A Balanced Employment Strategy
This article originally appeared in Lēad Magazine, Issue 14: The Search for Balance.
By Peter Andersen, PhD, Economic Forecaster, Andersen Economic Research Inc
In the aftermath of the last recession, employers are faced with a myriad of challenges from a new business landscape. Increasingly, there is a need today to find some kind of balance in what is a wider range of business uncertainty.
In the past, business forecasts have often been targets rather than true forecasts that incorporate an assessment of the probabilities of what could reasonably happen. The financial crisis and the economic shake-out of the last seven years have made employers more willing to think of a wider range of forecast outcomes. They are also now more open and willing to think about challenging and bad news forecast outcomes that they previously did not want to consider or even hear about.
Today, employers face a list of forecast uncertainties that is longer than ever before. The management of a company’s employment assets now needs to be balanced against an uncertain future involving such things as cyclical market demand, intense competition, foreign exchange volatility, uncertain inflation trends, regional wage cost developments, and transformative technological change.
The issues of outsourcing and insourcing are also bound to rear their heads. International outsourcing is no longer in vogue and this has direct human resources implications. There is a lot to think about – more than can be handled in an article short enough to keep readers’ attention.
Let’s start with the economy and market demand. This is a different kind of business cycle. Market demand is growing more slowly than past standards would indicate. It has been a slow recovery. However, will this continue indefinitely? Is there a possibility that conditions could return to normal and that a faster economic recovery could appear in 2014 and 2015? What are the probabilities of this happening? Opinions will vary, but the possibility lies within the range of reasonable outcomes.
This means employers need to balance this kind of uncertainty with an appropriate employment strategy. Flexible employment contracts seem to be the answer. However, there needs to be the option to lock in needed skills and expand the workforce rapidly if the improvement in market demand turns out to be stronger and longer lasting than expected.
This is where the competitive environment comes in. It is hard to make the argument that business is not more competitive today than ever before. It cuts across all dimensions – price, quality, design, service, and response/delivery speed. Globalization has shaped this environment, but so has the pressure of the recession and the low inflation environment in its aftermath.
Remember: it is your employees that allow you to compete on all of these levels. For an employer, the trick is to get the right balance between employment contract flexibility and an assured supply of the right kind of worker. The risk is that your competitors could move quickly if business conditions improve, lure your employment assets away, and scoop up a limited supply of additional workers. This risk can only be managed by keeping a close eye on business conditions and labour availability.
Foreign exchange rate volatility is an uncomfortable fact of life for employers, but it is something that cannot be ignored in managing risk. The Canadian dollar (CAD) has a habit of making large and unpredictable moves that can be either good or bad for your business. It is making such a move right now. There has been a big sell-off in the CAD since the beginning of the year. A lower CAD is good news for the business outlook. It will have a direct effect on your staffing requirements. The timing, however, remains uncertain.
Big currency moves affect all employers, even those in the services sector who do not think that they are competing with anyone outside the country. Basically, we all have customers who are influenced by currency swings. They don’t have to be exporters because an overvalued CAD can open the door to competition from cheaper imports. The sharp decline in the CAD since the beginning of the year means that you don’t have to be as nervous in committing to a more aggressive hiring stance.
Inflation and wage cost developments are also difficult to predict and can affect your employment strategy. Recently, inflation and wages have been increasing at surprisingly low rates. However, history tells us that big swings are possible. If there is a big pick-up, how can we protect company profitability? Performance-based wage structures offer one solution. Another is to manage your workforce in such a way as to maximize productivity. Non-wage rewards also offer a range of possibilities.
Furthermore, market demand has more than one dimension. Canada needs to break out of the box and move beyond its traditional trading partners, the U.S., the U.K., and Europe. The emerging market economies (EMEs) are the fastest growing on the planet and we have not done a good job in developing business with them. The challenge for companies is to balance this opportunity with an employment strategy that could help develop business in these more exotic markets.
The application of technology-to-business use is accelerating, but it remains complex in its direction and usefulness. A balanced approach to this situation would be to change the age and experience mix of your workforce. Younger employees will be more in step with many new technologies and advancements, and your assignment of responsibilities should reflect this.
The bottom line points to flexibility and the search for options. The future will always be uncertain, but what counts is how one adapts to change.
About the Author
Peter Andersen is an independent consulting economist specializing in applied economic forecasting. He obtained his doctorate in economics from Harvard University. Peter provides strategic economic advice to management through boardroom meetings, video conferencing, economic reports, email commentary, and telephone calls. He is a regular keynote speaker at industry conferences in Canada and the United States. Peter has also been teaching financial economics and money as well as banking at the University of Texas at Austin since 2001.
Since its first issue in 2007, Adecco Canada’s Lēad Magazine has been keeping employers on the cutting-edge of developments, trends, and breakthroughs in workforce management. Featuring articles from some of Canada’s foremost economic, legal, diversity, political, and HR experts, Lēad is an invaluable guide through the dynamic and ever-changing world of employment affairs. To view past issues, please visit our Lēad archive.