Can a Business Hire Its Way Out of a Recession?
With the GDP growth rates of the major western economies either slow, flat-lining or receding, I don’t think it is safe to suggest we are comfortably within a post-recession era.
In fact, the IMF cut the growth forecast for developed economies in 2012 by 0.7 percent to a mere 1.2 percent and the 2013 forecast was cut by 0.5 percent to 1.9 percent. So, with economies languishing in terms of GDP or dipping in and out of recession, many western firms will still need to keep their recession-based businesses strategies close at hand – and hiring teams will need to continue to align their tactics with the business and provide recession conscious resourcing initiatives.
While I realize that HR and recruiters cannot necessarily hire their business out of recession (that would be remarkable), recruiters can recession proof their hiring tactics and ensure they are focusing on raising the competency and performance levels of the business.
A key hiring imperative for recruiters operating in today’s post recessionary, but economically stunted, climate should still be to enable their businesses to do more with less – and below I have outlined several recession-proof hiring strategies that accomplish this task:
1.) Focus on internal applicants first before going external
Research from Wharton Business school indicates that external hires get significantly lower performance evaluations for their first two years on the job than do internal workers who are promoted into the job. External hires also have higher exit rates and are paid 18-20 percent more. As well as this, internal applicants can have a lower time-to-hire and cost-to-hire reducing empty desk time.
So, for the first two years at least internal hires may be the more profitable hiring option and a good recession-proof hiring strategy. As well as this, focusing on internal staff career mobility should also raise your staff retention levels as research from Ranstad has shown us that the main reason for staff leaving voluntarily at the moment is lack of career development.
2.) Focus on cultural fit in hiring to raise your new hire success rates
Lack of cultural fit not skills is thought to be the main reason that new employees fail. In fact, a study by Fresh Minds Group showed that the main reason for new hire failure is much more likely to be interpersonal than technical. The study found that 26 percent of new hires fail because they can’t accept feedback; 23 percent don’t last because they’re unable to understand and manage emotions; and 17 percent lack the necessary motivation to excel.
In order to align with the more for less recession conscious hiring strategy, you must raise your new hire success rates and one way to do this is to start assessing for, or at least placing much more emphasis on, cultural fit in your hiring practices.
3.) Develop an employee referral scheme
We talk about this a lot, but the data is overwhelming; it’s a great hiring strategy at the best of times, but indispensable in a recession. This is a way you can hire while at the same time improving all your hiring metrics. Research from Jobvite tells us that candidates that come via employee referrals are hired 55 percent faster than candidates from other channels and have much higher retention rates than staff from other channels, e.g. 47 percent stay longer than three years compared with just 7 percent from job boards.
4.) Make sure new hires are better than their predecessor
Recruiters should raise the bar and define a new higher performance success profile, which is focused around current superstars and takes into account the view of future stakeholders of the role. To align with a more with less, recession-conscious, hiring strategy, recruiters must ensure to bring in new people who are better than those they replace.
5.) Allow underqualified applicants as long as they can demonstrate their star quality in a cover letter
In a recessionary environment with high unemployment, you may be facing high applicant volumes, which make it tempting to set very high entry standards. Doing this may result in you deterring strong applicants from applying, which goes against a more for less hiring strategy.
So, tempting as it may be, be sure not to over specify person requirements; alternately, think about adding a clause to your person specification which says, “If you don’t meet all our criteria, but think you can do an outstanding job, please apply, but tell us why you feel you can do a great job!”
Finally, while I admit that recruiters cannot literally hire their way of out a recession, they can do the next best thing and that is to adopt a recession-proof hiring strategy, which is focused on reducing time-and cost-to-hire, while increasing performance and retention levels, which should lead to increased levels of profitability for the business.