3 Equations That Support Upskilling in a Recession (No Math Required!)
In a recession, companies frantically crunch numbers. But are you crunching the right numbers for this recession?
“[This] doesn’t feel like a normal recession,” said Mark Elliot, CFO of the consulting firm Mercer. That’s because this recession is different. Along with inflation and the looming recession, “we’re still seeing a lot of demand.” This continued demand, along with the war for talent and today’s unique workforce, changes traditional recession calculus.
The strategies you’ve seen companies use in past recessions like massive layoffs and cutting benefits? It won’t work. In fact, it may exacerbate things.
Instead, during this recession, we recommend focusing on upskilling. Forget massive layoffs and cutting benefits. Here are three upskilling equations for this recession to save money and build a competitive edge. (No math required!)
1. Upskilling = Do More With Less
Upskilling IS doing more with less.
Do more with less: the battle cry of the recession. A popular strategy among experts and corporations to do this is upskilling employees. Business Today recently published an article that interviewed experts and it singled out upskilling as the “biggest pillar to lean on” during the recession.
You’ll also find dozens of articles today discussing the new buzzword, “quiet hiring.” While we’re not fans of the phrasing or the tone of “quiet hiring,” it derives from an upskilling + doing more with less strategy. How? Well, Emily Rose McRae, Senior Director of Research at Gartner, defines quiet hiring as “when an organization acquires new skills without actually hiring new full-time employees.”
This means a strategy of redeployment, internal mobility, and creating opportunities for employees to learn new skills. With this strategy, companies redistribute work among fewer employees. It’s more efficient, and when done right, it gives employees opportunities to grow and advance in the company.
Not to mention that studies show upskilling increases productivity overall. A few years ago, the World Economic Forum published a report which estimated that “wide-scale investment in upskilling has the potential to boost GDP by $6.5 trillion by 2023.” This mind-numbing number, according to the report, “does not [even] tell the full story.” The report also included a qualitative analysis to show more holistically how upskilling “delivers[s] higher levels of productivity.”
The math is simple: by investing in upskilling, you hit the recession gold standard of doing more with less.
2. Upskilling Costs < Rehiring Costs
Upskilling is more ROI positive than layoffs.
In a stable economy, upskilling employees is more cost effective than hiring. But does this math apply to a recession?
Yes. While it seems like “upskilling < hiring” is moot during a recession, recessions are not only about layoffs. Layoffs are the first part of the equation—the second part is rehiring. When companies lay off employees in a recession, many plan to rehire those same roles when the economy bounces back. So by laying employees off, companies set an expensive rehiring cycle in motion.
Gallup estimates that the cost of replacing an individual employee ranges from one-half to two times the employee’s annual salary. Also, keep in mind this doesn’t also include the strain on internal resources to let a role sit empty for months and then bring a new hire up to speed. So while layoffs may cut costs for a few months, if you are planning to rehire, it may not be worth it in the long run.
A firing and rehiring plan is costly in other ways too. If you fire your talent in the midst of a talent crisis (like right now), you’ll struggle to meet the demands of a recovered economy. To get ahead, keep your talent on your payroll.
To double your competitive advantage, don’t just keep employees on the payroll—upskill them! “Layoffs are a missed opportunity to develop a competitive advantage by preparing for the future of work,” David Blake said in an interview with Silicon Republic. What the CEO of Degreed alludes to here is upskilling. If you upskill during the recession, when the economy rebounds, you’ll be the quickest and most talented company out of the gate.
The math is simple: a firing and rehiring plan is not as cost-effective as keeping and upskilling your employees.
3. (-) Upskilling = (-) Retention
Skimping on upskilling causes recession turnover.
Upskilling, like the oh-so-popular layoff tactic, also clashes with the popular tactic of cutting benefits. Learning and development boost retention, but in lean times, retention programs fall by the wayside. Many companies hope that the dire market conditions will keep employees from job shopping. But will the cold of a recession keep this group of workers in their seats?
According to consultant, Andrea Maliska, cutting benefits can cause highly driven and high-performing employees “to feel like they are not getting the benefits, growth, and value out of their jobs.” This can cause attrition among any group of workers, and today, you’re dealing with the workforce that instigated the Great Resignation.
The current workforce was bold enough to quit and search for a new job when times were good, and they’ll continue their search during this economic downturn. (They’ll bolt even quicker if you have massive layoffs and cut benefits.) The title of a recent article by Fortune Magazine says it all: “Economic Fears Aren’t Enough to Stop Employees Jumping Ship in 2023, LinkedIn Predicts.”
This LinkedIn survey of 2,038 UK workers shows that “60% of professionals were considering a job change this year.” More than half of UK workers are willing to change jobs while the UK experiences back-breaking inflation. This tells us that despite economic uncertainty, today’s workforce is still determined to get what they want.
What does today’s workforce want? The opposite of traditional retention tactics. The LinkedIn survey, along with our own research and survey findings, shows today’s workers want bigger paychecks, a better work-life balance, and opportunities for learning and growth (aka upskilling).
The math is simple: you’ll hemorrhage talent if you don’t invest in upskilling.
Get Ahead By Upskilling in a Recession
Don’t pull out your old recession playbook and leger. The unique circumstances of this recession—the war for talent, an expanding skills gap, and a unique young working generation—make most old tactics counterproductive.
This recession requires a new calculus. Instead of focusing on the bottom line, focus on talent and people. Focus on upskilling—you’ll save money and build a competitive edge.
To learn more strategies to attract and keep young talent talented, download a free copy of our ebook, “Tomorrow’s Talent: How to Hire, Retain & Keep Them Talented.”
For more reasons to invest in upskilling during a recession, check out Taylor Blake’s article, “4 Reasons Companies Should Focus on Upskilling During the Economic Downturn.”