How to Prepare for a RecessionOct 26, 2022
How often do you hear the following questions:
- "Are we in a recession?"
- "Are we headed for a recession?"
- "What should we do if we hit a recession?"
Some background on recessions
We have been living in an expanding economy for over ten years which is a long time based on historical cycles (typically a recessionary cycle every 4-5 years). Certainly, there was a sudden economic drop for several months in early 2020 when the Covid shock hit. Despite the prediction of many "experts" that the pandemic would send the economy into a recession, the opposite ended up happening. The main point is that nobody (including well-known business leaders) consistently accurately predicts the future.
I experienced three recessions in my recruiting career (the early 1990s, the early 2000s and "The Great Recession" from late 2007 through 2009). I internalized a few insights based on the experiences of myself and many others. These insights add perspective on what it means to be in the recruiting industry during a recession:
- Each recession is different. You can't accurately predict what a recession will mean for any specific recruiting firm.
- Some firms have great years, and others suffer significantly during the same recessionary periods. Some variables include the industries and occupations you recruit in, your specific clients, and your approach to adapting.
- If the economy is in a recession, but hiring for your specialty is not, then your firm is not in a recession.
- Recessions offer a tremendous opportunity to learn, adapt, and improve that you would not normally take advantage of during "good times." Many firms emerge stronger than they were as a result of a recession!
How to prepare for a recession
Now that you have some relevant context around recessions, here are my suggestions to help you prepare wisely and set yourself to emerge stronger while minimizing the fear and stress that often accompany any mention of the "R Word":
- Prioritize your mindset over everything else. The biggest risk an owner or leader of a recruiting firm faces is adopting a "recession mindset," which pushes you into a state of fear. Research has consistently demonstrated that when in a state of fear, our thinking and decision-making are flawed. For that reason alone, you must become aware anytime you shift into fear-based thinking. You don't want to fight or deny fearful thoughts since that only makes it works. They're going to occur naturally, and that's okay.
What you want to do is shift or redirect these thoughts. An effective way to make this shift is to ask reframing questions such as "what is the opportunity here?" and "how can I turn this situation into a positive?" Your mind will go wherever you direct it to go. If you look for what's not working, you'll find it (this one is easy, isn't it?). If you look for how to turn around what's not working, you can find that too.
- Invest time and money into a good lead-generation program now. If you are already using one, look for ways to improve it. The purpose of a recruiting firm lead generation program is to stay "top-of-mind" with your audience and to develop your audience's perception of you as an expert / trusted advisor. This leads to more inbound business with people who come to you for help. Understand that you need to continuously evaluate and modify what you are doing with these efforts since nothing that works will continue to work indefinitely. For example, many recruiting firms have found that messaging your first-degree LinkedIn connections does not get the response it did in the past.
The critical thing to understand is that your metrics are likely to change in a recession. For example, if 1% of your prospects used to respond to your messaging, that percentage It may diminish significantly. This means that you need to develop a bigger list, better messaging, or both.
- Take an objective view of your ROI on your different expenditures. Prioritize what to keep and what to cut. Your evaluation must be in writing, so it's out of your head. This allows you to look at it objectively. Don't make decisions based on the price alone. A higher-priced item may provide you with a greater ROI than a low-priced one. It's unwise to cut out your high ROI items when you need them the most!
- If you have staff, make sure you're clear on whom to lay off if things get difficult. Focus on a combination of ROI and culture fit rather than your base compensation. A recession is a great time to eliminate the lower performers whom you would keep during nonrecession times. Also, if your business experiences a significant downturn, you can approach your staff about temporarily lowering their base and raising their commission rate. The job market for recruiters is fluid, and many people would rather reduce their base than lose their jobs.
- If the space you're in lends itself to temp/contract recruiting, you may find that many companies replace direct hire recruiting with interim resources. If this is the case, you may grow in this area in a way that more than offsets your direct-hire business.
The above list provides some proven ways to deal with a recession that lowers your stress and sets your business up to emerge stronger than before. One last thing: don't assume that you need to take recession-based actions if you do not experience a prolonged downturn. A down month or two could be a "normal fluctuation." If you panic and cut and then experience a bounce-back, you'll be sorry.