David is a veteran human resources leader and President of IQTalent, an on-demand talent acquisition and executive search firm.
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The economy has been anything but predictable for the last two years. From a pandemic to inflation to soaring interest rates, it’s hard to know what will come next. For many leaders, headcount planning may seem like an exercise in futility. We can all look back at the financial plans and budgets we laid out over the last several years and see a plethora of adjustments, pivots and outright do-overs. But throwing up our collective hands is not the answer.
As leaders, we know the cyclical nature of the economy, how to manage through a crisis and how to make changes on the fly. Although the future remains unclear, it’s time to set a course for 2023.
Nothing affects profit margins like headcount. Labor costs that are too high can cause profits to suffer; likewise, not having the right people in the right roles can stifle growth, significantly reducing revenue. On average, employees comprise about 70% of a company’s annual budget, so nothing is more important than your hiring decisions.
A road map to successful headcount planning begins with an assessment of the talent you have in place versus the talent needed to grow your business in the coming year. In a year where every expert seems to have a different opinion on the future of the economy, the key to success will likely be to remain agile and flexible.
Collaborating across all departments is imperative to an accurate headcount plan. Let division leaders provide input about their department’s talent needs and expectations for growth. Consider their opinions on internal promotions as well as attrition. Look at demand forecasts across a range of scenarios. Make sure marketing and sales numbers meet manufacturing and research plans. Once you’ve evaluated where talent will need to be hired across the organization, the next step is to look at your recruiting resources.
Talent acquisition departments often seem like the first place employees are hired during hypergrowth as well as the first place jobs are cut when a recession hits. Evaluating your internal hiring team is essential to meeting your headcount goals.
Ask your head of TA about the team’s metrics: How many job requisitions can a recruiter reasonably manage? What is the team’s time to hire and what are the average monthly hires per recruiter? Share your headcount plan with the head of talent acquisition to determine if your plan is attainable with the current team you have in place.
HR and TA leaders are often burned out from the seemingly endless cycle of scaling up their team and then cutting it back when the economic conditions change. For example, Meta recently announced that its recruiting team would be “disproportionately affected” by the 11,000 layoffs the company is planning.
One way to slow the cycle of hiring and firing across talent acquisition departments is to consider outside, on-demand candidate sourcing and recruiting. On-demand or contract recruiting can augment an internal team without a long and binding contract and without the more permanent commitments of full-time employees.
On-demand talent allows for flexibility within the recruiting and hiring department, offering a short-term solution to the hiring challenge. HR teams might consider leveraging on-demand outsourced talent, particularly during uncertain economic conditions. It allows you to have a team in place to meet your most ambitious headcount plans while giving you flexibility should you be forced to pivot if economic conditions become unfavorable.
Evaluate where it is imperative to hire a full-time employee and where a freelance or contract worker might be a better fit until we see more stability in the economic outlook. Contract-to-hire labor can be considered as part of hiring plans for 2023 without the liability of adding to your permanent headcount.
Hiring on-demand or freelance talent can have its drawbacks at times. You are not able to vet the contract worker like you would a full-time employee, and you may not know they are not a good fit until you are several weeks into the work (and the bill).
Ask the contract employee or company for referrals and even for examples of previous work before you make the final decision to get a better idea of their experience. Losing time and money to poor contract workers can leave you weeks behind and cause you to miss your budget. Better to go a little slower at the beginning versus ending up with a contractor who doesn't fit the bill.
With all the talk of layoffs and hiring freezes, it’s easy to fall into the trap of stifling your headcount plan and laying low while the future unfolds. But pessimism never ends with growth. If you don’t plan for success, your organization will be the one that falls behind when the economy comes roaring back and the war for top talent is fully engaged.
Instead, remain flexible and show your ability to lay out an agile headcount plan that is cautiously optimistic, with the ability to change quickly as the conditions warrant.
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