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Rightsizing Your Workforce in the Face of Economic Change

Businesses everywhere are still grappling with tremendous change, as pandemic aftershocks continue to roll through the global economy. Although most Covid-era restrictions are behind us, organizations large and small are still dealing with significant people-related issues. Workforce capacity planning is just one piece of this complex, multi-faceted puzzle. But if you’re an employer, rightsizing your workforce has likely become one of your top priorities during these turbulent times.

One of the most serious repercussions of the pandemic involves talent — or the lack thereof. Companies aren’t able to hire enough skilled workers to meet their operational needs. This inability to attract and retain qualified talent — coupled with inflation — is driving compensation higher. In fact, according to the March 2023 U.S. employment cost index, civilian wages continue to increase, up 5.0% over the past year. And depending on the industry, some workers are asking for even more.

This means employers are having to get creative when attracting and sourcing talent. For example, some are focused on rightsizing their workforce to maintain operational efficiency while qualified workers are in short supply. And many companies are downsizing and upsizing simultaneously, as they adjust to continuously changing industry challenges and trends.

Effective Workforce Rightsizing Isn’t Only About Efficiency

For numerous organizations, workforce rightsizing involves reliance on contingent workers. This can be a smart choice. Contractors and temporary workers often provide the flexibility needed to operate efficiently and effectively, even when market demand shifts or business priorities change. This strategy is also attractive because it helps protect internal employees and their core responsibilities.

Even so, a flexible workforce might not be enough to weather a negative business cycle. It may also be necessary to make the difficult decision to lay off existing employees. Obviously, the most challenging aspect of downsizing is deciding which employees to lay off.

Is it best to make these decisions based on individual performance? What role should seniority play? And how can you be sure your remaining team will have the skills, knowledge, experience and motivation to sustain your business through tough times and support future growth?

If layoffs are followed by a hiring freeze, there’s the additional question of how to retain remaining employees. What will you do if critical contributors decide to resign? The last thing you want to do during a business downturn is jeopardize a product launch, revenue goals, or customer experience.

It’s important to recognize that drastic workforce adjustments can trigger problems with stress, morale, and engagement. Naturally, staff members who aren’t laid off are likely to soon wonder, “Is more bad news on the way?” or “Am I next?”

Even in an era known for record levels of voluntary resignations, job loss is foremost on employees’ minds. In fact, it is the top concern among 85% of people, according to the Edelman 2022 Trust Barometer. Concerns like this can prompt even the most loyal team members to start hunting for a new job. And without proactive intervention from leaders, this kind of “flight” response can spread and upend your organization’s efforts to regain stability.

Rightsizing Your Workforce: 4 Key Strategies

When rightsizing your staff, finding the right balance isn’t easy. It’s even more difficult when you need to downsize one department while upsizing another.

You can certainly be upfront about your intentions — and you should be. Transparency and clear communication are essential when managing change. However, you can’t afford to lose sight of the fundamental challenge every organization must face. You must determine the best way to anticipate and respond to potential business fluctuations. Here are a few ideas that can help:

1. Include Contingent Workers in Your Plan

By definition, contingent workers serve as supplements to your core employee base. They generally work on a project-by-project basis. As such, adding contingent workers to your plan offers significant flexibility when rightsizing your team becomes necessary.

In fact, 63% of organizations told SAP Fieldglass that contingent workers enable greater organizational agility. What’s more, 62% believe contingent workers are essential for filling key IT and digital skills gaps. For example, when companies experience a sudden influx of work, they can call on this scalable talent pool for quick access to the right capabilities.

2. Be Strategic About Any Hiring Freeze

When initiating a hiring freeze, one of the biggest mistakes companies make is to halt all recruitment activities and contingencies, entirely. It’s important to continue hiring-related processes. This way, when the need for additional help arises, you can more easily pick up where you left off and maintain operational continuity.

Even if incremental roles are temporary, you’ll be better able to tap into the skills needed to support critical business objectives. In fact, 61% of companies told SAP Fieldglass that contingent workers help accelerate their speed to market. In other words, relying on flexible staffing can actually help you continue to scale during a hiring freeze.

3. Treat Skills Development as a Long-Term Investment

Don’t be shortsighted about talent recruitment or development. Focusing only on the skills you need now can leave you scrambling to fill critical roles down the line. In addition to the skills and competencies you need today, emphasize what will be essential for your business in the next few years.

Investing in professional development also gives you a chance to leverage learning and growth opportunities in your recruitment efforts. It can help your job openings stand out in today’s environment, where jobseekers value employers that emphasize learning and career advancement.

