Managing in a Downturn :Mistakes CEOs make - Headcount Part 2

There's one more point which I forgot to mention in my earlier post regarding cost cutting through headcount reduction.

And that is, quite simply, that a downturn is actually a good time to hire. While I have earlier discussed the rationale for careful, calculated headcount reduction based on skills and performance, there is also a very strong case for careful, calculated hiring based on long term needs, skill gaps within the organisation and growth strategy.

Let's not forget that most companies recklessly cut headcount without the kind of skill/talent based analysis I've advocated earlier. This results in a sudden availability of talent, which may help resolve two problems of talent acquisition in the good times:

a) the sheer unavailability of suitable and good talent due to competition between employers for the best and the brightest

b) even if suitable talent is available, it may be costly; the dynamics of supply and demand in a growth situation leads to salary increases which may not be affordable in the short or long term

However, in a downturn, good talent is suddenly affordable, especially if the recruitment is carefully tailored to strategy. This kind of hiring is also good because it shows a new hire a solid growth path within the organisation, which can lead to high retention levels if the organisation is careful. More on that later.

Therefore, it is imperative that cost reduction is done carefully; you dont want your best talent working for your competition simply because they've been more careful than you about how to reduce headcount!