To say September in the UK was extraordinary and tumultuous is an understatement. In the space of four days, we gained a new King and a new Prime Minister. We’re now waiting with bated breath to see what impact our new Prime Minister’s economic policy will have.

The news outlets don’t appear optimistic. Wherever you look, economic storm clouds are gathering. Ongoing COVID infection rates, global supply-chain, food, skills and energy shortages, a still-turbulent labour market, inflation, rising interest rates, widespread drought and flooding… The list goes on.

On the eve of previous downturns, the traditional business response to recession has been to slash budgets and headcount. We’re already hearing of job losses as organisations baton down the hatches and brace for turmoil. The FT has reported(1) a sharp uptick in the number of corporate insolvencies.

These are hair-raising times.

The end of traditional labour markets

But we’re as far from traditional markets as we could ever be. The Internet has transformed globalised commerce and created layers of transparency that have irreversibly disrupted employee attitudes and behaviour in ways we’re all still struggling to understand.

One thing is clear, however. People of working age no longer hold the expectation that a job is for life.

Furthermore, the past decade has seen a rising tide of workers operating as self-employed. Whether this is by choice, or as is the case at the more precarious end of the job market, out of necessity – today, organisations have multiple different ways in which to access talent and get work ‘done’.

A 2021 report from MIT in partnership with Deloitte(2) revealed that 87% of senior executives now include external workers when considering the makeup of their workforce. Indeed, so vast now is the breadth of the impermanent labour force, that Deloitte refers to it as the ‘alternative workforce’. It’s become the fastest way to get work tasks delivered ‘on-demand’.

Conventional approaches to redundancy have included a formal consultation process, ideally followed by outplacement support for those impacted, assuming of course there’s budget for it. But even within the field of outplacement, recent years have seen streamlining and cost efficiency introduced to such an extent that often, those facing redundancy no longer have access to any direct human-to-human coaching support.

This recession will be different

If we know nothing else about it, this recession will be different. Because it’ll be hyperconnected by the Internet. That’s a whole different essay.

But let’s for a moment examine one aspect of economics and explore how the labour market has changed since the onset of the pandemic.

When we first locked down in 2020, thousands of people in the most hard-hit industries quickly lost their jobs. Across aviation, tourism, hospitality, leisure, retail and more, many employers streamlined their workforces. With no clear view of when the pandemic might be over, many ex-pat workers left their countries of work as soon as lockdown restrictions ended, to get back to their families. As I’ve written about before, the pandemic gave rise to a widespread re-evaluation of what really matters.

In addition to those who left the UK, there’s another swathe of the active participants in the labour market whose lives are complicated by illness. Those classified as clinically vulnerable no longer feel safe to freely mingle in society, as COVID-19 continues to pose a risk to their health. At the time of writing, the BBC has reported a fresh rise in infection rates within the UK(3).

Another factor reshaping the labour market is the volume of people who’ve left it altogether. The UK Office for National Statistics has reported that one million people have left the workforce since the first lockdown, most of whom are over the age of fifty(4). Fresh data(5) reveals a range of drivers behind the decision to quit working. More than half of this number consider themselves financially resilient and debt free. Of those expressing a willingness to re-enter the labour market, flexible hours and the ability to work remotely are key priorities.

It's not hard to see why we now have a squeezed labour market and subsequently why we’ve witnessed such a huge boom in listed staff vacancies.

One more thing. For those employees who felt less than impressed by the way their employers handled employee relations during lockdown, the post-lockdown flurry of hiring activity has been a perfect opportunity to move onto pastures new.

Little surprise then, that Deloitte has found almost 60% of surveyed CEOs to have reported skills shortage as their primary risk to growth(6).

And now, on top of skyrocketing energy prices and escalating inflation, our new Prime Minister has signed off on tax cuts that have sent the financial markets into turmoil. Redundancies and unemployment can only be weeks away.

What does this mean?

Skills shortages AND redundancies

If we learned anything from the 2008 financial crash, it’s that afterwards the labour market looked very different.

