In recent years, everyone has felt the pinch of economic uncertainty due to overall economic downturn, high inflation rates, geopolitical tensions, supply chain disruptions and even a shift in market demand. How do organisations across the globe respond to such an unpredictable climate?
In 2022, one out of five companies in the Asia Pacific region suspended hiring new employees, with only two out of five hiring for crucial roles due to recession fears. In 2024 around 5700 companies announced hiring freezes and mass layoffs, and with headlines about hiring freezes and layoffs becoming increasingly common, what exactly are these companies doing in those pauses? Are they just stopgap measures or have they become something more strategic and future-driven? In this article, we will touch upon those interesting shifts.
What has changed?
Hiring freezes has long been a go-to strategy for organisations to sail across uncertain economies, often seen as a necessary pause to cut costs, sustain downturns, and have enough cash flow. But is that still the only reason? Over the past few years, we’ve seen a shift. Companies are now using these pauses as a deliberate, strategic measure. Instead of just hitting the brakes, companies are taking a step back to reassess their talent strategies, making data-backed decisions to build resilience during downturns and position themselves for stronger comebacks during upturns or hiring surges. So, how exactly have hiring freezes evolved to meet the changing dynamics of the job market? Let’s explore the key highlights and patterns that have emerged over the years.
Key Highlights
- Focus shifted from myopic survival to long-term strategy.
- Internal mobility is up by 30% since 2021; 85% of organisations plan to invest in workforce upskilling/reskilling these initiatives can save up to 92% of hiring costs.
- AI integration in business processes has risen from 55% in 2023 to 72% in 2024, driving productivity and cost savings.
- Companies adopting flexible work models see a 30% boost in workforce scalability and flexibility.
- Data-driven workforce planning has gained prominence.
6 Key Patterns Observed during Hiring Freezes
1. From external hiring to internal mobility
Traditionally, hiring freezes meant a complete halt to recruitment, except for a few crucial roles. However, organisations are increasingly tapping into internal talent pools to tackle uncertainties. Internal mobility has risen by 30% since 2021, highlighting internal recruitment as a winning strategy for growth and adaptability.
Internal mobility up by 30% since 2021
Source: HRDIVE
2. Upskilling/reskilling the current talent
Tech disruptions and shrinking skill shelf-life have prompted organisations to focus on upskilling or reskilling their workforce. Studies show that upskilling existing employees can save companies an average of 70-92% when compared to the costs of hiring new talent. With 40% of skills required for future jobs being new or evolving, the World Economic Forum projects that 59% of the global workforce will need to reskill or upskill by 2030.
"Reskilling initiatives aren’t just about building skills; they’re also a smart way to cut costs and future-proof the workforce."
Difficulty in finding Skilled IT Talent
Aberdeen Strategy and Research conducted a study on 1400+ IT professional representing North America, Europe, Asia (APAC), and Latin America (LATAM), 59% of respondents find it difficult to find skilled IT talent. Upskilling the current talent would be one of the solutions.
Source: Aberdeen Strategy
3. Downsizing vs. rightsizing
Downsizing is not an ideal approach, but it can be the right approach for navigating economic downturn or a low-demand phase from the employer's point of view. However, it may damage the brand value of the company and instead, many organisations are focusing on "rightsizing", which involves gradual changes, such as shifting roles, fostering internal mobility, and upskilling current employees.
4. Embracing remote work and global talent pools
Remote and flexible work models have become integral to workforce optimisation strategies. According to Deloitte, businesses using remote hiring and tapping into global talent pools experience a 30% increase in workforce flexibility, enabling them to scale teams while reducing operational costs.
5. Adoption of AI and automation
Generative AI has had a transformative impact across industries. In 2024, 72% of all companies across the globe integrated AI into at least one business function, compared to 55% in 2023. This surge underscores how organisations are embracing AI to automate mundane tasks and improve productivity. Deloitte also found that 68% of companies that invest in technology and innovation during tough times are more likely to outperform competitors in the long run.
Spending in tech continues to increase despite freeze in hiring and cost cutting
A recent study by Aberdeen Strategy, indicates companies globally plan to increase their IT spending even in a downturn.
6. Shifting from survival to strategy (Data-driven workforce optimisation)
Organisations now leverage data analytics to optimize their workforce, ensuring the right people are in the right roles. A Gartner survey cites that 70% of organisations plan to increase their investment in data over the next three years.
Learning from past uncertainties
Lessons from past recessions highlight that organisations with a future-focused, progressive approach are more likely to not only recover but thrive. A Harvard Business Review study found that companies combining cost-cutting measures and investing in new opportunities outperformed competitors by at least 10% in sales and profits.
By focusing on productivity, technology, and staff retention, organisations can emerge stronger from uncertainties. Successful strategy is in adopting a balanced strategy, blending defensive and offensive tactics to build long-term resilience and agility.
Success rate
Firms that surpassed their competitors by at least 10% in both sales and profits
The key to navigating economic uncertainty lies in balancing short-term survival with long-term adaptability and growth.
Recessions and economic uncertainties are inevitable. However, organisations can remain resilient by focusing on talent strategies and long-term agility. Hiring freezes, when thoughtfully applied, offer opportunities for organisations to realign workforce strategies, embrace innovation, and invest in their people. These strategies benefit the organisation but also empower employees to transition into a more resilient, future-driven workforce.
