We may not officially be in an economic recession, but the Staffing Industry has certainly felt a slowdown over the past 18 months:
- The SIA | Bullhorn Staffing Indicator has been reporting double digit YoY declines in temporary hours worked since October 2022.
- Some staffing verticals are down as much as 40% from their 2022 highs.
- BLS data shows no growth in household employment and all the gains from foreign born workers.
Even without these indicators, recession preparation should be part of your business plan. The following best practices can help your organization prepare for the next economic downturn, successfully navigate it, and even emerge from it in a more competitive position.
Build a War Chest
Your organization should have two or three months of operating capital in the bank, plus access to another two or three months of funding through lines of credit or other financing options. Even in a recession, opportunities will arise; to take advantage of them, fast access to cash is critical. Capital reserves also help your organization stick to its long-term strategy instead of deviating from it to respond to crises.
Plan for Problems
A 30% drop in revenue, losing your largest customer, seeing half your open orders go on hold—all these scenarios are real possibilities. Brainstorm problems like these, then develop detailed, written plans to respond.
- Every response plan should identify task owners.
- If a plan includes staff reductions, include your HR department in its development.
- Include execution tracking in every plan.
- Review each plan every quarter and update as needed.
Create Forward-Looking KPI’s
These indicators will let you know when to put certain response plans into action. KPIs vary by business; examples include the number of associates on assignment per desk, the number of open orders per recruiter, your sales pipeline, revenue, net operating income, percentages of canceled/on-hold orders, etc.
Look for Waste
Review your organization’s processes and identify situations that limit productivity or create bottlenecks. Include organization charts in your review; look for duplicative roles and issues with span of control. In this exercise, the help of a Lean Six Sigma Black Belt is invaluable. Ensure there are scorecards and clear performance expectations for every role in your organization. Hold the team to the same high standards as when times are good. Develop plans for role consolidation if necessary; this includes communication, training, and performance management.
Cost Savings
Complete an inventory of your technology spending across the organization. Look for rogue spending on credit cards at the desk level. You’d be surprised what is out in the field. Evaluate each vendor to determine if you are achieving the promised ROI and if it is still a necessary expense. We see companies paying for duplicative capabilities across multiple vendors quite often. We call this tech bloat. Schedule performance reviews with each of the vendors to ensure you are getting the most out of each product and you understand their upcoming roadmaps. Discuss contract renegotiation. We see several software vendors willing to negotiate price for contract extensions. Now is the best time to have financial discussions with your technology partners.
Determine Your Investments
Economic slowdowns are tremendous opportunities for well-prepared organizations to focus internally and invest in people, processes, and technology.
- Acquisitions – A recession is your chance to acquire market share from competitors that are less prepared or not as forward thinking as your organization. And in every downturn, there are valuable assets you can acquire at discounted prices.
- Technology – New staffing technology can increase productivity for recruiters, sourcing specialists, salespeople, and middle-office/back-office support staff. An economic slowdown is an excellent time to invest in new tech, as the slower business pace gives your team more time to focus on the upgrade. You can increase your company’s value while competitors are just trying to survive.
When evaluating investments, one of the key decisions points needs to be market share. Ask yourself this question: “Will this investment position our firm to outperform our peers as the market returns?” Several studies show that companies that invest or acquire during slowdowns outperform their peers by as much as 50%.
Most technology investments will be considered capital expenditures and not affect your EBITDA. When the recession passes, you’ll have better technology and processes, plus a staff aligned on the future: a real competitive advantage.
Prepare to Prosper
Every challenge is also an opportunity. You can’t prevent economic headwinds, but you can plan for them—doing so is preparing to prosper.
As Newbury Partners President, Chris Scowden brings 25 years of recruitment leadership experience and application of leading-edge technology to the Staffing Industry. Before joining Newbury Partners, he led business transformation and division turnarounds at AMN Healthcare and TrueBlue. Before leading some of the largest process and technology transformations in the Staffing Industry, Chris was the Global Delivery Leader for IBM/Kenexa RPO. He has worked closely with Bullhorn and several of Bullhorn’s acquired companies as an enterprise customer over the years. We invite you to learn more about Chris.
About Newbury Partners
Newbury Partners brings years of experience as technology advisors to the Staffing Industry. We specialize in providing tried and true best practice methodologies through every consulting, implementation, reporting and analytics, development, and strategy engagement. Our commitment to our clients is to provide honest and transparent communication to create lifelong partnerships.
For more information, visit www.newburypartners.com.
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