Due to the current economic climate and talent market, businesses are dealing with a tricky situation regarding workforce planning and management. They may have several questions, like whether they should continue hiring or implement layoffs. To understand how economic uncertainties are affecting workforce planning, Littler conducted a study.
The business world has witnessed several ups and downs in the economy over the last few months. This has thrown a wrench in organizations’ workforce planning for this year. On the one hand, inflation remains relatively high, and mass layoffs across companies and geographies continue to make headlines. On the other hand, unemployment seems to be at a 53-year lowOpens a new window . While there are still fears of a recession, the labor market may cool down if organizations cut back on hiring raises.
This complex scenario raises a few important questions for employers in the coming months, such as, â€œShould they continue hiring as normal?â€ Should they prepare for a recession? Or should they implement more layoffs?
To understand how economic uncertainties are impacting workforce planning and management, Littler conducted a study across the technology, retail, manufacturing, hospitality, and healthcare industries. The following are a few insights from the study.
Employers Are Confident in the State of Their Businesses
Recent reports showed that inflation is slowly cooling down while consumer spending has posted the biggest gainsOpens a new window in nearly two years. Most survey respondents seem to be responding to this economic improvement with optimism about the state of their businesses. About 47% said their optimism was somewhat high, and 29% said it was very high.
This sentiment seems to be carrying forward to the year ahead, with 47% of respondents being somewhat optimistic and 28% being very optimistic about the state of their businesses 12 months from now. Further, larger companies (>10,000 employees) seem slightly more confident than smaller companies (<500 employees) in the future state of their businesses.
Confidence levels, however, seem varied across industries. Surprisingly, the tech sector, where mass layoffs are making headlines, looks more confident, with 77% of respondents saying they are somewhat or very confident in the current state of their businesses. This confidence could suggest that businesses believe taking appropriate measures now to address the previous over-hiring will prepare them to thrive during economic uncertainties.
Yet, Employers Remain Concerned About Broader Economic Conditions
Despite being confident in their own businesses, employers are worried about how the economic uncertainties will affect their workforce planning and management. About 77% of respondents expressed concerns in this regard.Â
To what extent economic uncertainties are a concern for organizations’ workforce planning
The technology industry expressed more concern than other sectors, with 87% of respondents concerned to a moderate or large extent. The healthcare, retail, and hospitality industries are not far behind. Notably, 70% of manufacturing respondents were concerned about the current economic conditions.
Economic Uncertainty Drives Caution in Hiring
While 24% of respondents have implemented layoffs/workforce reductions or are in the process of doing so, about 60% of respondents are not planning or considering them. Larger companies have conducted layoffs than smaller businesses (36% vs. 14%). The story is similar regarding hiring freezes (28% vs. 16%). In fact, smaller companies seem keener on increasing their workforce.
As a result of economic uncertainties, what are organizations’ statuses regarding the following actions
The discrepancy between the study’s findings and the prevalence of layoffs in the news may be partly due to â€œloud layoffs,â€ as mass layoffs by popular tech companies generate more media attention. At the same time, other industries either hold off or even ramp up hiring. The study’s data seems to support it. About 60% of tech professionals say their organizations have conducted or are conducting layoffs, compared to 29% in healthcare, 21% in retail and hospitality, and 19% in manufacturing. More tech respondents also say their organizations have implemented hiring freezes.
The fact that 60% of respondents don’t plan layoffs may reflect lessons learned from the pandemic and a competitive talent market. During the initial days of the pandemic, many companies laid off employees and then struggled to hire qualified talent when they started reopening in mid-2020. Further, companies have constantly struggled to retain and hire talent for the last couple of years. This may have discouraged many employees from laying off people.
Companies that are content with their current workforces, too, have decided to avoid layoffs. Instead, they have tried to reduce excess overhead through controlled spending and the natural attrition of their employees. Some have also announced voluntary separation programs.Â
A few companies have also taken other steps to avoid layoffs, and manufacturing appears to be one such industry that has taken different steps. Compared to other respondents, a higher percentage of respondents from this industry implemented hiring freezes (30% vs. 20% of all respondents), delayed salary increases and promotions (27% vs. 9%), and conducted temporary furloughs/workforce reductions (13% vs. 7%).
The result is a situation where employers are caught between navigating the economic upheavals and recognizing a need to retain talent and grow to position their businesses for success.
See more: Keys for Successful Workforce Planning
For employers who have persevered through the challenges created by the pandemic, a transformation in how we work, and a competitive talent market, the uncertain economic climate is another example of the complex and nuanced challenges of managing a workforce today.
While navigating the upheavals may look tricky, the best approach is to avoid layoffs as far as possible, given the competitive labor market. Instead, take alternative steps, as mentioned above, along with upskilling and smart workforce management to engage and utilize employees to the maximum, leading to business success.
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