The global recession is not a new phenomenon. Everyone knows that this business cycle happens at regular intervals. It happened in 2008, 2001, and 1991 as well. Experts warn that it can now again occur in 2023. While some say that a recession is already occurring, the World Bank warns businesses and people of the possible global recession in 2023.
While the global recession has occurred many times, people are still clueless about the impact of this downturn on businesses. This guide walks you through the effects of the global recession on companies and how to hire during these times.
What Is a Global Recession?
A recession is a period when the economy is not growing. A global recession, on the other hand, is when the world’s economy as a whole isn’t growing. The exact definition of what qualifies as a global recession can vary depending on who you ask and what country they are from.
However, most economists agree that if more than one country experiences negative growth for two or three consecutive quarters, this constitutes a global recession.
Many factors can cause recessions to occur worldwide. These factors can include:
- High inflation rates
- High unemployment
- Low productivity levels
- War or natural disasters
- Political instability (e.g., revolutions)
Similarly, even oil embargoes by OPEC members can lead to a global recession. For example, the Arab Oil Embargo proclaimed by OPEC members and led by Saudi Arabia against nations that supported Israel during the Yom Kippur War led to a sudden rise in oil prices in those nations, leading to a recession-like situation.
How Does the Global Recession Affect Businesses?
The impact of the recession on businesses varies, but some common factors can be observed. Here are some such factors:
The global recession affects businesses in many ways. First and foremost, the consumer, the economy’s primary driver, has suffered a loss in income, impacting their ability to purchase products and services. This leads to lower demand for business products, resulting in reduced sales revenue and, ultimately, higher business costs.
However, non-food brands can still perform better than food brands. A study conducted in 2009 after the Great Recession of 2008 compared the sales volume of global recessions from 1990 and 2008. The study found that non-food brands performed better as the sales didn’t drop as much as food brands.
In addition to this is a loss of money for the company and its employees. This is where you come into the picture as an employer. You will notice that companies are laying off workers as they try to cut costs during these challenging times. This means that more people will be looking for jobs than usual.
Layoffs are a common cost-cutting measure during a recession. When times are tough, companies reduce their spending wherever possible. Layoffs are usually the first step companies take to cut costs, but layoffs can also be good for both the company and the employee.
However, there could be negative consequences associated with this strategy as well, namely, how it affects morale within an organization’s workforce, who may feel betrayed by decisions made at higher levels within their organization’s hierarchy.
You can see this employee layoff pattern during the Great Recession of 2008, when HP laid off around 25,000 employees. Currently, it’s the eCommerce giant Amazon implementing enormous layoffs to cut costs.
Why Hire During a Recession?
As a business owner, you know that hiring is the quickest way to grow your company and put your best foot forward. But what if there’s a recession? Should you hire at all?
The answer is yes. Hiring the right people for your company is even more critical in a recession because they can help you create better products or services.
While employees can’t do much in the recession, the executives should manage your business during these challenging times. Hence, an executive might need help with his or her tasks. In that case, the executive might not be able to delegate tasks effectively as many employees might have been laid off.
When an efficient employee is not available for assistance, it is best to seek help from an executive recruitment agency. These executive recruitment agencies can source potential executive assistants for the C-suite who can easily handle your work. Thus, you will not have to hire an employee just for delegation, which can be costly during the recession.
Challenges in Hiring the Right Candidate During Recession
If you have been trying to hire, you know that it has become challenging. The competition is tough, and the candidate pool is small. This can make it difficult for your company to find the right candidate for open positions. If you have been looking at hiring in recent years, then these difficulties might seem familiar:
- You are likely facing a larger pool of candidates than usual because many have been laid off by their employers. What’s more challenging is that many won’t be as qualified as you would like them to be, but they will still come to try their luck as they won’t have anything else to do.
- You may have noticed that many candidates are either not interested in working at your company or ask for higher salaries than they deserve. This makes them less desirable overall because it means more work on your end just before making an offer. If they accept your offer, then there’s no guarantee that they’ll stay with your company long enough for those extra hours spent researching them upfront not to go unnoticed.
- It’s also possible that some people who would otherwise be willing do not want jobs anymore because their companies cannot afford them during this period.
As we have discussed, hiring the right candidate can be challenging during a recession. To find suitable candidates, you must put in extra effort and time to research and vet candidates thoroughly. You should also consider hiring different kinds of candidates like interns, freelancers, or job-sharing professionals who might not be able to commit full-time but can help your business grow in other ways.