For millennial graduates entering the job market in the fragile years following the global meltdown, prospects were bleak. As US educator, public speaker and author Julie Lythcott-Haims has written(7):

“In 2014, the economy was finally beginning to recover from the Great Recession that began in the 2008-2009 academic year. In terms of landing full-time paying work, the recession hit Millennials harder than any other generation. Twenty- to twenty-four-year-olds with a college education had suffered the greatest percentage increase in unemployment rates. This years-long slow start into the job market doesn’t only hurt in the short run; people graduating from college in a recession economy see their overall long-term earnings diminished by 10 percent – across their lifetime. In addition, this particular generation of young people is graduating with more student debt than any previous generation.”

She goes on to describe the extent to which the post-crash labour market landscape was dominated by unpaid internships rather than paid full-time jobs for entry-level graduates. Pre-2008, zero hours contracts didn’t exist. Nor did the range of gig platforms available to outsource the delivery of work to the lowest bidder.

The 2010s fuelled precarity and left those at the bottom of the social ladder struggling to make ends meet. 2008 destroyed any belief in job security, and, some argue, is to blame for the reduced average lengths of tenure that define the job market today.

If we can guess anything about the looming economic turmoil, it’s that it will leave fresh marks on the labour market. Given, however, the ever-expanding influence of technology, I think we can safely assume that AI, automation and robotics will be firmly embedded as low maintenance alternatives to human labour.

Once the economy finally stabilises, permanent employment is far less likely to be the mainstay feature it has been in the past. The alternative workforce will allow CEOs to de-risk their recovery plans and build workforce agility into their operating strategies.

Redesigning redundancy

As redundancy takes root over the coming weeks, however stressful for all parties involved, it’s critical not to overlook the huge amounts of tacit cultural and organisational knowledge that will be lost.

And it’s also important to remember that in a gradually shrinking talent pool, there may well be an opportunity down the line to rehire staff members who already understand your business model, your client landscape and your way of doing things. Managing redundancy with grace and empathy is therefore key.

In short, if you have to make staff cuts in the coming months, it’s very much worth thinking about HOW you downsize. Aim to design the potential for boomerang working(8) into your approach.

Boomerang workers are those who leave an organisation, for whatever reason, only to return at some point in the future. Much as in the same way that progressive organisations have focused on building alumni networks in recent years, focusing on building a loyal organisational community or tribe that transcends your payroll is definitely worth thinking about.

There’s every likelihood that once the economy stabilises, organisations will need to bake in a reconfigured approach to employment that incorporates the alternative workforce for optimal workforce agility.

Designing and implementing a redundancy process that, as far as possible, allows the proverbial door to stay open and relationships to stay intact is key. The past two years have provided more than a glimpse of very public humiliation for organisations who are perceived to have handled staff relations badly. Think of the open letter to Apple CEO Tim Cook(9) or the backlash faced by BrewDog CEO James Watt(10) as two examples.

Whatever happens in the coming weeks, protecting your employer brand has never been more important. If you have to let people go, please do it with heart. These are difficult times and those CEOs who manage the difficulties that lie ahead with grace, humility and emotional intelligence are bound to gain more ground, once the markets get back on an even keel.The turn of phrase ‘war for talent’ is now long in the tooth. But heed my words when I say that empathy matters in the future of work. It underpins the experience economy and business long-term sustainability. Building and nurturing trusted communities is now integral to future commercial success.

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References

1.     https://www.ft.com/content/116c29df-8747-4c5d-8f27-65042eaa27db

2.     https://sloanreview.mit.edu/projects/workforce-ecosystems-a-new-strategic-approach-to-the-future-of-work/

3.     https://www.bbc.co.uk/news/health-63009813

4.     https://www.theguardian.com/media/2022/aug/09/get-over-50s-back-to-work-to-tackle-uk-labour-shortage-says-john-lewis-boss

5.     https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/articles/reasonsforworkersagedover50yearsleavingemploymentsincethestartofthecoronaviruspandemic/wave2

6.     https://www2.deloitte.com/us/en/pages/chief-executive-officer/articles/ceo-survey.html

7.     Lythcott-Haims, J (2015). How to Raise an Adult: Break Free of the Overparenting Trap and Prepare Your Kid for Success. London: Bluebird Pan Macmillan

8.     https://sloanreview.mit.edu/article/the-benefits-and-risks-of-rehiring-a-boomerang-employee/

9.     https://www.theregister.com/2022/05/03/apple_return_to_the_office/

10.   https://www.bbc.co.uk/news/business-5742825