As economists predict that the effects of the Great Recession will begin to dissipate by the second quarter of 2010, the same question arises in the minds of every CEO and HR vice president and manager.
That question is: who do we hire and when do we begin to hire additional employees?
The first step in the development of any strategic staffing plan is to conduct an inventory of the skill sets that already exist in the company. By conducting such an inventory you would be able to identify what skill sets exist, and those that don’t. Rather than just hiring an employee with a single skill set you would want to target your search for an employee who has multiple skills, especially those that are not presently found in the company.
As part of this hiring strategy, the HR manager and the CEO need to identify where the increase in business will be realized. What segment of the business will experience growth, what segment will remain stagnant? Slow, incremental growth can be addressed with overtime or the expansion of the hours worked by part-time employees. It can also be addressed by engaging temporary employees through an agency. As the growth rate remains consistent, you would then make the commitment to hire a permanent employee.
Let’s explore each of these strategies in depth.
When there are small or even sudden increases in volume, a company can elect to offer overtime to their existing work force. This expansion of overtime hours will increase your cost per unit manufactured or service hour provided by upwards of 50 percent.
If you have an organized work force, the offer of overtime hours is controlled by a collective bargaining agreement. That agreement may call for overtime based on seniority, not on who is the most productive. So, in some cases, overtime may not be the best use of the available human capital.
In many cases overtime is a very short-term cost ineffective solution, and should only be used as needed. The downside risks include but are not limited to worker fatigue, reduced morale and quality issues. It might be advantageous to consider using temporary or contract workers to handle the increase in sales or production.
Temporary or contract workers
When the need arises, sometimes using temporary or contract workers is the best solution to a sudden increase in sales or production.
There are a number of firms in this area that can supply skilled workers up to and including chief financial officers on a temporary basis. The positive side of using this type of help is that you use them as you need them, without any long-term commitment. Another positive is that in some cases a temporary worker stands out and you may elect to hire that person from the agency. These types of temp to hire agreements are available and provide greater flexibility to the business owner.
One final positive is that you don’t pay benefits or payroll taxes when you contract for temporary workers. Those obligations belong to the agency providing the workers. The negatives are that in some cases you don’t get the same person for the entire assignment and retraining is necessary each time a new face walks in the door. Also, as the economy improves the pool of temporary workers will begin to shrink as the more qualified individuals obtain permanent employment.
Many firms are outsourcing a percentage of their production to smaller companies rather than increasing the size of their work force. As business returns, some firms may hire additional employees, while others may increase the percentage of production they outsource until they are confident that the turnaround is real. It depends on the amount of risk a firm is willing to assume.
You certainly don’t want to hire additional workers and then do another reduction in force three months later. That could be devastating to the morale of any firm.
At some point it will become necessary to add permanent employees to your work force. The question is who, marketing and sales, support or production?
If your organization is sales driven, then it should be sales.
If you are a subcontractor to another OEM, then you would need to add production as the economy improves.
As I alluded to earlier in this article, you will need to have clear criteria as to who you will need to hire and what skill sets will be required. The aforementioned skill set inventory will provide you with the skill sets that are missing from your company. Once this step is completed, you will have the necessary criteria including a job description that includes the needed qualifications to perform the identified tasks.
Prior to hiring the first additional employee, some decisions need to be made by management. Should you go after past employees who have been laid off or seek out new employees from the general work force? Bringing back laid off employees could reduce your training costs and they already are familiar with the company culture and environment. The potential negative here is that you elected to lay these people off in the first place based on some measureable quantitative criteria and the least productive or troublesome workers were downsized first.
Your other option is to begin to hire a new workforce and train and orient them to your culture and performance expectations. This would entail longer lead times and more in depth interviewing and reference checking. This process insures the candidate would fit into your culture and that they have the requisite skill sets required to be successful. Going the direct hire route provides the opportunity to upgrade your work force and to add greater flexibility with additional skill sets.
I experienced a similar economic downturn in 1982 while at Gimbels Midwest. Management elected not to rehire the employees who had been previously laid off, but instead invested in more automation and centralization of functions, which permitted a greater degree of flow through to the bottom line. Only after business continued on a positive trend for an extended period of time were additional employees hired. Many of those people who were hired were part-time and could be flexed to full-time as the need arose. The number of employees were greater, but the full-time equivalents were the same or slightly higher. What was gained was flexibility, while maintaining a high degree of expertise within the base workforce.
There could be no better time to assess your workforce and add the skill sets that you will need as the economy begins to turn in the second and third quarters. This is the time to increase the quality of your workforce and position your company for further growth and opportunity into 2010 and beyond.