Should You Freeze Hiring During Uncertain Economic Times?
When it comes to hiring and managing during turbulent times, one thing separates the wheat from the chaff: a progressive focus.
Despite an 8-year bull market, many businesses are still licking the wounds caused by the 2007 financial crisis. Add a volatile political climate and predictions of impending economic turbulence, and you can’t blame those growing wary of rapid growth or expansion opportunities.
But, as the supply chain is already suffering from a talent gap, can companies afford to slow or freeze hiring — or, even, to downsize? Research suggests that organizations that balance caution with a forward-looking talent-acquisition strategy may fair best through difficult economic times.
When risk pays off
Research by Harvard Business School faculty assessed the performance of 4,700 companies across three recessions, and found that only 9% came out in better positions. The success stories had in common a progressive focus, meaning that they were extremely selective about pruning investments and stayed on the watch for growth opportunities.
We’ve all heard anecdotes that support this research.
In the 1940s, when Hewlett-Packard was starting out, times were challenging for the nascent electronics company. But the founders took the tremendous risk of hiring legions of engineers, despite the economic downturn. Many, including the founders, credit the company’s success to this risky decision.
See the way forward by looking back
What does this mean for your business?
Claudio Fernández-Aráoz, senior advisor at the global executive search firm Egon Zehnder and executive fellow at Harvard Business School, offers a comparison to the Roman god Janos, the god of beginnings and endings. Janos is often represented with two heads, facing opposite directions. “His ability to look back is what enabled him to see way forward so clearly,” says Fernández-Aráoz. “His horizon was exceedingly long-term.”
Is your business accurately assessing risk and balancing caution with bold decision-making? Fernández-Aráoz describes how Egon Zehnder weathered the economic crisis following the dot-com bubble burst and 9/11: “A natural reaction would have been to obey the short-term signals and retrench and, indeed, that’s what most of our competitors did, dismissing up to 50% of their staffs. But we barely downsized. We continued to hire outstanding consultants and elected every single candidate who came up for partner during that period,” he writes.
Fernández-Aráoz credits these practices with his firm’s readiness to seize opportunity the moment the market began to recover. The take-away here is that while it’s crucial to mitigate risk during turbulent economic times, “it is those who stay calm, remember the past, and plan for the future who will triumph.”
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