The impact of a threatening recession on the future of work.
With unemployment at a record low, the great resignation, hybrid workers, closed international borders, massive salaries and a tech talent skills shortage, we’re going through the most complex talent crisis in recent memory.
In addition to all that, former Treasury economist Warren Hogan believes there is now a 50 per cent chance of a recession in Australia next year. He blames higher interest rates, reduced tolerance for larger budget deficits and slower global growth.
Are we in the midst of a tech talent bubble?
Yes. It’s been a tech talent perfect storm! Cashed-up companies have aggressively poached staff, offering massive salary increases – some in the order of 50%! Large corporates are also digging deep, targeting talent from smaller players and offering big bucks to bring employees across.
Smaller businesses can only fight back by making higher offers or losing their experienced staff to take on the training challenge with less qualified people. The main problem is salaries have risen across the board, with some inexperienced team members now earning as much or more than business leaders and founders.
How can we solve the talent shortage?
Stop hiring. If 2021 was the year of “Grow, grow, grow”, then 2022 must be the year of “Cut, cut, cut.”
Since the beginning of 2022, the US has seen a number of businesses including Tesla, Paypal, and Netflix all make job cuts of 10-20%. High-profile start-ups like Fast have run out of funding and shut their doors, leaving 300 people without a job.
Australia usually lags about six months behind the US and over the last two months, we’ve heard about staff layoffs at local companies such as HealthMatch, Bizpay, and Booktopia.
Recently, neobank Volt Bank, announced it had run out of capital and would close its doors, with 140 employees losing their jobs.
Tech valuations have taken a nose-dive with some high-profile Australian firms down 90% from 12 months ago.
This puts extraordinary pressure on any business to cut costs and make job cuts. With severe drops in valuation right across the tech sector, it also means capital is drying up.
What does a recession mean for the local talent market?
NAB recently announced that 100 tech roles would be off-shored to India and Vietnam. The unrealistic salaries demanded by inexperienced developers and engineers may be behind the move, prompting NAB and a number of other Australian businesses to hire offshore workers.
Imagine what a 10% headcount reduction does for the local talent market? According to the Tech Council, there are currently 860,000 Australians employed in the tech sector. A 10% cut across the industry over the next three to six months means 86,000 people looking for a job.
Hire slowly ahead of demand, and focus on critical skills
Business leaders know they can’t take their eye off the ball in terms of hiring and retaining employees, while at the same time they understand that the market could pivot quickly. As such, they need to continue hiring with a focus on the most critical skills and jobs. Instead of hiring ahead of demand, they must balance current needs for available talent and try not to over-correct in an environment where talent shortages continue to threaten operations. In industries likely to be negatively impacted by recession, business leaders need to be more cautious, while leaders in other industries may take a more balanced view.
Companies MUST change the way they go about identifying and hiring talent.
One way around this issue is by undertaking a staff outsourcing strategy. This strategy can help your business outsource your workload to contractors or freelancers who are more than capable of handling it without compromising on quality.
This current environment presents an opportunity to a fresh look across your entire workforce to find where you can stop doing work by changing standard operating procedures, simplifying processes, and deploying technology more effectively.
Turning to an outsourcing partner can help reduce up-front costs by using off-the-shelf solutions. First consider whether the work could be stopped–and if not, focus on finding areas where technology could enhance the way teams work and unlock new opportunities.
Outsourcing repetitive roles can free up talent to move into more rewarding roles and focus on higher-value, more interesting and impactful work.
Take a longer term view to transform your business
Every business should be looking at how they can redeploy and optimise their current staff members into roles that will drive competitive advantage and can only be done inside the business.
The workplace is no longer the place where workers go to work. This fact alone is reason to assess support and services across the entire organisation and carefully examine where the most value is to be gained based on current activities and costs.
In addition to actions leaders can take to address the current shortage, it’s equally as important to take a longer-term view and shift both thinking and strategy when it comes to transforming their business.