ECONOMIC CYCLES AND HIRING…. Is Your Company Ready for Recovery?

The cycles between the best of times and the worst of times can have a disastrous impact on your ability to hire well and with confidence. Economic conditions force companies to re-examine business strategies and budgets, especially in the areas of discretionary spending. In difficult economic conditions downsizing tactics are likely to first occur in administrative functions. Normally, the least productive employees are told to leave first. If conditions worsen, downsizing cuts into operating functions like sales and production. When economic conditions improve, tactics reverse and companies re-instate operating functions and eventually the indirect administrative positions as well.

These economic cycles have an obvious impact on the level of unemployment in the country. They also have a “not so obvious” affect on employee turnover. Research has shown that in the United States, during normal economic conditions, people change jobs often… or they would like to. Consider the following:

• In the eight year period from December, 2000 to November, 2008; an average 3.3% of American workers quit their jobs each month to take other positions…. that’s about four in every ten workers each year! US Bureau Labor Statistics

• The average US Corporation loses half its employees every four years. Frederick Reichheld, “The Loyalty Effect”

• Fifty-Five percent of US workers plan to quit within a year. Sibson & Company, study cited in HR Magazine

During poor economic conditions these numbers improve and most companies experience a significant decline in the number of employees who quit. Workers “stay put”, even if they would rather leave, because of the fear of losing their job and the lack of alte
ative opportunities. This gives some business managers a false sense of confidence in employee loyalty. They worry less about employee retention strategies. Their recruiting and hiring skills get rusty and their organization development competencies weaken. They’re in a survival mode…playing defense. They’re not prepared for the offensive and growth. Then, the economy turns and recovery begins.

This period of early economic recovery can wreak havoc on organizational development and your company’s performance for years if it isn’t handled correctly. First, you must rebuild the organization which isn’t an easy task for a team that’s been playing defense for a few years. Second, an improving economy is often accompanied by a significant increase in employee turnover when employees who want to move on have the opportunity to do so. In the surge of new people… people to replace the jobs eliminated as well as replacements for the employees who now have alte
atives elsewhere… your company’s ability to hire, train, and develop will be strained.

Chances are the Human Resource Department was cut to “bear bones” during the downturn. You have new managers with no experience or experienced managers with “rusty” skills conducting employee interviews. They might be shortcutting hiring process procedure. It’s a perfect set up trouble. You probably won’t notice it because it’s all camouflaged by the abundance of job candidates. In fact, because of the abundance of available talent, there’s a tendency to hire over qualified people which only adds to the turnover problem. In this kind of environment there’s plenty of opportunity for error and costly hiring mistakes which make rebuilding your organization difficult and could destroy your plans for a timely smooth recovery.

Make no mistake, companies must react and adjust to changing economic conditions. In bad times they make the difficult choices to survive. In good times they take full advantage of their growth potential. Good companies do this very well… contracting their organization profitably in bad times – expanding their organization profitably in good times. But great companies not only expand and contract profitably through these economic cycles, but maintain the strengths of organizational development as well. They keep their internal competencies of staffing and hiring alive and well. The most important of these is management commitment to follow hiring processes and the interviewers’ skills working within them. As your company begins taking applications and considers candidates, it’s time to assess your hiring processes. And the most important component in any hiring process is the interviewer.

The key to maintaining the internal competencies of hiring and development during the worst of times is following a few simple guidelines…

• Keep your hiring processes in writing and insist that they be followed

• Screening interviews, pre-employment activities, and implementation of your hiring system is the proper function of the Human Resources Department

• Interviews should always be conducted by managers having a vested interest in the success of the new hire

• Hiring decisions should be made by the hiring manager… the manager that the new hire will report to

• All managers should be skillful interviewers

• Interviewing should be a part your initial manager training regardless of economic conditions – if you can’t hire and staff well, there is no way that you can manage well.
William E. Miller
Presidentr
Performance Leadership, LLC
www.performanceleadershipllc.com