Looking for Strategies to Recession Proof Your Staffing Company?
Over the years, Harvard Business Review has published amazing content on how to weather recession. While not created specifically for the staffing industry, HBR’s articles contain excellent advice to help your company manage the challenges we currently face.
Below, I summarize key takeaways from three of HBR’s best recession strategy articles published since the Great Recession – and explain how to apply them to your staffing or recruiting agency:
Takeaways from “How to Survive a Recession and Thrive Afterward”
De-leverage before a downturn. Rule #1: don’t run out of money!
Because a recession usually brings lower sales and therefore less cash to fund operations, surviving a downturn requires deft financial management.
- Restructure your debt to get lower interest rates.
- Turn to a funding company or bank to get capital to keep your business running.
Focus on decision making.
- Making tough decisions should be centralized (i.e., handled by senior leaders).
- Decentralized is best for fast response (i.e., put real-time decision-making where the expertise lies: in local managers’ hands).
Look beyond layoffs.
While some layoffs are inevitable, they aren’t the only – or best – way to cut costs.
- Cutting costs via operational improvements leads to faster recovery.
- Furloughs, hour reductions and performance-based pay also help control labor costs.
Invest in technology.
Look for tech that helps you become more transparent, flexible and efficient, or that lowers your cost of service.
Takeaways from “Roaring Out of a Recession”
Don’t be too defensive.
- Slash-and-burn, crisis-mode thinking may cut costs short-term, but it also hinders recovery.
- Fact: Defensive companies achieve just half the post-recession growth and one-tenth the profitability of top performers.
Don’t be too aggressive.
- Organizations that are too optimistic and opportunistic may miss important warning signs – and be blindsided by poor financial results.
- Fact: Post-recession (if they even survive), promotion-focused companies’ sales and earnings may rise faster, but they realize only 60% of the sales growth and one-fifth the profitability increase of the top performers.
Strike an optimal balance: Become a progressive company.
- Examine every aspect of your business model. How can you do things differently: better, faster more cost-effectively?
- Reduce costs permanently through process improvement.
- Invest to develop new markets and enlarge your assets.
- Increase spending on R&D and marketing.
Takeaways from “How to Market in a Downturn”
Understand “recession psychology.”
Thinking and decision-making change during a recession. Traditional market segmentation (by age, income or interest) may be less relevant than a psychological segmentation that considers consumers’ emotional reactions to the economy:
- Slam-on-the-brakes: reduces all types of spending by eliminating, postponing, decreasing or substituting purchases.
- Pained-but-patient: optimistic about the long-term but less confident about the near term, so they also economize (less aggressively) in all areas.
- Comfortably well-off: feel secure about their ability to ride out bumps in the economy and consume at near-prerecession levels.
- Live-for-today: carries on as usual and remains largely unconcerned about savings.
Consider how each of these types of buyers views your services:
- Essential – something they cannot do without.
- Indulgences – desirable services whose immediate purchase is considered justifiable.
- Postponables – needed or desired services whose purchase can reasonably be put off.
- Expendables – unnecessary or unjustifiable.
Then, focus your marketing on becoming more essential, offering lower-cost versions of indulgences, increasing the urgency of postponables, and showing how expendables are actually necessities.
Looking for more advice to thrive in this uncertain economy?
Here are three free resources for you:
- Download our eBook, “Strategies for a Changed World: Creating Your Playbook for Success.”
- Visit our COVID-19 Recovery Resources page for more business strategy and marketing ideas to recession-proof your business.
- Join the new Staffing Works Slack Group. We created a Slack group to help the staffing industry come together to deal with the challenges we are all facing. The group is a place for staffing professionals to discuss sales, marketing, recruiting, technology and other issues that are impacting your company.
If there’s anything more we can do to help, we’re just a click or call away.