The United States has weathered its recent economic uncertainty remarkably well. Despite seesawing tariff policies, immigration crackdowns, the elimination of thousands of government contracts, and creeping inflation rates, the country has not yet entered a recession. However, businesses have become extremely cautious, and the labor market has cooled significantly.
While the country has not seen the kind of mass layoffs that plagued the IT sector in the immediate post-pandemic era, hiring has largely stalled. Without a clear idea of what the future holds, companies are focusing on holding the line and preserving stability, rather than planning for change and growth.
Recent history shows us that this kind of hesitation can cause significant damage down the line. Many companies that stalled hiring in the early stages of the COVID-19 pandemic found themselves scrambling months later, without the talent needed to pivot or meet surging demand. In contrast, companies that used the initial slowdown to assess their workforce and implement strategic hiring plans were able to rebound more quickly and easily than their competitors.
This is a lesson that can serve companies well today. Even if you’ve stalled hiring, you don’t have to halt progress. By using this economic slowdown to assess your talent needs, your organization can identify critical skills gaps, prepare for generational turnover, and build the agile workforce needed to respond quickly to market shifts. Proactive workforce planning is critical to weathering the current climate and emerging as a leader during the next economic upturn.
Step 1: Assess Your Current Workforce
The first step in creating a strategic hiring plan should be compiling an inventory of your existing staff, likely separations, and the skills and competencies your team needs to be successful, including professional development needs.
Skills Inventory
Beyond the number of roles within your organization, your workforce consists of identifiable skills. These may include technical skills, soft skills, certifications, and other qualifications. An inventory of these skills can help you better understand which ones are critical to your organization, skills gaps, and how to help each employee achieve their highest potential. Skills inventories can help shape decisions around redeploying employees, tailoring professional development, succession planning, and talent acquisition.
A skills inventory is especially critical during times of change. As pointed out in a piece by Miriam Groom:
A skills inventory serves as a strategic anchor, helping organizations align employee skills with key business priorities, especially when navigating change. By cataloging employees’ technical, soft, and specialized skills, HR can match internal strengths to organizational goals, ensuring talents are fully leveraged and revealing any skill gaps that may need attention.
If your company doesn’t already have a comprehensive skills inventory, this period of economic slowdown is the perfect time to create one.
Tenure And Retirement Risks
As the workforce ages, organizations are losing valuable employees to retirement. Use this time to evaluate tenure and identify those employees who are approaching retirement age. Understanding the wealth of skills that they bring to the table is critical for knowledge transfer and talent acquisition.
Leadership Potential And Succession Gaps
A comprehensive skills inventory is also a valuable tool for identifying leadership potential and succession gaps. Scour the inventory to determine if there are potential leaders who could be developed internally. As you identify those who could potentially step into leadership roles, you will also gain an understanding of which roles have no clear successor. Recognizing these gaps early on gives you ample time to address the issue, whether through targeted training or talent acquisition.
Development Needs
A skills inventory is also helpful in identifying development needs. In addition to existing skills gaps and those that might appear due to attrition, it’s important to consider evolving technology. The rapid pace of technical change means that even your most skilled workers will likely need to undertake upskilling or reskilling.
Upskilling has several benefits. First and foremost, it creates and refines needed skills. But it also demonstrates an employer’s investment in their employees, making workers feel valued. And when workers feel valued, productivity, engagement, collaboration, job satisfaction, company loyalty, and retention all skyrocket. Additionally, candidates are attracted to employers who offer upskilling and other development opportunities.
Step 2: Assess Current And Future Gaps
After you’ve assessed your current workforce, it’s important to undertake a thorough skills gap analysis to address current and future gaps – at all levels within your organization. A skills gap analysis will uncover any discrepancies between the skills your existing team has and the skills that your company needs to meet its goals.
While a written job description may be a good starting point, it’s important to examine all the capabilities that are required for success in each role today. The workplace has changed dramatically in the last few years, especially in tech and engineering roles. New tech has been introduced to the workplace and cross-functional teamwork has become more integral. These changes require strong soft skills, such as adaptability and collaboration.
Once you know where skills gaps exist within your current team, you will have a better understanding of how to prioritize investments in your workforce. For example, with the rapid rise of artificial intelligence (AI) tools, you may need to invest in ways that allow you to optimize the use of those tools. Or, if you anticipate the need to pivot as a way to manage the economic downturn, you may need to invest in developing leaders or a workforce that has the technical skills to manage that pivot. Those investments might be made in upskilling your current workforce or in strategic hiring.
