Experienced managers and executives know that even if the U.S. is in a recession, it will ultimately ... [+]
In an economic downturn, companies should view layoffs as a last resort rather than the go-to, quick-fix solution. With record-high inflation, high-interest rates and escalating costs of goods and services, business leaders typically opt for a headcount reduction right out of the gate. It becomes socially acceptable to downsize people in a cost-cutting measure because many other companies from various industries are doing it too.
Zapier, a software company specializing in workflow automation, is one of the few organizations thinking outside of the box when it comes to downsizing. Instead of immediately conducting a layoff, the company has instituted a secondment program to save jobs and help its employees learn new skills and talents.
A “secondment” refers to the opportunity for an employee to be temporarily reassigned to another team within the organization, or in some cases, a different company entirely.
Bucking The Trend
Since the job market has cooled down, the need for recruiters has diminished. Instead of letting them go, as many other firms did, Zapier has retained its recruiters and temporarily reassigned them to projects other than sourcing, screening and onboarding candidates.
The software company leveraged the skills and experiences of its recruiters to add value across the business in critical areas. The firm is helping its team explore career paths that interest them. This will make them better recruiters and help the company be more resilient and agile over time, instead of being reactive to market conditions.
Zapier, a startup, built its talent acquisition team from 15 to nearly 40 recruiters between October 2021 and June 2022. The recruiting team helped scale the organization’s workforce from 550 to over 800 in 2022.
If Zapier had let these recruiters go, when the economy eventually turned around, the company would then have to start recruiting talent acquisition all over again. The search would take time. The new recruiters would have to be trained, learn the products and services and become acclimated to the corporate culture.
In the long run, it's cost-effective to keep them on staff, hunker down and learn new skills. It is also a great way to provide personnel to divisions that need extra help, but don't have the budget to hire people.
Learning From The Past
As evidenced in the recent labor shortage, stemming from the Great Resignation, businesses have learned how hard it is to find, attract, recruit, hire and retain workers. Experienced managers and executives know that even if the U.S. is in a recession, it will ultimately pass. It is a prudent decision for companies to hold onto their employees tightly. In an inflationary environment, the prospective candidates will demand more money than those who previously held the role.
Executives need to recognize that without an entire workforce, it could cause significant damage to the firm’s brand and reputation. This is especially true if the company enacts a massive downsizing via an online, one-sided video call, it will invoke anger and social media backlash, calling out the tone-deaf and callous attitude of the company’s management. Some of these organizations may never recover from the adverse publicity. Lessons from Better.com show that it's wiser to hold onto people and push through the rough patch.
There Are Options Other Than Layoffs
Instead of a knee-jerk downsizing, companies should offer temporary furloughs with an option to return once the circumstances improve. The firm could convert employees into temporary or contract assignments for the short term until the economy rebounds. Rather than automatically defaulting to layoffs, employers could consider pruning the employees’ pay and reducing hours worked.
Companies can enact a four-day workweek or provide the option of going on a sabbatical and returning when the situation improves. The firm could initiate work-sharing programs or institute hiring freezes, allowing attrition without replacement. Similar to Zapier, companies can use the time wisely to train people, teach them new skills and give them new projects.
Businesses can also adopt a remote-first program. Sell off the costly real estate, don’t renew expensive leases, and the cost savings could be used to keep the employees on the payroll.
CEOs And C-Suite Executives Shouldn’t Be Immune From Layoffs
C-suite executives should not be immune to the vicissitudes of the marketplace and should be earmarked for downsizing if they have not met the standards set for them.
It’s rational to terminate a well-paid executive who made poor business decisions, such as hiring too aggressively and burning through cash reserves, as if the good times would last forever.
Senior-level managers receive large salaries and stock options that could make them extremely wealthy. If their performance doesn’t match the amount they are paid, their separation from the payroll will save a fortune compared to letting go of a regular worker.