4. Leverage a Talent Marketplace

Essentially, a talent marketplace is a system that helps employers align talent with open roles. It can work one of two ways:

  • Internally, you can use this kind of system to facilitate employee mobility, helping individuals pursue different roles based on their skillset. Or you can redefine and reorganize an employee’s existing role so it better aligns with your organization’s changing needs. This process can be especially helpful during a hiring freeze.
  • Externally, a talent marketplace can help organizations open the door to freelance, temporary, or gig workers who are qualified for hard-to-fill roles. Think of it as creating a larger, more agile talent pool that lets you secure the right skills at the right time, while saving costs typically associated with recruiting and hiring internal employees.

Final Notes on Rightsizing Your Workforce

Pandemic aftershocks are still reverberating through the business world — and organizations will continue to be disrupted by unexpected external factors. As a result, smart employers are staying open to more agile workforce planning and management strategies.

Today’s successful employers are already rethinking the way they recruit, hire, manage, lead, compensate, and redeploy talent. Rightsizing your workforce is just one piece of this larger puzzle, but it can make a significant impact on your organization’s long-term success.

Are You Ready to Lead Through Uncertainty?

Sponsored by HiBob

As 2023 begins, the world of work is bracing for a rough ride. For more than a year, inflation has gripped the economy. Previously unstoppable tech companies are reeling from recent layoffs. And other industries are tightening their belts, as a recession now seems unavoidable. What will it take to lead through uncertainty?

Strategies that helped organizations thrive under different circumstances are no longer relevant. But during lean times, how can you preserve what’s valuable and unique about your organization? This question is top-of-mind for leaders everywhere. So let’s get advice from someone who understands the factors driving today’s business climate:

Meet Our Guest:  Ronni Zehavi

Today, I’m thrilled to welcome Ronni Zehavi, Co-Founder and CEO of modern HR platform provider, HiBob. After more than 25 years of experience in launching and leading successful technology companies, Ronni knows first-hand how to guide organizations through volatile, uncertain circumstances. Now he’s sharing his unique perspective and expertise to help others lead through uncertainty.

Managing Multiple Unknowns

Welcome, Ronni. Let’s dive right in. How can organizations navigate through uncertain times?

It’s a bit like driving a car. In 2021, driving fast may have been easier because the road was clear. But today it’s bumpy and cloudy. No one knows when it will end, so you need to slow down.

2023 is going to be challenging. First, read the map and then adjust your plan. How long is your runway? Do you have enough cash? Do you have enough funds to weather the coming storm?

Then look realistically at the environment. A slowdown will have an impact on your customers as well as your organization. Will you be able to generate the revenues you expect?

The Long Game

The economy will eventually bounce back. How can we prepare for that now?

It starts with your people. Invest in them. Make sure you can retain all of them. Or, if not all of them, focus on your most important people. Because you’ll want them to be with you when the tailwind comes.

And more than anything else, think positive. What goes down comes back up. So optimism is critical.

How to lead through uncertainty

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What About Layoffs?

Is there a right way to reduce headcount? How can leaders avoid damaging their company culture?

Layoffs are only one option in a CEO’s toolbox when adjusting to a difficult environment. First, you may decide to slow down hiring. If a slow down isn’t enough, then you may need to freeze hiring or freeze salary increases, or both. And if needed, the next option could be salary cuts or layoffs. One or both.

But it is important to think about the people who stay as well as those who are laid off. Retention can be affected when those who remain are expected to do the job of two people or even more.

Communication and transparency are critical to preserve your culture.

Can Flexible Work Help?

Do you think economic changes will influence where we work? 

I don’t think so. I think hybrid work is here to stay. Flexibility was a nice-to-have perk a few years ago. But the pandemic proved that organizations can deal with it.

The ultimate combination is two or three days at the office or two or three days remote. It offers flexibility, but it keeps engagement and collaboration among people.

How to Support Hybrid Work

I like the idea of finding a balance between onsite and remote work. But how can leaders accomplish this? 

It’s a journey. It will take time until we get there as a standard. But flexibility is all about what we call internally, The Three T’s:  Trust. Transparency. Teamwork.

If your organization follows these values, it will help you create a flexible work culture.

 


For more insights from Ronni about how to lead through uncertainty, listen to this full podcast episode. And be sure to subscribe to the #WorkTrends Podcast on Apple Podcasts or Stitcher.

In addition, we invite you to join our live Twitter chat about this topic on Wednesday, January 25th at 1:30pmET/10:30amPT. Follow @TalentCulture for questions and be sure to add the #WorkTrends hashtag to your tweets, so others in the community can easily find your comments and interact with you!

Also, to continue this conversation on social media anytime, follow our #WorkTrends hashtag on Twitter, LinkedIn, and Instagram.