Hiring Freezes Create a Cycle of Failure
Anyone who has worked in the corporate world for even a few years has probably experienced a hiring freeze. As you might guess from the name, this is where companies stop (freeze) all hiring. Personally, I could never see the logic in this action, even though I understand the causes.Why do companies institute a hiring freeze? There are a variety of reasons, but the most prevalent by far is that the revenue forecast is looking poor and management wants to contain costs. Given that, it seems to make perfect sense to freeze hiring. No new employees coming on, no major increases in expenses. What could go wrong?
photo credit: ollografik
Keep in mind that the reason revenue forecasts are low to begin with probably comes from two sources:
- The economy is turning down, or
- You’re losing to your competitors.
A hiring freeze will not alleviate either of these pressures. If the economy is in a downturn, then a hiring freeze is only delaying the inevitable. You certainly aren’t making things better by refusing to employ people. If anything you’re contributing to the downturn.
If you’re losing to your competitors, it will be very difficult to catch up to them by freezing hiring. If you freeze hiring, you delay or halt projects by constricting their resources. However, no CEO wants to tell the market or customers they’ve delayed or canceled a project, so they freeze hiring because they don’t know what else to do. In fact, when you’re losing to your competitors, that’s when you need to redouble your efforts. Hiring freezes are non-action. They’re a slow steady death. Your competitors aren’t freezing hiring and delaying their projects, so you’re just getting further and further behind.
As you can see, the cycle goes something like this: get behind, freeze hiring in hopes that reducing expense will magically make up for lost revenue, magic doesn’t happen, projects are delayed, customers cancel orders, market responds by lowering stock price, get further behind, continue hiring freeze, etc., etc.
I’m not saying that companies shouldn’t control hiring. They definitely should, but it should be a normal business process not a panicky reaction. Also, consider freezing bonuses, first class travel, expensive dining, holiday parties, company newsletters, etc. before you resort to freezing hiring. Employees may not like this, but they won’t stop working.
If things do get really bad, then don’t freeze hiring (indecision). Be a leader and realize what needs to be done. Cancel projects, lay off employees, and re-structure the business to either work in the current economy or challenge the competitor effectively.
I know it’s not always that clear cut, but a hiring freeze is a disease on your business and often one of the first signs of an imminent demise.
