Recession Archives - The Future of Work Exchange

The Recession-Ready Enterprise

Business Leadership Contingent Workforce Direct Sourcing General Insights Talent Acquisition Technology and Innovation by Christopher J. Dwyer on 04/03/2023

There has been great debate in recent months about a recession. Are we already in a recession? If a recession occurs, will it be light or something more impactful? Or will the economy be resilient and avoid a recession entirely? Enterprises in technology and media industries are already reacting to recession fears by laying off tens of thousands of workers. As we move further into 2023, how could a recession impact the extended workforce?

Business As Usual

There’s no doubt we’re experiencing challenging economic times. However, businesses must continue with mission-critical projects and initiatives that often require specialized expertise. The skills gap remains inherent in many enterprises, leading to continued demand for contingent workers. And as the Future of Work Exchange research indicates, 47.5% of the enterprise workforce is comprised of extended workers. That figure cannot be ignored, especially during times of economic distress.

Digitization Evolution and Workforce Mercenaries

Despite the recessionary climate, there is an enterprise evolution occurring: digitization. Whether it’s talent acquisition platforms, accounts payable solutions, or larger enterprise resource planning systems, businesses are transforming from tactical (manual) to strategic (digital) strategies across the operational landscape. And with digitization comes the extended workforce.

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The Recession-Ready Enterprise

Business Leadership Contingent Workforce Direct Sourcing General Insights Talent Acquisition Technology and Innovation by John Yuva on 01/26/2023

There has been great debate in recent months about a recession. Are we already in a recession? If a recession occurs, will it be light or something more impactful? Or will the economy be resilient and avoid a recession entirely? Enterprises in technology and media industries are already reacting to recession fears by laying off tens of thousands of workers. As we move through the first quarter of 2023, how could a recession impact the extended workforce?

Business As Usual

Digitization Evolution and Workforce Mercenaries

As more enterprises pursue digitization, mission-critical hyper-specific skillsets and expertise are not only preferred but required. Transforming into the digital era means companies are implementing new technologies that leverage artificial intelligence, machine learning, blockchain, and other Industry 4.0 automation. Enterprise integration of these technologies requires specific skill sets and competencies that are often outside the capabilities of existing permanent employees.

Hiring full-time employees for digitization projects and initiatives does not make fiscal sense (particularly during a recession) unless the role is a data analyst or scientist critical to interpreting daily analytical outputs. Otherwise, contingent workers specializing in digital transformation integration and implementation are the ideal choices — aligning contractual agreements with workforce budgets. Hyper-skilled talent is the future for enterprises expanding their product and service offerings through automation.

Supply chain and procurement are fields that employ hyper-skilled talent. Enterprises will hire a chief procurement officer to transform the procurement department through digitization and eliminate manual processes. A timeline may last two years, but once the project is complete, the individual seeks out other organizations with transformation as a critical initiative. These types of workforce mercenaries are much more abundant today than a decade ago. Their sole purpose is the execution of strategically detailed operational initiatives to elevate the enterprise competitively before taking on a new assignment elsewhere.

Sourcing such talent is already available to many organizations through workforce platforms and processes.

The Recession-Ready Enterprise

Direct sourcing and talent marketplaces are now table stakes for enterprise competitiveness. The use of these channels is necessary to source extended workers and hyper-skilled talent with current, specialized competencies. Recent Future of Work Exchange research found that 82% of businesses utilized more extended talent in 2022 than in 2021. During a recession, organizations can specify specific hours for extended workers who are already accustomed to flexible schedules or defined project timelines.

The workforce mercenary is likely to find an abundance of opportunities in a recession with 73% of businesses planning to divert external talent to mission-critical type initiatives and projects over the next six months. This is a clear sign that organizations are taking a more proactive stance against a possible recession than in the past. It appears quite possible that talent acquisition strategies will also shift during a recessionary period as the extended workforce closes critical skill gaps.

Enterprises with the ability to scale their extended workforce before, during, and after a recession are best positioned to weather an economic downturn. Seek workforce mercenaries for those transformational initiatives, while leveraging external talent for skills gap challenges. It’s a critical balance, but one that separates the modern enterprise from those still operating at a tactical level.

