Nailing Down Your Staffing Needs For A Potential Recession
2023 brought the risk of a global recession as countries worldwide experienced a price hike. As recession looms in the distance, businesses prepare to recession-proof their operation and minimize the effects of this economic problem.
Recession is notorious for breaking down even the most successful businesses. Recession-proofing your business will keep the business afloat while offering your employees job security.
As recession becomes a globally imminent problem in the foreseeable future, we have curated a guide to help you prepare to survive the treacherous problems that may come with it. In this guide, here is everything you need to know about nailing down your staffing needs for a potential recession.
Recession And Businesses
A recession is a period of temporary economic decline in a country. It is a period during which trade and industrial activities reduce drastically due to the significant and widespread downturn in economic activity.
Without getting too technical, the simplest way to determine or identify a recession is by a fall in GDP in two successive quarters. For a period to officially be noted as a recession, the National Bureau of Economic Research defines the period as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”
The NBER definition of recession uses several variables to determine if a period of economic decline is a recession or not. This, explained by the Covid-19-induced economic decline, was categorically referred to as a recession, even if it was an extremely short one of about two months.
However, just as Covid 19 and its economic problems came without warning, the recession made an entrance often without announcement. As a result, it is important for businesses to “recession-proof” their operations to prevent a great impact of these sustained economic contractions in the establishment.
Effects Of Recession On Businesses
As previously mentioned, a recession results in a period of economic downturn. Although this economic downturn does not last more than a few months, its impacts are not as transient and can last a long time even after an uptick in economic activity.
Both small and large businesses are affected during a recession. However, unlike small businesses, large businesses have more resources to combat the effects of economic decline.
Recession can be cruel to businesses, causing unemployment and limiting production. It can even go as far as causing businesses to ‘throw in the towel’ or ‘hang up their boots’ when it is not handled well.
Some ways recession can affect businesses include:
1. Reduced Profit
An economic decline comes with a hike in prices. This price hike will make it more expensive for businesses to acquire materials needed for production. However, when they do acquire these materials, they spend more than the usual amount required.
As a result, production becomes more expensive. Product price increases, and customers may choose to purchase from competitors who offer a lesser price. When this happens, sales decrease. To combat this problem, companies usually choose to cut costs, gameplay that usually leads to a reduction in profit regardless of how the company handles the problem.
2. Credit Decrease
Lenders are businesses, too, and they are not immune to the effect of a recession. During an economic decline, lenders fist their wallets tighter.
Lenders are more cautious about who they give loans to. They often resort to increasing interest rates to make more profit and making lending requirements stricter.
As a result, customers are more frugal with their spending. Businesses find it difficult to access their usual lines of credit to secure their own. The problems are almost cyclical as credit decreases, leading to reduced profit.
3. Reduction In Cash Flow
During a recession, businesses find it difficult to make timely cash payments. Customers will delay payment which in turn leads to a delay in the business paying its suppliers. Additionally, customers are spending less money, which leads to a reduction in profit.
This situation becomes increasingly difficult as companies cannot afford loans to clear their debt. Those who do will incur more debts in the form of high-interest rates.
The reduction in cash flow is especially challenging for B2B establishments. In such instances, all business bills will go unpaid until the customers pay their debt.
4. Declining Stock Prices And Dividends
As cash flow reduces and profit declines, negative impacts creep into the business’s official financial statements. One of the most significant parts of a business’s financial statements that take the hit is the quarterly earnings report.
These reports will show evidence of a decline in dividends. Stock prices will drop. Markets will be volatile. Stock prices will experience wild swings. There will also probably be a clamor among shareholders for new leadership.
5. Reduction In Product Quality
One unavoidable problem many consumers face during a recession is a reduction in product quality. In a time where money is hard to come by, and customers are bargaining for lesser prices, companies do all they can to keep the prices of their products low. This is no easy feat as product materials are more expensive to purchase.
To handle this problem, many manufacturers resort to reducing the quality of their products. This offsets the possible prove increase and provides a temporary product price reduction. However, as a result, many consumers will no longer get the satisfaction they usually derive from these products.
Regardless, reducing product quality will also reduce the company’s bills. This will, in turn, reduce their risk of piling debt on the company’s now shaky budget.
6. Staffing Problems
Product quality and cash flow are not the only problems recession brings. One major problem plaguing companies during a recession is staffing issues.
The staffing industry is usually the first to feel the impact of a recession. Job orders will dry up as candidates increase. Competition for available jobs will increase as the number of candidates in job applications surpasses the number of jobs available.
Employees holding job positions will become worried about their future in the business world. This, combined with every problem listed above, can be a recipe for disaster for a company that is not properly prepared to handle a recession.
Nailing Down Your Staffing Needs For A Potential Recession
The problems that accompany a recession are not to be underemphasized. One of the problems that can quickly degenerate into more problems is a company’s staffing issues or staff inadequacies.
