With the current economic environment being so volatile and potentially destructive for businesses, bosses have to find ways to avoid financial distress. There are various ways to manage it, but one of the most common first-aid approaches is to cut operating costs. It’s particularly effective in times of economic downturn or market fluctuations. Our today’s article aims to shed some light on one of the cost-cutting methods known as the hiring freeze.
If your business is going through a rough patch and you’re looking for solutions to keep your company afloat, this article is something that can help you. Keep on reading to get a comprehensive overview of what a hiring freeze is, how to implement it in a company, and what results to anticipate afterward.
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The hiring freeze approach implies putting the hiring process and creating new positions on hold. Of course, the key positions are to be filled, but not the non-essential ones. How exactly does it help? As a minimum, it helps businesses avoid laying off staff and retain top talent by preserving normal working conditions and salaries. There are some illustrative statistics to grasp the managers’ motives better.
Financial strains would be the most common reason for introducing hiring freezes, however, it’s not always that a company resorts to hiring freezes because of being financially challenged. It may also be a way to preserve profit margins in the conditions of a sudden economic downturn or an industry slowdown.
In case it’s connected with financial troubles, here are some reasons to implement the freezing approach.
And finally, some “amusing” recruitment facts from Harvard Business Review:
An organization is lucky if its new hires are successful, but what if not? All the expenses double or even triple. Given it’s in financial trouble, such lavish spending is definitely irrelevant. Here is when hiring freezes come into play.
Liquid assets are assets that can be converted into cash without significant loss in time and value. If a company experiences any issues with liquid assets, it can lead to implications for its financial health, including money shortages for covering day-to-day operations. Introducing a hiring freeze will help reduce costs and accumulate funds, therefore, contributing to improving the company’s liquidity.
Let’s be brutally honest, our world is getting more and more like a roller coaster ride, with unexpected twists and turns. Such things as economic recession, environmental threats, or pandemics have an inevitable influence on business and may require some crisis-management initiatives to help a company get back on track. A hiring freeze is an example of such anti-crisis measures.
Of course, introducing the approach to your employees requires preparation. Let’s have a look at what happens behind the scenes.
Firstly, it’s crucial to assess the current and future workforce needs. Critical roles may still be open to job seekers, but any other skills gaps can be solved with the redeployment of existing employees. The upper management has to develop strategies on how to utilize internal talent to its fullest eliminating the need for external hiring.
Secondly, an organization has to create and present a hiring freeze policy. It should provide transparency and fairness in its application to all the members of the organization. Besides that, the policy should demonstrate that the company adheres to legal requirements and employment regulations.
Next, to maintain employee morale, the decision to introduce a hiring freeze should be clearly and timely communicated to people. It’s essential to explain that a hiring freeze works for the good of the company and employees, as it helps to avoid layoffs and contributes to salary budget stability.
Finally, consistent monitoring to trace if the initiative proves its effectiveness and has a positive impact on the company. It also gives room for making adjustments.
A hiring freeze is introduced as a temporary measure, normally for 3-6 months. However, it may well end up being infinite, up to the moment when the organization has stabilized its revenue or recharged resources. Generally, everything depends on the reasons, whether internal or external.
In case of internal reasons, the duration of the hiring freeze will highly depend on solutions to handle the financial imbalance. If a company stops hiring for external reasons, like the global crisis, natural disasters, or any other force-majeure circumstances, it may last until the company develops and implements a crisis management plan.
Even if the hiring freeze method is used as a preventive measure, and the company is not dealing with any financial instability, it will hardly pass without a trace for both, employees and employers. Let’s have a look at how exactly each of the parties could be potentially impacted.
The remaining employees may obviously get stumped or concerned by the innovation, as it typically implies increased workloads and limited growth opportunities. It’s fraught with employee productivity and morale decrease, however, proper communication can help prevent the storm. It’s good if management and employees have trustworthy relations, as it will help to implement the hiring freeze policy with sympathy and understanding that it’s now forever.
Employers may be also affected by the hiring freeze implementation. Firstly, it poses a threat to the employer’s brand and reputation as it questions the perception of stability in the company. It may also result in challenges with attracting top talent in the future. However, the same as with employees, publicity requires transparency. If the company’s marketing or brand management team manages to present the decision in the right way, the company has a high chance to escape rumors or negative perceptions.
