How Fear of a Recession Impacts Talent Strategy
June 7, 2023 – As budgets tighten and leaders prepare for a possible recession, recruiters say that investing in the employee experience is still a high priority. Most economists agree that the economy is in an unusual state, leaving them unsure if and when a recession might occur and what it will look like. A new report by Slayton Search Partners says that for businesses that are trying to prepare, now appears to be the time to tighten spending and establish a strong foundation to make it through. “But what about hiring and investing in talent amid economic uncertainty,” asks John Doyle, the report’s author. “The talent market remains bullish despite the threat of a recession, so how should leaders navigate accordingly?”
The news appears to shift on a weekly basis. JPMorgan Chase CEO Jamie Dimon, confirms there is indeed “recessionary” activity in the current landscape, stemming from some of the headlining bank failures and layoffs. “However, it’s not indicative of a recession such as the U.S. experienced in 2008,” said Mr. Doyle. “The fact is, the monthly job reports of the first quarter were highly positive, and the unemployment rate remains at a 50-year low. Although economists expect unemployment to rise as we edge closer to a recession, the projections are still lower than other historic recessions.”
With such optimistic numbers, the result is a sustained trajectory of robust consumer spending, despite inflation and rising interest rates, according to the Slayton Search Partners report. Together, these activities actually appear contrary to a recession. In fact, economic forecasters at Deloitte say that a recession is only 30 percent likely—and that it’s more probable that economic growth will simply slow to a crawl, along with job growth, spending, investments, and more.
How Economic Uncertainty Impacts Employment
“Even if a recession doesn’t happen, there is still a challenging landscape that employers must grapple with: namely, high demand for talent, a short supply of skills, inflation-led wage increases, elevated quit rates, and shifting employee expectations,” Mr. Doyle said. In Slayton’s recent executive survey, the firm discovered that 72 percent of senior leaders were considering a job change in 2023, and in many sectors, C-suite turnover is ballooning. Furthermore, in fields like technology, the firm found that talent is expensive and scarce, despite the tech sector layoffs that took over headlines in late 2022 and early 2023. In fact, layoffs at companies besides these high-profile organizations are still relatively rare, according to the report.
“And, interestingly, even if a recession does occur, these challenges will likely remain, especially where the competition for top talent is critically high,” Mr. Doyle said. “Demographic shifts in the U.S. are largely to blame. In particular, the pandemic kickstarted many retirements, and Baby Boomers continue to age out of the workforce—especially those in executive positions who are increasingly experiencing COVID fatigue. At the same time, data shows that college enrollment rates are on the decline, purportedly because of ballooning tuition costs as well as the more pragmatic outlook of Gen Z compared to their predecessors. The result is decreased access to the skills companies need to lead into the future.”
John Doyle has more than 20 years of executive search experience, specializing primarily in the human resources function. He has recruited chief human resources officers, as well as group level HR generalists and functional specialists across a wide variety of industries for companies of all sizes. As an HR professional, Mr. Doyle has directed the development of recruiting, training, and management assessment strategies for client companies coast to coast.
Additionally, despite low unemployment rates, labor force participation is still lower than pre-pandemic levels—many have left the workforce entirely, and not just because of retirement, according the Slayton Search Partners report. The firm notes that some of the reasons behind the smaller work force are mostly COVID-related including: slower population growth (fueled in part by higher death rates), increased dependent care needs, higher unemployment benefits, and decreased attraction to low-paying jobs (due to inflation). “Ultimately, employers are facing tight competition for skilled professionals and leaders, and this will likely continue regardless of the foreseeable economic outlook,” the report said.
How Leaders are Responding
“The pandemic and post-pandemic approach to talent acquisition and retention was generous, to say the least,” said Mr. Doyle. “Unrestricted remote work opportunities, unlimited PTO, and various perks became the norm in the quest to attract and keep top talent in the face of the Great Resignation. But as the tides change, leaders are faced with two options: take the traditional recessionary approach to right-size their workforce, freeze hiring initiatives, and dial back perks and benefits; or continue to invest in their people despite economic red flags.”
“There’s no question that corporate budgets are getting tighter as companies prepare for the potential repercussions of economic turbulence,” Mr. Doyle said. “However, with the talent market equally tight, not to mention the higher expectations of today’s workers, many companies may find themselves in a double-bind. It’s a contradiction that requires companies to be strategically thoughtful.” A Gartner report recommends smart budget trade-offs, savvy talent strategies, and optimal digital investments, among other tactics. “Committing to a talent-first, human-centric work model will ensure higher levels of retention, motivation, and productivity—all critical factors to sustain in the face of economic uncertainty,” Mr. Doyle said.
A recent Forrester report is direct in saying that if a company is overly focused on a coming recession and cuts their investment in employee experience accordingly, they will pay the price. A McKinsey report stated that responding to the mixed signals of the current economy requires companies to protect their business in the short-term while staying focused on long-term success. The Slayton report notes that it’s a tight balance.
“Emerging strong from any recessionary storms that may come will depend upon prioritizing the employee experience from top-level leadership all the way down to the front lines,” Mr. Doyle said. “Hiring the right professionals with the right skills, focusing on career and leadership development, and designing a flexible working model are three key strategies for building a resilient workforce. At the end of the day, storm clouds are gathering. Whether or not they will wreak havoc on businesses is still unclear. Leaders who prepare by readjusting their budgets and focusing on the employee experience will be the ones to come out stronger on the other side.”
Experienced Recruiters
Established in 1985, Slayton Search Partners focuses on finding executive talent in the consumer, retail, financial services, insurance, industrial, and private equity sectors. The firm said that its network of industry leaders invariably leads it to opportunities outside of its core practice areas. Evolving markets, emerging technologies, and changing consumer habits have impacted all industries, said the search firm, and that the need for strong executive talent is far-reaching.
Last year, professional services firm The Judge Group acquired Slayton Search Partners. The Judge Group is a provider of consulting, learning, and talent services with over 50 years of experience. The acquisition of Slayton Search Partners brings a retained executive search capabilities to Judge’s broad portfolio, the company said. “The acquisition of Slayton combines two leading providers of search services with decades of experience and expertise,” said Marty Judge, CEO.
Related: CEOs Anticipate a Possible Recession
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media
