Why Companies Should Work With Recruiters During A Recession [2022 Stats]
Tech layoffs are all over the news and dominating our LinkedIn feeds. This negative press may be causing feelings of uncertainty and fear about the economic climate. For startup leaders, this is enough to instill doubt and cause them to question their hiring plans.
But most of the layoffs have been in FAANG companies. In fact, the North American job market remains strong: 50% of U.S. companies are continuing to hire as planned throughout 2022, and into 2023. The reality is, these layoffs have actually reduced candidate interest in Big Tech - not startups.
State of Hiring in the U.S.: Most companies planned to hire as expected throughout 2022 and into 2023. Source: Robert Half
That isn’t to say that tech companies aren’t facing other pressures, though. Nine out of ten leaders say they’re having trouble finding skilled professionals for the roles they need to grow. What’s more, there’s a lot of evidence that shows layoffs are actually detrimental to businesses during and after a recession.
The truth is, hiring the right staff is hard. And knowing what skills to hire for - especially in a recession - is even harder. But recruiters can help you speed up the process and find + retain the right talent. Here, we share why companies should think twice about cutting their hiring plans - and how to make the right hiring decisions easier.
Companies that play their cards right can thrive during a recession
Recessions are cyclical in nature. On average, they occur once every 10 years, and there have been 7 “bear markets” in the U.S. since 1972 (a 50-year period). Before then, market crashes happened much more frequently. But better-functioning markets and improved economic management led to a gradual decline.
Recessions can actually be a great time to snap up talent and grow. During the 2008 financial crisis, for instance, dozens of tech companies thrived. Netflix, Mailchimp, and Warby Parker are all among companies that developed strategic growth plans and came out of the recession in a better position.
Netflix launched their streaming service in 2008 during the financial crisis.
What did they have in common? For one, they were all in the technology sector. This is key: businesses and individuals alike continue to become more dependent on technology. Further, these companies carefully balanced the ability to find efficiencies, while investing in innovation.
Similarly, focusing on branding, quality customer service, and new business areas are also beneficial. Again looking at the 2008 recession, Citigroup had actually grown in assets over a 7-year period. It was one of the only banks to do so. The reason? They worked on improving their brand perception with consumers, by focusing on quality customer service and supporting community services. Similarly, Netflix came out on top during this period: they introduced a new product, their flagship streaming service, and worked on channel partnerships to grow their reach.
What sets these companies apart?
According to HBR, post-recession winners have the following elements in common:
They mastered the art of staying lean while investing in innovation. These companies were able to strike a delicate balance. They combined defensive approaches (like improving operational efficiency) with offensive ones, such as developing new markets, investing in new assets, or both.
They didn’t slash headcounts. While layoffs and hiring freezes may seem intuitive during economic downturns, it can actually do more harm than good. Layoffs have significant impact on company morale. While cutting talent can lower a company’s cost-to-sales ratio during a recession, this often drops off when a recession ends.
They hired talent to grow new markets and products. Progressive companies took the recession as an opportunity to invest in new market opportunities that would support their expansion in the long term.
Progressive companies that invest in R&D during a recession outperform company that employ different strategies. Source: HBR
What can we learn for this 2022 recession? While managing cash during recessionary periods is critical for startups, lowering head count, and eliminating R&D might end up costing you more in the long term.
Why defensiveness is a poor strategy during recessions
Companies that focus on “defensive” strategies - like layoffs and reducing spend - actually lose focus on the long-term, post-recession growth. But there’s more than that. Layoffs create work environments ripe with fear and pessimism, leading to employees feeling disempowered. And trying to “do more with less” often reduces overall quality of the shipped products.
Sony was an unfortunate example of this. In the late 1990s, the company eliminated 16,000 jobs, which at first seemed like a strategic move: they realized 4% growth in profit for a few years. But after that, they struggled to regain momentum, with sales tumbling 10% year-over-year after 2002.
Data shows that, defensive companies that focus on loss minimization will actually fare worse in the years to come.