While it’s important to address existing gaps quickly, it’s also critical to look ahead. Significant digital change is imminent. Digital transformation, AI integration, and increasing automation will all change the way we work. As well, it’s inevitable that regulatory standards will continue to evolve. The skills your workforce needs, the ways that they do their jobs, and the projects they work on are apt to change within the near future.
By engaging in strategic workforce planning three to five years in advance, you will be able to build agile, resilient, and future-proof teams. According to a recent McKinsey report,
[many] top performers are using strategic workforce planning (SWP) to stay ahead in the talent race, treating talent with the same rigor as managing their financial capital. Under this analytical approach, organizations don’t wait for events or the market to dictate a response. Instead, they take a three-to-five-year view, using SWP to anticipate multiple situations so that they have the right number of people with the right skills at the right time to achieve their strategic objectives.
Staying ahead of change has become more critical than ever.
Step 3: Plan For Retirements And Succession
Retirements are one of the easiest workforce challenges to predict. And it’s a challenge that many employers will need to deal with to the end of 2027, as America experiences its greatest surge of retirees in history.
Baby Boomers – those born between 1946 and 1964 – are exiting the workforce in droves. As they leave, they’re taking their institutional knowledge, critical skills, and leadership experience. It’s crucial to forecast expected retirements over the next one to five years so that a proactive plan can be made to address the talent and skills shortages.
Rather than scrambling to replace retirees as they leave, organizations should be using this downtime to forecast retirements and strategically plan to backfill those roles. Whether you promote from within (which is a way of signalling that you are invested in the success of your existing workforce) or hire externally to bring in new or needed skills, planning for that transition will considerably ease strains on your organization.
Ultimately, a strategic succession plan will build a bridge between short-term needs and long-term growth, setting up your future leaders for success.
Step 4: Evaluate Flexible Talent Models
If the 2020s have taught organizations anything, it’s the need to stay nimble. Whether you’re experiencing an economic downturn, a pivot to new projects, production spikes, specialized technical challenges, or a leadership transition, your staffing needs will change. In all these scenarios, short-term staffing, consultants, and contract-based talent can offer efficient, targeted support for just as long as needed.
In addition to consultants and contractors, fractional executives can be tapped to provide any leadership and/or expertise that your organization may need on a short-term basis, whether in finance, operations, marketing, technology, or strategy. Hiring any experts on a consultancy basis allows companies to access needed skills and knowledge without committing to the cost of a permanent hire.
One other flexible talent model to consider involves payrolling services. This is still a relatively new model in the tech and engineering fields. However, it’s gaining momentum, particularly in response to Baby Boomers exiting the workforce. Payrolling services allow organizations to bring back retirees as part-time or temporary workers, with a third-party payroll provider overseeing all aspects of their pay, including compensation and benefits.
Flexible staffing solutions might be considered less than ideal by those who believe longevity is critical to company loyalty, productivity, and institutional knowledge. But most organizations have been facing volatility and uncertainty for the past few years. That seems unlikely to change any time soon. It’s important to shift our thinking around flexible staffing solutions. They provide a way to quickly scale operations up or down by tapping into a highly skilled and knowledgeable talent pool.
Step 5: Align Your Partner Ecosystem
Once you’ve finalized your strategic workforce plan, a critical step is creating a strong partner ecosystem. A strong support system will go a long way in implementing your plan.
Assess and strengthen your external partnerships so that you have trusted resources to turn to when needed. The right partners will be able to help you quickly and effectively start the hiring process when the economy picks up again. Consider building and maintaining partnerships with the following types of firms:
- Recruitment agencies that have expertise with tech and engineering hires;
- Staffing agencies who offer direct hire services in tech and engineering;
- Consulting firms and agencies that can provide tech and engineering professionals for interim project-based work or leadership coverage; and,
- Training organizations that offer professional development and/or upskilling opportunities specific to your sector.
Building or refreshing these relationships now will ensure that everything is in place when it’s time to pivot or respond to a surge.
It’s tempting to brace against uncertainty. But instead of bringing your organization to a standstill, embrace the slowdown. Use this time to assess and develop a strategic workforce plan so that your organization can hit the ground running when the market turns. Companies that engage in planning now will be the ones best equipped to fill open roles with upskilled employees or new hires, ramp up productivity, and remain competitive when the next economic upswing occurs.
