If you haven’t been living under a rock for the past 15 months, you have probably noticed that the decline in oil prices has resulted in many Houston businesses experiencing symptoms of an economic recession. What does a recession mean for you? Historically, recessions equate to reduced availability of professional jobs.
While the effects of the free fall in oil prices may have not spilled over to your economic sector yet, it’s important to note that banks are already restructuring the troubled loans of oil and gas companies. This could result in more layoffs in the energy sector and will likely impact other industries as well.
But even greater than the oil and gas industry, we’re seeing international economic upsets in China, Latin America, and in other areas of the American market economy. Some are expecting to see in 2016 a recession greater than that of the 2008 recession.
How Most Companies React to Recessions
Most companies without effective leadership would begin to cut the upper management who complete the 20% of the work. This leaves the lower level employees that complete 80% of the work. Many of our clients lay off the CFO and other “non-essential” leaders within the company. Why pay $50,000-$100,000 more for an employee when they only complete 20% of the work needed? Less professional jobs are thus becoming available because those positions are now deemed obsolete or as overhead.
The experienced professionals are being removed from their positions due to their higher cost. Therefore, we tend to see many “battlefield promotions”. The military coined this term as a promoted soldier due to the death or injury of a senior officer.
Like in the military, employees are often promoted during a recession not necessarily because of their skills. But because their supervisor left or was laid off. CEOs or hiring managers feel that if these employees can do 80% of what their manager did, then asking them to do the whole job isn’t too much of a stretch. While they might have the talents to succeed, they may not have the skills needed to complete that last 20%.
Less Professional Jobs Available
As difficult as it is for those receiving battlefield promotions to get up to speed quickly, the fired managers face an even tougher challenge. Suddenly, there are more qualified candidates in the marketplace than there are positions available. The available jobs have been filled from within through battlefield promotions.
Highly-experienced individuals found that they have to take positions they are overqualified for at reduced pay. This is where the value of the network you have built (or will wish you had built) really pays off. Your connections in the marketplace can mean the difference between securing a desirable position, or settling for what you can find.
When looking for a job with limited openings in the marketplace, find an organization where you fit and can provide value. Even if that means taking a pay cut, the money should come when things turn around.
Hiring & Restructuring Human Capital
Regardless of how this emerging recession is impacting your organization, realize that the #2 reason why businesses fail is employee turnover. Think about it. The costs associated with replacing an employee include: hiring, interviewing, on-boarding, training, mentoring, and waiting approximately 6 months before they find themselves accustomed and productive in your organization. The hiring process is getting longer and thus, more expensive.
As you’re building a new team or assessing your current employees for possible battlefield promotions, consider how you can build a star-quality team. A star-quality team will carry your company through tough times. Assess your current employees as if you were hiring them for the first time. If a battlefield promotion is necessary, who will rise to the occasion and provide the most value to your company?
In tough times, companies generally try to run leaner. There are ways to do more with less and to measure the productivity of those limited resources. If you’ve exhausted all resources within your organization, then it might be time to look at how to hire the right people to build your team.
Access your Strategic Pricing Model Execution Plan in SCFO Lab. The step-by-step plan to set your prices to maximize profits.
Click here to access your Execution Plan. Not a Lab Member?
Click here to learn more about SCFO Labs