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What Happens If the Recovery Is Very Slow?

by
Lou Adler
Jul 10, 2009, 6:05 am ET

Despite my optimistic view of the past few months, I’m considering the possibility that the recovery could be very long in coming and very slow in growing.

If so, it’s important that you start planning your recruiting activity and resource needs for this worst-case situation.

To take a stab at this complex issue, imagine you’re in the boardroom with your company’s senior executive team discussing the impact of the prolonged economic slowdown on your current business strategy and the current year’s annual operating plan.

Your input involves your employees’ morale and productivity, the company’s organization structure, all of the organizational development plans underway and proposed, and the overall hiring outlook.

The Big Picture: Impact on the Company

While I’m no expert at this, I suspect the initial discussions last year at the initial executive confab, right after black September 2008, focused on massive short-term expense control. Hopefully, you were part of this planning session to make your views known.

Most likely, the results of this session included a hiring freeze, a companywide expense reduction program, and a huge RIF. It’s now recognized this was a bit of a knee-jerk reaction, but typical when business conditions quickly turn south.

Moving forward, when the executive team realized it overreacted (sometime in the first quarter of 2009) these expenses cuts were fine-tuned. If you were in the meeting, you would have said, “I told you so.”

It normally takes about three to six months to realize that reactive expense cuts are too deep and not targeted enough. Based on this, some relief was provided for critical projects, but some appropriate, important deeper cuts were made.

Now moving on to the second quarter of 2009. This is when companies started preliminary planning for the recovery and started to release RFIs and RFQs for projects that were just shelved six months earlier.

As part of this, everyone responsible for approving these projects, especially purchasing, was in expense-control mode, ensuring they’re negotiating very hard, and getting the best price possible for everything.

Nine months later though (July 2009), there is a big shift in the conversations at these board meetings. As long as you are a participant, you know all about these and are a critical part of the go-forward planning. As you’re aware, this talk doesn’t just involve recovery planning and short-term tactical moves; there is an ominous feeling that things just might not return to normal.

One question most executive teams are now considering is what happens if the tepid recovery peters out. Or, what if there’s a short-term bump, followed by an inflation-fueled bust?

These are significant strategic issues, without easy answers.

Whenever there’s a fundamental shift in business conditions, as we’re possibly seeing today, a corresponding shift in business strategy and operational direction is required to ensure long-term company viability.

This is much bigger than budget cuts and hiring freezes. Ultimately, decisions made under this dark cloud will affect every aspect of business, including product and marketing strategy, operational performance, and financing.

Of course, it affects the recruiting department and what it will be doing over the next three to nine months.

Impact on the Recruiting Department

While I have no clue as to how the recovery or non-recovery will affect your company, I have no doubt your company will be affected. Here are some things your executive team is probably considering, and the impact of these on the recruiting department.

With the major expense reductions already implemented, the near-term outlook will most likely focus on improvements in operational efficiency. This will involve major process reengineering efforts in every function and department, including some type of significant reorganization. The goal of all of these programs will be to extract long-term cost savings and increased flexibility. This will allow a company to better react to whatever the economy has in store for it.

These efforts will affect the recruiting department in at least three ways. First, on the hiring front, making sure that the right people are available to conduct whatever reengineering effort is underway. Second, if there’s a reorganization, the recruiting department will need to help move some people out and add a few here and there. Third, and most important, is a reengineering of the recruiting department itself.

From what I’ve seen in just about every company in the Fortune 1000, huge operational efficiency opportunities are available to increase both recruiting department and individual recruiter productivity. One important example is the idea of eliminating requisitions and using a hub-and-spoke sourcing model powered by a robust CRM instead.

Here’s a recent article that describes this approach in more detail, plus some other sourcing ideas that can profoundly increase recruiting department productivity.

Other ideas to increase recruiting department productivity include having recruiters partner much more closely with hiring managers to eliminate wasted effort, overhauling the role of hiring managers to be totally responsible for hiring, implementing a rolling workforce plan to minimize costly reactive sourcing programs, and leveraging the employee referral program to target A-level passive candidates.

All of this needs to be based on a detailed process flow map highlighting inefficiencies and bottlenecks. At a minimum, this will help prioritize your process reengineering efforts. (Email me if you’d like to see a sample of this type of process flow map.)

On a worst-case basis, assuming an extremely shallow recovery, some companies will need to undergo a massive restructuring to have a chance of long-term survival — think GM, Chrysler, many banks, and perhaps some units at GE, to highlight a few.

