It's a perplexing time. Employers desperate to hire and retain talent are planning layoffs and hiring freezes. Organizations addressing labor shortages are boosting pay and benefits to attract candidates while also taking steps to reduce headcount.
Companies are pursuing a range of strategies illustrating the paradoxical nature of the current labor market, according to a PwC survey of 722 U.S. executives—chief human resource officers, chief financial officers, chief operations officers and corporate board directors.
When asked how they are responding to the current business environment, 83 percent said they're focusing their business strategy on growth and only 30 percent see recession as a serious risk.
"This is somewhat surprising given the mixed signals in the economy right now, including rising interest rates and slowing economic growth," said Bhushan Sethi, joint global leader, people and organization, at PwC and an adjunct professor at the New York University Stern School of Business. "After more than two years dealing with uncertainty related to the pandemic, business leaders recognize the urgent need to focus on growth in order to compete, and they're zeroing in on what they can control," he added. "With growth in mind, executives are exploring both acquisitions and increases in internal investment."
Finding the right talent continues to be a challenge. Talent acquisition and retention was cited as a serious business risk, second only to cybersecurity. Nearly two-thirds of respondents (63 percent) have changed or are planning to change processes to address their labor shortages, up from 56 percent in January.
"Organizations are still walking a tightrope when it comes to talent as we begin to see the longer-term impacts of the Great Resignation," Sethi said. "Finding the proper balance between investing in specialized talent, managing headcount costs, and driving productivity and morale will remain a top focus. After a frenzy of hiring and a tight labor market over the past few years, executives see the distinction between having people and having people with the right skills."
For example, 50 percent of respondents said they are planning to reduce their overall headcount, 52 percent are implementing hiring freezes, 46 percent are dropping or reducing signing bonuses, and 44 percent are rescinding job offers.
Experts said the staffing imbalances arose from overhiring during the pandemic in areas where demand has since fallen off.
"With the lack of qualified candidates and the Great Resignation, companies were competing for talent, and this may have caused them to overpay for that talent," said Eric Cormier, manager, HR services at Insperity, an HR outsourcing firm in Kingwood, Texas. "Now the uncertainty of the economy could have an adverse effect on company growth plans and as a result force them to refocus or adjust their needs. This challenge may potentially include laying off those that they were so desperately seeking just a few months prior."
They may need to adjust headcounts through automation and process redesign in some areas, while continuing to fill other roles that require specialized skills, Sethi said.
"We see these precautionary actions more in certain industries," he added. "Consumer markets and technology, media and telecommunications companies, for example, are more likely to invest in automation to address labor shortages. At the same time, health care is seeing bigger talent challenges than other industries and is more focused on rehiring employees who have recently left."
Nearly half (49 percent) of respondents to the PwC survey said they are looking to rehire boomerang employees, while 52 percent are considering business acquisitions to gain access to needed talent, 56 percent are dropping COVID-19 vaccination mandates, 64 percent are increasing compensation and 70 percent are offering more remote-work opportunities.
Solving the Talent Conundrum
The economic uncertainty is pushing employers to consider layoffs and pump the brakes on talent acquisition, but experts agree that to avoid discouraging future growth, the best recruiting teams will take advantage of the cooler market to reset talent strategy and make opportunistic hires.
"Yes, it is a confusing time—we're downsizing and upsizing simultaneously," said Josh Bersin, an HR industry analyst, thought leader, and CEO of the Josh Bersin Company. "But the key is not to do this in a draconian way." Employers can flourish during this economic cycle, he said.
"You have to accept that this is not a traditional demand-driven downcycle," he continued. "This is a rapid change in demand, accelerated by the pandemic and 15 years of digital disruption. So rather than just lay people off, you need to redeploy your people into new roles. Topics like reskilling, career mobility, talent marketplaces and organizational agility are now all C-level topics. Companies that figure this out quickly can climb the new growth curve as their markets and industries change."
Sethi recommended leaning into growth amid the uncertainty. "Focusing on your growth agenda will be key to competing," he said. "Pay close attention to the changes and trends that may impact your business, and assess which ones you can plan for. Analyze your strategic workforce needs to understand both the skills and capabilities required today as well as those that will be needed to execute your company's future strategic initiatives."
Cormier advised employers to review their open headcount and projections for new hires and adjust them to be in line with the current state of the economy. "While bringing in new employees has its advantages in an uncertain economy, a good strategy may be to first look internally," he said. "This approach would help with both the acquisition and retention of talent and may end up being the best decision for the company overall. If this is not possible, then a cautious approach to recruiting and a review of the company needs around adding new positions should be reviewed and adjusted as the economy shifts."