It’s been more than a decade since the last major financial crisis in the US. In fact, since then the world, until recently, has been experiencing a long run of growth with interest rates kept low to boost the economy.
Yet as we move into 2023, many experts are predicting the economy will move into a recession. In fact, the latest IBD/TIPP Economic Optimism Index found more than half of Americans believe the country is already in a recession.
There are a variety of reasons why the economy has stalled, as rising wages, skyrocketing prices, high inflation and staffing shortages are all making it more difficult for organizations to grow, or even maintain, their profit margins.
When a recession is on the horizon, organizations must do all they can to reduce costs and improve business flexibility. In this blog, we look at why an effective contingent workforce management program is a critical aspect of that.
What is the chance of a recession in 2023?
Goldman Sachs Chief Executive Officer David Solomon told Reuters: “There's a reasonable chance of a recession in the US, but it's not certain. I could still see a scenario with a soft landing.”
In fact, recent minutes of a meeting from the Federal Reserve, as published in US News, show that officials believe the economy is showing signs of weakening and that “risks to the baseline projection for real activity were skewed to the downside” with “the possibility that the economy would enter a recession sometime over the next year as almost as likely as the baseline.”
If the US does fall into a recession, it’s likely to differ from the two previous recessions in 2001 and 2008 that were strong, loud and tangible from the very start. This recession, if it does hit, is likely to be slower and longer, with a quieter impact than previous recessions.
An effective contingent workforce program can help businesses mitigate the impacts of a recession
While it’s unlikely to be as significant as previous recessions, this recession will still have an impact on both businesses and workers if it arrives. Businesses can prepare for a recession, and dramatically minimize the impact it has on their finances, by focusing on workforce management transformation.
That’s because most businesses are failing to effectively and strategically manage their contingent workers.
Most businesses have no official contingent workforce program and no company-wide, standardized processes in place. Hiring managers engage staffing agencies on their own terms, and at their own price, leaving companies with a complete lack of visibility and control over where their money is being spent, how suppliers are performing and how many workers are being hired (and for how much).
This leaves organizations with rogue spend running rampant throughout their organization, which makes business growth difficult during a recession.
An effective contingent workforce management strategy that improves business visibility and control over contingent workers, on the other hand, can help businesses better prepare for a recession. Here’s how:
✔️ It improves your bottom line
When you have improved visibility and control over your contingent workforce, you can mitigate rogue spend across your business and prevent hiring managers from overspending with suppliers. This not only saves your business money, but improves your bottom line so you can continue to grow during a recession.
✔️Improved business agility
Businesses must be able to adapt depending on the economy. A recession could mean less clients and fewer resources required. An effective contingent workforce program allows organizations to scale their workforce up and down (improving their speed and access to top talent), depending on market demand.
Interested in learning more about how you can implement a successful contingent workforce program and better prepare for a recession? Get in touch with Contrax today. Our team of contingent workforce management specialists would love to help.