a far shorter time than the upward growth of an economy. Yes every business needs to survive the bad, to enjoy the good, times. And as a result will need to make cost reductions to do so. But throughout the downturn, and when the good times return, all businesses require top talent to thrive. Shedding your staff as your first cost saving exercise may well be a costly mistake you live to regret.

Conclusion

There are many ways to improve business performance, efficiency and productivity, and as a result reduce costs now, and improve your bottom line long term. Cutting your cloth for the short term effect of a downturn, shouldn’t be about taking a short term view. Not if your plan is to be in business for the long term.

When preparing your business for a recession, retaining your top talent should be your priority. Its not just the cost of replacing them when business improves. When you lose staff that have relationships with your clients. Have sound understanding of how your business operates, your systems, processes and interacting with your team. There’s a cost attached to replacing this knowledge, that does not show up on your accounts.

That’s not to mention that inevitably when any company makes redundancies, they’re likely to lose talent they want to retain, due to the uncertainty. Add this to the fact your competitors will snap up the people you let go, where possible your talent should be the last, not first, cost reduction you make. Or you may just be giving your competitors an advantage, or making a costly mistake, that comes back to haunt you.

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If you’re interested in help optimising your company’s performance, check out our case studies to see what we’ve done for others, and get an idea of what we can do for you. Or get in touch to discuss your individual needs and how we can help you achieve your goals.