Preparing Your Firm for a Recession
October 4, 2019 Anna Adams
Top economists say that the next U.S. recession is not a matter of if it will happen, but rather a matter of when. Some say it’ll hit by the end of 2021, while others suggest it’s already begun. The question for us is how an economic downturn will affect the staffing industry, and what firms can do to prepare themselves to minimize the impact of a recession. In 2008, for instance, we saw a number of organizations implement strategies so that they could weather the storm better than their competitors. Let’s talk about a few tactics to deploy to make sure you’re prepared.
Diversifying Business Offerings
If your business is highly specialized, or if your offerings are confined to a particular industry, then you may be more directly impacted by an economic downturn. A recession will likely touch every industry, so it’s a good idea to diversify your offerings and expand your recruiting practice. While the 2008 recession was abnormally severe, the most affected industries included manufacturing, construction and printing, while industries like retail, IT and health care were less impacted.
Staffing agencies should look to partner with these more recession-proof verticals if they want to remain viable. Enlisting the help of a remote recruiting provider can help you expand your category coverage and better serve new types of clients. The job growth rate in the software sector, for instance, doubled the rate of growth in other sectors of the US economy. Landing a few tech clients (and nearly every company has an IT department these days) will be a great asset to your firm in the event of a downturn.
Expand Your Contract Business
The last recession saw US staffing revenue declined 28%. In a few short years though (faster than most sectors), the industry was back on an upswing, and that trend is likely to play out again in the next recession. This is because, at its core, staffing is about flexibility. So while contingent workers are often the first to go, they are also first in line when organizations are looking to bring on new talent. Staffing firms should strongly emphasize their contract business if they want to come out a recession relatively unscathed.
In a strange way, an economic downturn allows staffing agencies to do what they do best. That is, to place quality talent with clients who need it. In times of uncertainty, businesses will look for greater flexibility when it comes to their workforce, and staffing agencies can step in to meet that need. Emphasizing your contract business and the strength of your recruiters amid a recession will better enable your agency to succeed and come out the other side. Focusing and building upon current relationships is imperative in an economic slump.
Retain Your Best Recruiters & Employees
Most organizations are focused on cutting costs during a recession. Looking to maintain critical day-to-day operations, businesses will curtail their offerings and, in some instances, reduce overhead and lay off employees. While we understand that job loss is a part of economic instability, we have to emphasize the fact that organizations have to identify and retain top talent throughout a downturn. This includes both end-clients and staffing agencies. Cutting labor costs won’t do you any good if you don’t have any quality employees and recruiters on staff when the market bounces back. Basically this comes down to balancing both your short term and long term goals: Of course, your business will have to adapt to the recession and make a tough decision concerning employees, but you don’t want to drastically restructure your business to the point where you are no longer competitive in times of growth.
Offshore Certain Business Processes
As we mentioned earlier, partnering with a remote recruiting provider can help your organization, both in times of growth and economic instability. Lightening the load of your internal team by offshoring certain business processes, especially during a recession, can give you an edge over other staffing companies. The more severe the downturn, the bigger the upswing, which means more job openings and more applicants. This dynamic can place quite the burden of your internal staff, so enlisting the support of an offshore provider to assist with essential operations like HR, accounting and payroll can you help secure those placements faster than the competition. Having a documented recruiting and compliance process will help to smooth the transition, ensuring your offshore team functions more as an extension of your business—not just a vendor.
Recessions are part and parcel of our economic system, but they are not the financial omega they are often made out to be. By adopting some of these strategies and taking a long term approach, you can better situate your business to handle a potential downturn. All companies, including your competitors, are in the same boat. But by preparing early (diversifying your business, offshoring and retaining talented employees) you can position your organization to bounce back more quickly when the economy recovers.