The Factors Shaping the Future of the “Future of Work”

Business Leadership by Christopher J. Dwyer on 01/17/2023

The phrase “Future of Work” can be confounding. It’s become an oft-leveraged, relied-upon, and catch-all phrase to describe the ideal future state of how work is addressed and accomplished. Here at the Future of Work Exchange, our definition revolves around the tenets of the talent revolution, the impact of next-generation technology and innovation, and the complete transformation of business leadership and business thinking to evolve alongside the human factors within the contemporary enterprise.

When the Future of Work is discussed, it is imperative to remember that external market pressures and global indicators are what influences the way workers work and the way businesses operate. And, that could not be more apropos than right now in 2023.

The Economic Factor

Call it a “soft recession” or a “light downturn,” but no matter what, there will be some economic challenges ahead for the global marketplace. That in and of itself will impact how businesses optimize their workforce and their workplace; in fact, Ardent Partners and Future of Work Exchange research finds that nearly 75% of enterprises believe that anxiety over recession fears is actively impacting the workplace.

Inflation and global economic uncertainty translates into shaky financial ground for both people and professionals. Cost-of-living factors shape the way workers think about their current roles, while specific industries will face the burden of layoffs and shrinking headcount in the months ahead. With this, a giant question remains: will it mean that “power” shifts back to the employer after two-plus years of historic “Great Resignation” quits?

No matter the outcome, this much is clear: there are dozens of scenarios that could result, including:

Leaders having new leverage to force workers to return to the office.
Great Resignation-era professionals rethinking their choices.
A greater utilization of external talent and contingent labor, and;
Business leaders pumping resources, time, and energy into retaining talent.

That last point is especially critical, as the candidate experience is a foundational element of the Future of Work in 2023, as no matter how many cost-cutting processes are in place to balance a recession, these leaders must still double-down on the workplace, workforce, and culture improvements they implemented over the past two years.

The Education Factor

On the surface, there may not seem to be a link between today’s youth, lasting COVID implications, and the workforce of the future, however, the changes in how regions invest in education has a butterfly-like effect on future skills gaps.

In the past, organizations such as the American Action Forum estimated that there could be nearly $1.2 trillion in lost economic output as a result of gaps and shortfalls in education across the country…and this was before COVID. Quarantines and lockdowns were a necessary measure to combat the spread of the nefarious virus in its first year; the remote learning/school that was forced to happen as a result was devastating for children and adolescents who experienced a dearth of consistent schooling well into 2021.

If over a trillion dollars could be lost in economic measures before this all happened, then losses directly related to COVID (regarding skills gaps) is easily double or triple that number when all is said and done. Early-age learning is a foundational element of how humans progress throughout their lives, and, the bumps experienced during the pandemic will certainly show later this decade (and into the 2030s) when workers are dealing with new challenges and issues in a world yet unknown.

The Future of Work impact here: will 2020 and 2021’s inconsistent schooling result in a global skills shortfall in a future age when new, digital, and advanced expertise is required?

The Environmental Factor

Although recent news that the earth’s ozone layer may recover to its natural state sometime in the 2040s globally, there is still incredible concern over human-led damage to the environment and its impact on climate change.

This has resulted in a renewed focus on “green energy” that is sustaining and healthier for the planet. To achieve this goal and eschew carbon emissions and traditional energy sources, however, there will be a great need for new and advanced skillsets well into the future. According to the International Renewable Energy Agency, 12.7 million people now work in the global renewable energy sector.

In this insightful piece from the World Economic Forum, this number could blossom to over 38 million within the next seven years. An additional 25 million or so jobs created within this evolving sector would mean that innovative positions that require new skillsets would be developed. Considering the exciting developments in the wind power, liquid biofuel, solar photovoltaic, and hydropower industries, this translates into fresh crop of roles that may not even exist today.

New jobs require new talent that can drive new technology. A blend of brand new skillsets will be needed, as well as the best talent that already maintain strong digital and personal skills. As governments around the globe invest more resources into renewable and sustainable energy, it will determine how this global industry opens new possibilities for the Future of Work movement.

What Would a Possible Recession Mean for the World of Talent and Work?

Business Leadership General Insights by Christopher J. Dwyer on 07/25/2022

Inflation, a seemingly slowing economy, and an expected second straight federal 0.75%-point increase in its short-term rate (which would mark the first time this has happened in nearly 30 years) all point to one thing: a classic recession that would bring uncertainty, doubt, and fear to the greater business arena.

