Many economists are talking about a recession sometime in 2023, [i] though there is no consensus on how soon or how long it may last [ii] – and it may not hit all sectors or geographies equally. [iii] Some think there may not be a recession, [iv] or it may be different from the ones we have seen before due to differences in inflation and the labor market. [v] Will the Fed continue to raise rates? Will supply chains bounce back? What do all those layoffs in the technology sector mean? Last month unemployment reached a historic low; what does that mean? Should we change our recruitment strategies? The labor market still has nearly two job openings for every unemployed person.[vi] There is still a skills gap for the most sought-after skills. So, what does all this mean?
One thing is sure; the future is uncertain.
And through that uncertainty, businesses do their best to anticipate and prepare for various scenarios. So what can business and talent leaders do to prepare themselves and ease the pain of economic uncertainty? One strategy may be to continue to invest in their skills-based talent strategy. Investing in skill-based talent recruiting, development, staffing, and integrated talent marketplaces to leverage internal and gig workforce ecosystems should yield several benefits to help weather an uncertain future.
Organizational Agility and Resilience
During economic uncertainty, even more than when the business is booming, a company needs its best people with the right skills working on the right tasks. Demand might shift rapidly between product lines or service offerings. It is essential to be able to adapt quickly. Skills-based development should facilitate more rapid re-skilling and upskilling. It can also leverage internal mobility, refocusing talent on more profitable business areas if uncertainty impacts the business unevenly. [vii]
Talent marketplaces can allow companies to ramp their labor force up and down much more flexibly than reductions or hiring – providing the ability to respond more rapidly to changes in the market. For example, during COVID, opportunity marketplaces were used as engines to drive innovation in response to the pandemic quickly. [viii] This is especially true if it is believed a downturn may be brief.
Focus on Efficiency Gains & Operational Improvements
Economic uncertainty can be a great time to focus on getting operations as efficient and profitable as possible. Skills-based talent marketplace could be an excellent tool for getting lean. First, management can sponsor or crowdsource internal operational projects for which people can sign up. As a result, employees get to keep busy doing something meaningful for themselves and the company, and a leaner operation can weather the ups and downs better. [ix]
Skill-based organizations, whether they have the talent marketplace or not, are also better suited to engage non-degree-holding gig workers that can ramp up or down at any time. As a result, they may be more cost-effective for some projects while at the same time sharing work opportunities more equitably and granting employers access to larger talent pools.
If they have reorganized the workaround skills, skill-based organizations can allocate work more efficiently than jobs, so more work can be accomplished with the same workforce. If the organization knows which skills are needed for each role and task in the organization, it can identify gaps and overlaps between different jobs. They can leverage employees anxious to develop or demonstrate new skills with another who may lack the interest or ability to perform it, even though it’s on their job description. This “filling in” the nooks and crannies of work that went un or underperformed before could drive a dramatic improvement in efficiency when conducted at scale.
Alternative to Headcount Reduction
Economic uncertainty can drive companies to change recruitment strategies or cut labor costs. Market conditions can spark hiring freezes or even headcount reductions. But these options are often as costly to the company in the long run as they effectively cut costs in the short run. Recruitment and onboarding are expensive, as is the institutional knowledge that is lost forever once it leaves. To say nothing of the morale issues that typically accompany a reduction in headcount and the associated loss in productivity from a poorly engaged workforce, distracted by efforts to defend and justify their position.[x]
Skill-based organizations could avoid much of this. When there are no jobs to defend, there is just the work. If cost reduction is unavoidable, companies can minimize the loss of skilled workers, morale, and institutional knowledge by temporarily furloughing employees to work part-time through a skills-based talent marketplace – potentially rehiring them when the market turns back. This could significantly blunt the organizational costs of reducing labor and place organizations in a much more favorable position to bounce back quickly.[xi]
In the face of uncertainty, skills-based development can provide employees with a means to invest in their own value and a roadmap to advancement within their company when hiring could be unpredictable or to increase their marketability with the new skills they’ve developed. In addition, creating skills-based pathways can make employers more resilient while simultaneously building bridges between the skills employees already have and those they need for advancement. [xii]
Seizing an Opportunity
While economic uncertainty brings challenges, the resulting changes can bring opportunities for agile companies. It can be a lot easier to hire during economic uncertainty. As employees, and possibly the recently unemployed, become concerned about finding a safe port in the storm, demand for a stable employer often rises. It can also be a good time for a career change, as witnessed during the “Great Resignation.” Also, as other companies potentially lay off thousands of talented individuals, forward-thinking companies can poach rare talent despite a downturn. This can be accelerated with an externally focused skills-based talent marketplace, lowering costs and barriers to engaging with new workers. [xiii]
With 71% of CEOs reporting that a skills shortage would be their most significant business challenge of 2022[xiv] and 40% of companies still in the early stages of upskilling/reskilling,[xv] now is an excellent time for companies to invest in reskilling their people. Skills-based organizations can use a downturn to invest in their people with re-skilling/upskilling that will prepare them for the eventual upturn or in cross-functional adjacency skills that increase organizational agility and career mobility.
