Hiring Freeze - Is it the most effective strategy?

How often do you read – “Cisco India implements hiring freeze”, “Recruitment activities put on hold in Google”, “Hiring freeze policy at Apollo tyres” or “Patni, Fidelity, 24/7 Customer freeze recruiting budgets” . But why such hiring freezes and dramatic recruitment budget cuts? Is this the only way out during economy slowdown? Will cutting jobs or keeping recruitment on hold solve the business problems? Or on the contrary, will it prove to be a handicap in company’s growth?


This is certainly not first or the last recessionary cycle. The period of high and low growth, which are referred as economic cycles are more of a rule rather than an exception. These cycles tend to occur every three to six years and last for 6-18 months. This is one such temporary phase.

Undoubtedly, times are tough but then Indian economy is not sustained by exports alone, there is a huge domestic demand as well. The large foreign exchange reserves, high savings rate and a reservoir of management and entrepreneurial skills are some of India's strong economic fundamentals that insulate her from the global financial meltdown.

There’s definitely enough merit for companies to see an opportunity in such times and gear up to reap greater benefits when tough gets going. This could be possible only when there is a right kind of workforce or exceptional talent available within the organization. Perhaps resource freeze could be the easiest solution during global financial crisis but certainly not the most appropriate business strategy. More so for large business establishments because when there is a hiring freeze across the board, organizations’ growth gets impacted as some business units showing a high growth trend, generating enough revenue have to face the brunt due to lack of talent availability.

Not only this but there is an adverse impact on company’s repute as well. When the recruitment budgets are cut drastically, it leads to understaffing of employees making the existent staff work longer hours further impacting the quality of products/services and in turn affecting the organizational brand adversely. So at what price are you ready to contain costs? Have you given enough thought to the various long term consequences that the organization might have to face in the future?

In fact, it is during such times that the amount and quality of available talent is greater. If an organization is not recruiting, it is missing on some exceptional talent. Apart from this, ‘hiring freeze’ sends a wrong message to customers, analysts, suppliers and people at large that the company is in trouble which may affect the stock prices as well.

So how should businesses manage a strategic function of the organization in such trying times so as to achieve a competitive edge? Some of these are:

Welch-Way

There is certainly a case for 20-70-10 rule given by Jack Welch. This is the right time of weeding out non-performers by differentiating employees into various performance categories of the top 20%, middle 70%, bottom 10% and filling the vacant positions with competent and skilled employees. Cutting jobs to reduce cost and hiring freeze to contain costs are not the most appropriate measures as this will not only put unnecessary pressure on the existing staff leading to losing out on your organizational talent/asset but also impact the brand of the organization when economy returns to normal. Thus, right-sizing workforce is the way to go.

The Road Less Travelled

Times are different so think differently, get innovative and work out ways to widening the sourcing pool and minimizing recruitment costs at the same time. Simplest of it could be emphasis on sourcing through referrals and modifying organizational referral reward policies. For instance, instead of paying them bonus or cash prize, make the rewards more aspirational like dinner with CEO, organization-wide recognition during annual award ceremony, providing with developmental opportunities by sponsoring them for some professional course or skill building workshop which in turn proves beneficial to the organization as well or a 5 day paid leave.

Since, the number and quality of workforce available in the market will be high due to lay-offs by competitive organizations, it’ll be good to look for some such laid off, but exceptional talent or spotting the ones who survived the restructuring but their loyalty towards the organization is at an all time low. The other ways of increasing the pool of available candidates could be connecting with ex-employees and exploring possibilities of sourcing them or getting further leads or even sourcing talent through social networking sites, industry specific blogs or discussion forums.

Other low cost approaches to contain recruitment cost could also be hiring contract/temporary staff to minimize permanent liabilities. Efficient use of interns can also prove beneficial. Make interns accountable for deliverables and give them work best suited to their competence and capability.

Tough times require tough measures

Make recruitment policies more stringent with various levels of ratifications at each stage. Limit the hiring freeze to pre-identified non-key positions only, else continually add employees in business units which are experiencing growth and innovations and release the ones which are not performing to the organizations’ standards.

Maximize the high-touch, high values-add functions performed by the internal recruitment staff and outsource the rest. This would help in reducing expenses and retaining core-recruiting staff without overloading them with increased work.

Also, work out recruitment metrics to determine the impact of hiring freeze on organizational cost. This will further help the organization in deciding the future course of action.

Concluding Thoughts

Think different and be strategic in your approach by making sure that you are able to transform the challenges to the best of opportunities, else you will always be busy catching up with your competitors!