What Investors Should Know About Hiring in 2023
By Matt Massucci, founder and CEO, Hirewell
A new survey should serve as a warning sign for investors. Seventy-nine percent of executives said they believe a recession will take place in early 2023, but only 35% feel “very prepared.” In the Aon poll, nearly half of executives said they are just “somewhat” prepared or “underprepared.” The rest are either “only a little” prepared or not prepared at all.
There are all sorts of steps businesses can take to attempt to become “recession-proof.” As a recruiter, I see every few years how crucial talent is in a downturn. The skill sets it takes to lead an organization through troubled times are sometimes different from those needed during rapid growth.
This is especially true at the managerial and executive levels. In a study, professors from Columbia and Cornell explored how different economic environments forge different types of managers and leaders. Those who hone their chops during recessions learn to make decisions differently -- and having them as leaders can pay off for a company. “Our results indicate that the market assigns a positive and economically meaningful value” to chief executives with experience leading through a recession, they wrote.
Of course, this does not mean that all companies will need to hire new managers or executives should a recession take place. Many have the knowledge and skills to lead excellently through such times. But it is a powerful reminder that having the right people in place is the centerpiece of navigating through a recession. Companies need people who understand how to do more with less, and balance ambitious goals with contraction.
So one key for investors in 2023 is to find out what steps companies are taking to ensure they have the right leadership in place. In my experience, executive recruiting can play a major role in making this happen. As recruiters, we sometimes shift away from volume hiring and pour more efforts into our executive search function during these times.
But it’s also important to understand that as of now, the hiring market remains extremely competitive. Companies should avoid being too cautious.
The split picture
Companies that have been laying off employees are getting lots of attention. But they don’t describe the overall economy. “Job growth was much better than expected in November despite the Federal Reserve’s aggressive efforts to slow the labor market and tackle inflation,” CNBC reported. Unemployment remains low, and wages are going up.
I see two distinct buckets in place. Some companies, especially in the tech sector, are struggling and letting employees go. But many other companies are as hungry for talent as ever. In fact, the “great resignation” is still roaring ahead. In the latest figures, the number of people quitting their jobs remains far beyond the number being laid off or fired.
In fact, tech layoffs offer an opportunity for businesses in other sectors to snatch up employees who are ready to bring their skills to other industries. At my company, Hirewell, we’re hearing from more and more top performers in tech who are looking to work for a wide variety of industries. They’re also ready to relocate, no longer feeling the need to be situated in Silicon Valley or other tech hubs. And when companies allow remote work, they stand an even better chance of attracting this very in-demand talent.
To gauge how well any company is doing, whether in a recession or not, investors should keep a close eye on a company’s human capital. As investopedia explains, “When it comes to companies and businesses, human capital refers to the value of an employee's skills and experience… Because it's intangible and can't be expressed in a dollar value, it doesn't show up on the balance sheet.”
Studies have found that getting this information is crucial for investors. One found “evidence for a positive causal relationship between companies´ human capital investments and stock performance. That is an indication that investors can gain abnormal returns by basing their investment decisions on information about companies’ human capital.”
Because “human capital” can’t be expressed as a dollar figure, unlike other asset classes, investors need to look at other figures, especially rates of attraction and retention. Ask companies what they’re doing to recruit, attract, and engage the kind of staff that can help the company deliver returns, no matter what lies ahead for the broader economy.
The more investors get a clear understanding of the jobs picture, both inside companies and in the talent market in general, the stronger their portfolios will be -- and the more they’ll gain throughout the year.
Matt Massucci is founder and CEO of Hirewell.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.