As economic uncertainty continues, skills shortages remain, and new skill sets grow exponentially, forward-looking organizations are taking a skills-based approach to reshaping their people strategy for competitive advantage. Yet, while the promise of a skills-based organization can help navigate uncertain times, the key components, roadmap, and best practices are still being developed.
“While 98% of organizations indicate they want to shift towards skills-based work and 90% are actively experimenting with skills-based approaches, only one in five are adopting skills-based practices (infrastructure) to extend across the organization.” [xvii]
St Charles Consulting Group has been a leader in skills strategy and development for over 20 years. To continue that thought leadership. St. Charles and our parent company, NIIT, are launching our next research initiative on Skills-Based Talent Strategy for large, global, forward-looking organizations. The study will investigate the challenges, maturity models, and best practices to develop a skills-based learning and talent ecosystem. Results from the study will be published in June 2023.
If you would like to receive a copy of the research study, sign-up here.
[i] Alexandra York A Recession Is 61% Likely for 2023, Economists Warn (businessinsider.com) January 16, 2023
[ii] Q.ai. Will There Be a Recession In 2023—And How Long Will It Last? (forbes.com) January 20, 2023. Simon Moore Will The U.S. See A Recession? Key Metrics Offer Divergent Takes (forbes.com) February 7, 2023.
[iii] Eric Rosenbaum Gap between Main Street and Wall Street over the economy is widening (cnbc.com) February 9, 2023. Economic outlook: global economy, local impact – South Florida Business Journal (bizjournals.com) Feb 10, 2023.Jeanna Smialek What Recession? Some Economists See Chances of a Growth Rebound. – The New York Times (nytimes.com) Feb 9, 2023
[iv] Jamie Chisholm Bad news for the ‘pessimistic bulls.’ Here are ten reasons why a U.S. recession won’t happen. – MarketWatch Feb 17, 2023. Teresa Rivas Is the U.S. Economy Headed for Recession? Why a Downturn Probably Won’t Happen. | Barron’s (barrons.com) Feb 17, 2023.
[v] Andrew Lisa How 2023 Recession Will Differ From 2008 and How You Should Prepare Differently (yahoo.com) January 26, 2023
[vi] Charles Pastor. Unemployment Is at Its Lowest Rate Since the Moon Landing. Here’s What That Means for You (msn.com). Feb 16, 2023.
[vii] Shannon Block Prepare your workforce for a recession: Focus on skills – Denver Business Journal (bizjournals.com) Nov 2019
[viii] E. Volini, J. Schwartz, K. Eaton, M. Hauptmann, D. Mallon, S. Poynton, N. Scobie-Williams, Y. Van Durme 2021 Global Human Capital Trends | Deloitte Insights. 2021
[ix] Carolyn Lyden 7 Business Opportunities in a Recession | NetSuite April 14, 2022.Walter Frick How to Survive a Recession and Thrive Afterward (hbr.org), June 2019
[x] Walter Frick How to Survive a Recession and Thrive Afterward (hbr.org), June 2019. Samantha Kermode How to Navigate Talent Acquisition During a Recession | Investis Digital Dec 14, 2022
[xi] A Recession-Ready Talent Strategy (beamery.com) January 23, 2023
[xii] Bryan Hancock, Chris Higgins, Jonathan Law, Sarah Olson, Nikhil Patel, and Katie Van Duse Taking a skills-based approach to building the future workforce | McKinsey Nov 15, 2022
[xiii] Staff Reporter. Is It Easier to Hire During a Recession? – RecruitingDaily Feb 15, 2023
[xiv] Eric Friedman How Reskilling And Upskilling Help Companies Prepare For The Future (forbes.com) January 11, 2023. Heather Conklin Online learning is essential to help businesses close the digital skills gap | Fortune April 8, 2022
[xv] Linda Jingfang Cai Workplace Learning Report 2023: Building the Agile Future | LinkedIn Feb 15, 2023
[xvi] Elena Siniscalco The recession could become an opportunity to reskill our workforce (msn.com) Jan 5, 2023
[xvii] Sue Cantrell, Robin Jones, Michael Griffiths, and Julie Hiipakka. The Skills-based Organization: A New Operating Model for Work and the Workforce. Deloitte Insights Magazine, Issue 3. Sept 8, 2022