Amid ongoing uncertainty caused by the pandemic, recruiters and business owners are looking for lessons they can learn from the 2008 financial crisis to emerge stronger after Covid-19.
The global combination of slowdown and lockdown is uncharted territory for all business sectors, but the recruitment and staffing sector has been one of those most keenly impacted.
With their fortunes firmly attached to the hiring volumes and patterns of their customers, recruitment businesses all over the world are searching for ways to keep operating, stay agile and find opportunity within the new landscape created by the pandemic.
If recruitment is among the most-impacted sectors, however, it’s also among the most resilient.
Staffing businesses have weathered storms before – most recently in 2008 with the global financial crash.
So, what can companies who are striving to keep afloat and prosper in 2020 learn from the financial crisis of 2008?
Similar, but different
2008’s market crash had plenty in common with today’s scenario. Companies slashed recruitment budgets, froze hiring plans and focused first and foremost on their own survival. They drew up the drawbridge on supplier spend across the board and battened down the proverbial hatches. They also hung on every word of news, looking for clues as to how and when international markets may start to rebound.
The impact of Covid-19 is unique, however. Through being primarily a health crisis (as opposed to purely financial), there are important differences.
Firstly, many companies are continuing to operate and hire. Some sectors (including e-commerce, logistics, grocery and digital services) have seen dramatic spikes in demand.
Secondly, an ‘end’ (of sorts) is within view. Whilst it may currently be very difficult to predict exactly when international economies emerge from lockdown, companies can at least base planning around the core assumption that markets will pick back up when restrictions are lifted and society returns to something resembling ‘normal’.
This has given many sectors the confidence to continue with long-term hiring and development projects which are projected to extend beyond the anticipated time-frame of the pandemic.
Growth and competition
As with 2008, the likelihood is that the current pandemic will significantly change the make-up of the recruitment industry.
Staffing companies are already beginning to fail and close down in certain markets, while others have furloughed vast swathes of their workforces who may well not be re-hired on the other side of the downturn.
Along with this thinning of established agency competition, there will also be new growth.
Plenty of would-be entrepreneurs see the time afforded for planning as the ideal moment to launch their own ventures, perhaps even picking up the pieces from a failed former employer and re-building client relationships under a new, more agile brand.
However things look by the end of the year, it’s unlikely to be the same old faces in competition as when 2020 kicked off.
Evolution or extinction
Statistical comparison between 2008 and 2020’s events are complex and intriguing, but offer no helpful ‘apples to apples’ parallels.
For one thing, the Covid-19 crisis is just the latest in a string of related economic wobbles which create such a unique context that charting a direct comparison with the 2008 crash is extremely challenging.
Hot on the heels of Brexit, with interest rates at ‘ultra-historic’ lows and international debt figures spiralling, the backdrop to the pandemic was anything but stable before any lockdown measures were taken.
Financial initiatives such as government-sponsored furlough schemes are without precedent, and firm steps out of the current lockdown are still unclear.
As with 2008, however, one critical factor in the mix is how companies will respond to the shake-up in order not only to survive, but to emerge stronger on the other side.
In their famous 2010 publication “Roaring Out of Recession” in the Harvard Business Review, Ranjay Gulati, Nitin Nohria and Franz Wohlgezogen studied the fascinating link between the dot-com crash of 2000 and the meteoric performances of several companies forged in the heat of the downturn.
Their conclusion, along with that of many other experts, was that preparation and agility were the secrets to thriving where others failed.
Companies who out-performed the competition in the aftermath of the tech crash used their time to focus on decision-making, forming strategic partnerships that enabled them to leave their rivals in the dust when the economy picked back up.
They looked forward, scoured the new terrain for opportunity, and avoided the temptation to lock the doors and wait for everything to blow over.
A similar tale exists for recruiters today – while the current pandemic may look like a total commercial freeze, for ambitious and pro-active agencies it represents a unique opportunity to plan, partner and emerge stronger.
A few tips from Alan Simpson, a veteran FD
- Cash is king. Insolvency is a lack of cash, the only thing to have ever killed a business. With cash you can make all manner of problems go away. Without it, you’re done in three months. Forecast 13 weeks weekly, then the rest of this and your next financial year monthly, then a further three years annually.
- Anticipate at least six months of service interruption, that plus the length of your sales cycle for BD interruption, and at least a year delay to scaling plans. Even if you can’t see any immediate problems for your sector – some businesses are booming at the moment – look for them up and down your supply chain. They are there. You must anticipate them.
- Use any downtime wisely by honing delivery, maximising value adds, surveying, thought leader positioning.
- Seek finance now. It is available now, in unprecedented amounts and on friendly terms.
- Again, I can’t stress it often enough, cash is king.
Voyager Infinity and Voyager Mid-Office are software solutions that make Recruiters’ lives easier. Voyager Infinity is a CRM used by thousands of recruiters globally to source, nurture and maintain the relationships with their clients and candidates, and Mid-Office manages the entire Pay and Bill process (IR35 ready).