Workers are the strength of a company. As a result, the first step a company can take to prevent significant damage to its structure is to prepare its staff. Unfortunately, not every company knows the importance of staffing when preparing for a pending recession.
Don’t wait until it gets worse before you dive into your business’s staffing situation. Before the warning bells of a recession ring, make it a point to address your staffing inadequacies that may lead to bigger problems during and after a recession.
Begin by evaluating current and future staffing needs. Determine the necessary staffing costs and outline the most efficient and cost-effective hiring process for your business. The process may be discouraging, especially because hiring and retaining staff is a business’s largest expense. However, your staff is worth it as they are your best bet to getting business through the recession.
Some ways you can nail down your staffing needs in preparation for a recession include:
1. Hire For A Wider Range Of Skills
When recruiting employees, don’t focus on employing candidates with a narrow and specific list of skills. Instead, hire candidates with many skills that can fit into multiple roles. This makes the worker transferable so that you can shift them from one job position to the other.
Doing this means employees become transferable and play multiple roles at once. They will be more useful to the company, making them an indispensable option in a period where lay-off and unemployment will plague the economy.
By hiring employees with a wider range of skills, you can keep employees minimal while enduring their skills are enough to play the necessary job roles. In addition, these employees enjoy job security in an uncertain job market.
2. Rely On A Contingent Workforce
Contingent workers offer their skills and expertise to establishments on a provisional basis. They usually include consultants, freelancers, and other temporary workers or contractors hired to complete a project. These employees are not permanent workers and do not continue working with the establishment after the project has been completed.
3. Focus On Other Areas
Focus on other areas of the business outside staffing. Preparing for a recession means evaluating or reviewing the business to find blind spots and loopholes that may be creating e problems during the recession.
Review your expenses. Examine your budget and adjust your spending accordingly. Cut out unnecessary expenses to scale back your budget. Consider remote work or freelance job options for roles not primary in the organization.
Flaying unnecessary expenses off the company’s budget is a great way to put your business in a great financial position before a recession hits.
4. Focus On The Future
Dwelling on present conditions will cause you to focus only on the present and not prepare enough for the future. Companies that weather the storms of recession often do so by preparing well ahead
Prepare your company and staff for a potential recession. Have a plan in place to ensure you can tackle any issue the recession might bring. Train and educate your employees on how to handle economic decline. More importantly, prepare by hiring only the best candidates to ensure you have the right people supporting your business during a recession.
5. Streamline Operations
A disorganized business pre-recession will suffer the most when a recession rears its head. As a result, it is best to put a business in order even before the first signs of a recession become glaring.
Organize all operations, as doing this will get you through a recession. Make sure all your operations are streamlined and efficient. Ensure all employees are proficient in their roles and future roles in the face of uncertainty.
More Tips On Preparing Your Business For A Potential Recession
Nailing down your staffing needs before a recession is a great way to ensure your business survives when that recession comes around. Some more tips to prepare your business for a potential recession includes:
1. Make Data-Driven Decisions
Don’t gamble on your business by making decisions based on intuition. After all, every decision you make impacts how your business turns out.
To make informed decisions, make use of data-driven findings.
Data-driven findings usually provide insight into a situation. This insight is collated from data that are, in turn, compiled using Machine Learning (ML) and Artificial Intelligence (AI), two important technological solutions that are growing increasingly important today. Data-driven findings are usually a result of surveys, analytics, or research using numerous technological solutions for near-accurate findings.
Using a data-driven approach to make business decisions, you can improve operational efficiencies and decrease inefficiencies that may compromise your business.
2. Gain Insight From Employees
No man -or business- is an island of knowledge. A business might be a holistic entity, but it is also made up of parts that have independent functions, all driven to make it successful in its entirety.
Ask for direct feedback and insight from your employees. Use this feedback to make decisions before or even during a recession.
Using employee insight makes it easier to make decisions, as businesses will get this insight from various perspectives. This is important as bad decisions during a recession can break a workforce.
Regularly generate employee feedback by hosting general or one-on-one meetings. Additionally, build an inclusive work culture and a sense of community so that employees feel comfortable communicating their thoughts, ideas, and concerns.
3. Have A Cash Reserve
Building a cash reserve offers a ‘plan B’ for you to fall back on when a recession hits. Keeping a cash reserve will help because, during a recession, sales dry up quickly. This reserve will play a critical role in keeping your business out of debt and keeps your business from struggling.
Set aside a reserve that can take care of a few months of necessary expenses. Review your current loan options and potential loan options for when the reserve expires. This will keep your business operational during a recession.
Preparing For A Potential Recession
Recessions hit businesses so hard that many fold up and quickly go out of business in a few months. More concerning is these businesses sometimes find it difficult to pick up where they left off.
A recession might be scary, but being prepared will help you come out mostly unscathed. No one knows when the next wave of recession will hit, so it is best to begin preparing your business for potential inflation and recession.
Nailing down your staffing needs is one way to be prepared for a potential recession. Are you ready to survive a looming recession? Here is everything you need to know about preparing your business and staff for a recession.