In an article by the Associated Press (linked here from Boston.com), the markers for a recession are clear yet many pundits aren’t fully embracing these as a surefire sign that a crisis is looming:

Treasury Secretary Janet Yellen on Sunday said the U.S. economy is slowing but pointed to healthy hiring as proof that it is not yet in recession.

Yellen spoke on NBC’s “Meet the Press” just before a slew of economic reports will be released this week that will shed light on an economy currently besieged by rampant inflation and threatened by higher interest rates. The data will cover sales of new homes, consumer confidence, incomes, spending, inflation, and overall output.

The highest-profile report will likely be Thursday, when the Commerce Department will release its first estimate of the economy’s output in the April-June quarter. Some economists forecast it may show a contraction for the second quarter in a row. The economy shrank 1.6% in the January-March quarter. Two straight negative readings are considered an informal definition of a recession, though in this case economists think that’s misleading.

Yellen argued that much of the economy remains healthy: Consumer spending is growing, Americans’ finances, on average, are solid, and the economy has added more than 400,000 jobs a month this year, a robust figure. The unemployment rate is 3.6%, near a half-century low.

The National Bureau of Economic Research defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months,” yet economic activity isn’t stalling as much as a traditional recession. On top of this, the 1) jobs added figure and 2) an historically-low unemployment rate point to something else entirely: a recession that doesn’t feel like a recession.

With interest rates sky high, home sales are falling and falling, a much different scenario than the past 18 or so months, in which the market was incredibly competitive. Fewer home sales typically mean fewer purchases related to homes, such as appliances, home decor, professional home services, etc. This could cause a ripple effect on the economy, however, with consumer spending so robust right now, it certainly clouds any future visions of recessionary activity. Axios’ Neil Irwin refers to the current economic state as “the great weirdness,” stating:

But in this topsy-turvy environment, the Fed wants to see consumer demand slow enough to temper inflation. The report shows solid demand, yet it might not be strong enough to tip the committee in favor of an ultra-big full-percentage point interest rate hike, particularly given another reading out this morning that we discuss below. The bottom line: There are plenty of risks ahead, but American consumers are chugging along for now, which could keep overall growth in positive territory.

Alright, so we (maybe) understand it now: the U.S. could head into a recession, but maybe not…and if it does, it won’t be a traditional recession. Okay, got it. What does it mean for talent? What about the extended workforce? What about “work” itself?

First things first, no matter what happens, the extended workforce will continue to grow…and it will grow considerably faster if we do head into a recession. The 2008-2009 financial crisis saw the biggest jump in utilization of contingent labor in history. The “pandemic era” saw another spike in utilization. The odds favor this workforce closing the gap to half of total enterprise talent within the next 18 months. A recession, even a “minor” one by the weird standards we’re currently facing, would see some enterprises executing layoffs (but not to the extent (40 million people) that we saw during the early pandemic-fueled recession of 2020), which in turn would lead to more independent talent on the market, and those same enterprises leveraging extended talent to remain competitive. All in all, growth is in the forecast for the extended workforce.
Businesses must focus on the depth of their talent and leverage the necessary tools to help their workers thrive. A highly-skilled workforce (both FTE and extended) will help the economy grow; an enhanced output of products, services, etc. often leads to differentiation in core competition, a very strong link to businesses succeeding regardless of current financial conditions across the market. If that talent is spread out amongst many businesses within a given industry, there’s little room for those organizations that don’t value their workforce and don’t prioritize the employee experience. Can process automation enable workers to thrive with additional power via technology? Should digital workspaces be implemented to improve remote and hybrid workplace scenarios? Can we get over the digital transformation hump to ensure that the workforce blends the best of human and machine? Too, leveraging tools to reskill and upskill the workforce can perform wonders when it comes to helping workers recession-proof their positions and contribute to the future success of the organization.
Talent acquisition over the next few months becomes a critical endeavor. This is the time for talent acquisition executives to shine. They’ve been dealing with a frenetic labor market with candidates that are seeking purpose, flexibility, and lifestyle improvements; these are not attributes that are easy to quench for any TA leader, even the most seasoned. For many businesses, talent acquisition must become more dynamic and more agile to deal with both the fallout from The Great Resignation and the anticipated ramifications of whichever recession-sparked issues arise over the next several months. Leveraging the company brand, its culture, and what it can offer beyond compensation are all crucial factors for talent acquisition teams to revolutionize hiring over these next several months.

Look for more on this topic in the coming weeks on the Future of Work Exchange.