This restructuring includes disposing of non-productive assets, centralization of core functions, a huge downsizing effort, and possible consolidations with industry rivals. Offsetting this will be increased focus on new product development in combination with alternative marketing and distribution efforts.

In some cases, the recruiting department will be the one being restructured, so it’s important to be part of the solution helping design your organization of the future. This includes being on top of marketing trends, understanding how to implement a flexible and effective sourcing and recruiting program, and having only A-level recruiters on your team.

This is a very high-level view and quite pessimistic, but it’s not out of the range of possibility for many companies. Even if your personal situation isn’t as bad as described, getting prepared and taking some of the actions described will be helpful.

Then the worst-case for you will be the implementation of an extremely productive and efficient recruiting and hiring process for hiring the best talent on the planet. And I think we’d all agree, that’s a pretty good “worst” case.

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

  1. Kathy Lori

    I venture to guess that a number of the downsizings of late last year and early this year were more of the form “hey, the economy is bad and everyone knows it, so now is the time to get rid of those people we’ve been wanting to get rid of for a long time. With so many other places laying people off, this will disappear off the radar screen pretty quickly.” Yes, I see layoffs have slowed a bit. But I don’t see much in the way of hiring and probably not until late this year at the earliest. So why the big concern about the hiring departments? My last company hired a new engineer maybe every 8 years. What kind of a recruiter could build a business off of that?

  2. Dr. Tom Janz

    Great article, Lou– really insightful. These likely trends are all the more reason to use accurate, lost-cost, assessment INTEL to screen out the hundreds of pretenders anxiously seeking jobs– and then to screen in the Stars and Achievers quickly, before they land somewhere else. A Bay-area TV news story recently reported that employers turn to hiring their friends and personal contacts because they can’t handle the hundreds of people that respond to even a small posting. This practice only shoots themselves in both feet, since they narrow their talent pools and use less accurate ways of making the picks.

    We (and others such as PreVisor, Kenexa, DDI, AON, Valtera, Shaker, etc.) offer proven-powerful, science-based tests and behavioral interviewing tools. But only we (GHAS,LLC)offer the numbers (normed score reports) AND confirmed stories of past achievements collected online with no labor cost. And ONLY we calulate and guarantee the full financial performance benefits of hiring faster, more confidently, and with improved brand impact. To expand on one of your most insightful phrases– “Hire with your Head AND your Wallet.”

  3. brian johnston

    Lou- Great Article! Correct me if I am wrong, however it sounds like you are following Raghav’s lead here.. http://www.ere.net/2009/07/08/the-road-ahead/

    I any event two thought leaders in the recruiting business, that are highly respected, write “pragmatic” (Academic word!) or how real human beings talk “keeping it real”, is an affirmation of what’s is to come. (slow/painful recovery for majority) BUT, what the article does not say is that the top 10% (Minority) in ANY field will thrive, in FACT the opportunities (A-Talent) will be EXTRAordinary…

    Because…. “What the WORLD needs most are people who come alive!” (PASSION/LOVE for there vocation)

    Again, GREAT article….

    Brian-

  4. Lou Adler

    Brian – I’m not sure whose lead I’m following here, probably a bunch of leading economists who think the stimulus is not working. If it isn’t, then it’s prudent to do some serious contingency planning. It’s clear that phase I cost reductions need to be followed by phase II revenue growth to suggest a recovery is at hand. This revenue growth isn’t here yet, so Phase III restructuring is the next classical approach.

  5. Jonathan Hefferlin

    Lou -
    At last look, a bit over 10% of the non-tax cut part of the stimulus package has been injected, albiet things like construction projects may be started, people hired, but monies being spent slowly.

    Then there is part of academia claiming $1 in government spending cuts private spending $1, after an initial boost, then the subsequent offset (think Japan in the Nineties), when $1 in tax increases to pay some of it down results in a $3 cut in spending.

    Uncharted fiscal territory to be sure, for us at least.

  6. Keith Halperin

    Here is some recent data (reposted from a WSJ blog) concerning an estimate of when the various states’ levels of unemployment will return to pre-recession levels:

    http://blogs.wsj.com/economics/2009/07/28/home-prices-jobs-will-come-back-sooner-in-some-states-than-others/

    In a nutshell: except for Texas (2011), we’re talking 3-5 years for most large states.

    Keith D. Halperin,
    Sr. Recruiter and SPHR Emeritus
    keithsrj@sbcglobal.net
    415.586.8265

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