With financial indicators pointing toward a potential economic downturn in the next year or so, businesses are ramping up their planning for the business cycle to turn sour. It seems that every prognosticator has a different opinion about how bad the next recession will be, which industries will be hit the hardest, and how long it will last. But no one doubts that it’s coming, and sooner rather than later. Staffing firms should be examining their risk management programs with a recession in mind.
For decades, the temporary staffing industry has played an interesting and important role in the labor market’s response to the growth cycle. As client demand drops, a staffing firm will lose revenue, but it can adjust its headcount to soften the blow to the firm. But, historical trends suggest that some in the staffing industry may also be uniquely placed to benefit from a downturn. This can happen as clients shed the cost and risk of carrying permanent staff in favor of hiring temps, and the pool of potential employees expands as they are laid off from their permanent positions.
Whether a firm expects to benefit or anticipates significant contraction, planning for a recession should be part of a broader risk management strategy. There are several steps every staffing business can take, including:
- Investing in good practices now. Times of relative prosperity are the best times to improve an organization’s policies and practices. Short-term investments into things like management training, safety evaluation, and hiring procedures can pay significant dividends for many years to come. In good times, a serious problem like a major workplace injury can hamper growth, while in bad times the same injury might threaten the survival of the business.
- Studying how existing clients may be affected. Understanding the industries that the firm serves is often just the beginning. Delving into public information about how current clients handled previous recessions can give important insights into projected changes to staffing demand. This allows the firm to assess its ability to respond to anticipated changes and develop a plan for how it will meet future demand.
- Developing an open and honest culture. Staffing firms can see many benefits from having good relationships with their employees. If employees feel they can trust their managers, they will be more willing to share concerns about unsafe conditions or other problems at client locations. Part of developing that trust involves being honest with employees about their assignments’ vulnerability to a recession. If an employee needs to be let go, being respectful and considerate can help the firm maintain its reputation among candidates.
- Anticipate higher stress levels among employees. Recessions are hard. Temporary workers are often the first to be let go, but they can also be retained while permanent staff are laid off. As morale declines, temps can be just as affected as permanent employees. And, an individual’s spouse or other loved ones may be going through something worse. As stress levels rise, the risk of injuries also increases. By providing training and addressing hazards at client sites now, a firm can prepare its staff to be better prepared to stay safe despite the pressures of a bad economy.
Gunnin supports the temporary staffing industry in all aspects of risk management. We can help your business examine its current risk management practices and develop a sound plan for the coming economic downturn. Give us a call today.