If you've been in work for more than a decade, it's likely you will have already experienced the dreaded recruitment freeze; that automatic, usually un-researched and totally unnecessary reaction to fears of what MIGHT happen, creating a self-fulfilling prophecy of damaged productivity and lower profits and a general feeling of stagnation throughout the organisation. Well, even if you haven't, this post is about how to respond if you see the looming signs.
When I saw the self-congratulatory gloating of the journalist who actually won an award for causing the national hysteria that brought Northern Rock to its knees, thereby costing the British tax payers a fortune, I knew that common sense on the economy was in danger of flying out of the window. Thankfully, there are enough people prepared to make their own mind up and most organisations are forging ahead with their plans in terms of hiring.
May I use this opportunity, though, to issue a plea to UK journalists to look beyond the world where life begins and ends with 'the exclusive'. Our economy is confidence led and journalists, for better or for worse, greatly influence that confidence. Whilst they might think that, on the face of things, sensationalist speculation on the economy just fills column inches and air time, the more people keep their money in their pockets 'just in case', the more we all suffer.
Why the Freeze?
Even one sizeable organisation damaging its productivity by needlessly freezing recruitment is one too many. Word gets around. Suppliers feel the pinch as orders slow down, so they are forced to adopt the same policy - or worst still, maybe even lay people off.
Of course, there are some circumstances where there is a genuine need to reduce the cost base in order to maintain financial viability and protect the current workforce. In this post I am not referring to those organisations faced with such a dilemma, but rather those who almost without thinking, call for a hiring freeze as an automatic reaction to potentially difficult trading conditions.
Hiring freezes are a hangover from the days when organisations actually used to train people and talent was almost a commodity that could be picked up and set down at will. All it would take was a slight concern about profits or the economy and up the hiring shutters went. In today's labour market, however, where hiring and retaining talent is the single biggest challenge organisations face in terms of meeting objectives, such myopic and out-dated reactions merely damage an organisation's performance and future hiring capability.
Why the imbalance exists
The imbalance illustrated above is allowed to exist largely because of the oft used argument here on Forthewantofanail.org, which is that there are no real measures in place to calculate the impact of hiring practice, only the surface costs. Without these measures, when the FD calls for a hiring freeze, the manager trying to run the under-resourced department has nothing to point to and show why NOT hiring costs the company more money than the FD thinks he or she is saving.
To highlight this point let me re-use a recent case study of the company needing to hire a design engineer in order to modify an existing product to house a far cheaper component. Until we applied the new hiring metrics, the fact that this hiring requirement was costing the company over £50,000 per week, completely fell below any cost radar, therefore wasn't being considered when the hiring strategy / budget were decided.
Had this company applied a hiring freeze for, say the current quarter, considering the employment costs, the temporary 'savings' in this case (they are going to get hired eventually) would be £13,500, whereas the true cost to the company would be in excess of £600,000.
Now, this is an extreme example and you might be tempted to think "that wouldn't happen here". Well, all I would say is that this is exactly what the company in question would have claimed before it had appropriate measures in place.
How to avoid (an unnecessary) freeze
Closing on the post title, let's just first acknowledge again that, sometimes, putting a hold on additional wage costs is the right thing for an organisation to do. The key here is how do you know for sure, when that policy is purely based on the automatic reaction of hitting the proverbial hiring freeze button, every time the FD gets nervous?
Here are three suggestions on protecting your organisational performance from the soothsaying bean-counters!
1. Ask why? If the answer is along the lines of "we are concerned about future profits", just remind them that all profits are a by-product of what people do. It might not get you anywhere against the mighty sword that is the management accounts, but it's far better than meekly accepting policies that belonged to the days when skills were a commodity. Remind them that blindly implementing such a policy will seriously damage the organisation's future ability to attract good people.
2. Side-step the hiring moratorium. Build a strong financial case for each individual hire. Get HR, the FD and the operations people around the table to use their best creative talents to also examine why a hire SHOULD take place, rather than blindly defending a negative position. Remember, accountants can be creative too if encouraged to be so!
3. Share this article now. Head off a hiring freeze by getting policy makers thinking about ALL of the implications of a hiring freeze, not just the short-term delay on wage expenditure.