The goal is to find a balance between defensive and offensive strategies. Pragmatic leaders can improve efficiency while also investing in new assets or developing new markets, not by cutting staff.
Why startups are poised to thrive in recessions
If you’re a startup leader, you’re actually in a better position in this recession than you might think. There are a few reasons for this.
First, startups usually fill a critical need in the market. Particularly for lean startups that have done extensive customer research, they’re building products that people genuinely need. Further, startups are inherently lean: this means they can naturally operate more efficiently and spend less money. Finally, many startups offer lower prices than FAANG companies, which is particularly enticing during recessions, when businesses and consumers focus on saving money.
How 1,800 SAAS companies price their products relative to Mid-Market and Enterprise. Source: Reforge
Deploying an effective, recession-proof growth strategy
At this point, it may be helpful to take a look at your business’s strategic goals. What’s working? What isn’t? Are there any new markets, products, or opportunities you could explore for which there is a clear market need?
Look more deeply at the areas that aren’t working, and determine if you should invest less there. Then, look at what is working, and a key area where investing in research and development could pay off.
This latter piece will mean hiring the right talent. This is where recruiters can help you deploy an effective strategy to come out of the recession in a better place. Here are a few reasons why.
Quick execution and scaleup
Recruiters have minimal setup time and delays. They’re able to set up calls with candidates quickly, making your hiring process much more efficient. Here at Plus10, for example, we offer same-day turnaround. We also average about 10 or more calls per role per week. What’s more, we can help you break through the noise with honest, useful, and relevant information about the role you’re hiring and the candidates we present.
2. Understand the business need
When you work with a tech recruiter, they’ll have invaluable industry experience. But they also take the time to really understand your business goals and challenges by asking the right questions. What’s more, recruiters have a strong understanding of how specific roles correlate with business output and revenue. That means they can help you calibrate your strategic approach as needed.
3. Already have candidate networks and relationships
Good recruiters spend a lot of time getting to know candidates and growing their network. For an agency like ours that’s been in the business for 8 years, that means we likely know job seekers that will fit your needs. And these relationships go beyond assessing the skills: recruiters know the personality and traits of the candidates they present to you, so they also understand the nuance of your company and can help you find someone who truly fits.
4. Industry knowledge and expertise
Even within an industry, a lot of knowledge can feel pretty opaque. Market rates, for instance, for talent of varying seniorities, aren’t always clearly known. But recruiters know what the market rates are in various cities and during different economic conditions. This can help you position your company and role to attract the best candidates.
5. Recruiters can supplement your existing talent acquisition efforts
A good recruiter can work with your existing team, including Hiring Managers and Talent Acquisition Leaders. Perhaps surprisingly, a lot of recruiters have experience working directly with in-house talent teams. Many companies find it helpful to have both.
Standardized interview processes and recruiting workflow
That’s because, especially for scaling startups, external recruiters can take workload off the hiring manager. They can also help standardize the interview process and candidate assessments through their in-depth experience. This means building a recruiting workflow and interview design based on the specific company challenges.
Focus on hard-to-fill roles and international markets
Recruiters can help supplement efforts for hard-to-fill roles. Data Engineering, for example, or React Native Developers can be difficult to find, what with the skills gap the U.S. is facing. And if you’re interested in exploring new or out-of-reach markets, recruiters can also help you here. Plus10, for example, has a global talent market, and particularly strong inroads in Canada, which is becoming an increasingly popular destination for hiring tech talent due to the language, culture, and time zone overlap.
Recruiters can support in-house teams improve processes, refine branding, and source candidates.
Conclusion
The 2022 recession is stressful, no doubt. But it’s important to keep a level head and be strategic about growth plans. Layoffs and cost minimization can be detrimental to your growth, both today and when the recession does end. But striking a balance between being efficient and investing in R&D has shown to be a successful strategy for startups in the past. Developing strategic hiring plans with the help of a recruiter can help you invest in the right areas, find the right talent quickly, and improve your odds of success.
