How To Cope With A Headcount Freeze

Estimated reading time: 8 mins

The Global Financial Crisis continues, and Managers are being asked to do more with the same, or less. The inevitable ‘Headcount Freeze’ has been mandated in many organizations putting pressure on managers to maximize the return on investment. Holy Cow it’s getting tough!

There are a number of interventions that will ease the pressure. And it’s all about people.

A Headcount Freeze is established to limit costs. It tends to apply across the whole organization indiscriminately, and frozen headcount means that the whole organization must take a look at its people costs and utilization. With recruitment on hold, managers really have to get wise about how they use their people and ensure maximum efficiency and effectiveness. How is this done?

Look at this as Business As Usual

Microsoft recently denied that they had frozen recruitment. Whether that’s true or not, Lou Gellos, a Microsoft spokesman said “What is true is that we are evaluating hiring as we always do and we might make projections that are different than perhaps we had at the beginning of the year.” Microsoft, like many large organizations, understands that we are in a typical business cycle and managers must adapt accordingly.

Assessing resourcing against growth is what business is all about, whether we’re in growth or recession. So remember, this has happened before and as recent as the early ’00s after the dotcom bust. This means that for most organizations there is a track record of coping with a downturn and that this is not the first instance of this challenge.

Action: Dust off the records from the last downturn; bring in the veterans from the dotcom bust (and the recession of the early 90s) and discuss how it was back then and what interventions were made. Use those times as solid lessons and use that experience in strength.

A powerful mechanism is creating the top five lessons learned, assessing your status against each, and putting actions into practise. This may even require you to reshape or reemphasize your organization’s core values if they are in conflict with your new mandates. Don’t forget to make sure that confusion doesn’t arise!

Make your people most effective

Just because there is a hold on recruitment, it doesn’t mean that your people can’t be moved around into the gaps. This is an excellent opportunity for the ambitious to progress. It is a calculated risk to ‘promote’ your people into more responsible roles. This is a time to get support from your HR department in managing this risk. I put the word ‘promote’ in quotes back then because it isn’t always necessary to increase position or grades; it is normal to see structures flatten and to become more collaborative. HR support comes in when agreeing the ‘psychological contract’ you’ll make with your people who are given new opportunities – no doubt an expectation on increased pay and benefits will emerge yet you won’t necessarily be able to honor it.

I remember, following the early ’00s and 9/11, I was put in charge of a department despite my lack of experience. It was a gamble for my boss, and myself. I knew that the promotion was out of necessity, and that there was not extra cash to be put into my pocket. So I looked on the opportunity as a learning experience, a valuable asset for my resume and a way of opening new doors and networking. So I immersed myself into the new role with gusto. The gamble paid off in the end as I eventually gained credibility in the role and emerged triumphant.

One tip to share is that people who are put into more responsible roles without prior experience need all the support they can get, and a key aspect of this support is to provide regular feedback and appraisals. Their new responsibilities will be challenging and also an important learning opportunity, so maximize your investment and manage the risk by helping these people learn from their new experiences.

Times like these require you to limit key-man dependencies in roles that are expensive to recruit for. You’ll also need to limit the impact of absence. How do you do this? Cross-skill – get your people to train up their colleagues in order have stand-by deputies for coverage. Knowledge Transfer, though, is not as easy as saying it will happen! A reality of people management is that workers can often feel threatened when they’re asked to share their knowledge. This often happens before roles are outsourced or made redundant. Knowledge is power, and it isn’t always shared. Requests to share knowledge need to be preceded by positioning of the organization’s challenges, and where possible, commitments that jobs are safe (but if this isn’t true, don’t say it). Consider incentives and rewards to encourage knowledge sharing.

One word of caution (and this is where HR support comes back in), be careful of ‘constructive dismissal’, or the perception of it. In a nutshell, this is when people are put into roles in which they will underperform, and then sacked. The perception that this happens is far greater than genuine instances! Conversations about new responsibilities need to be carefully managed because of this.

Action: Look at the roles you were looking to recruit for, and then consider who in your current workforce could fill them. Flatten the structure if need be, and use collaboration instead of singular accountabilities. Cross-train people to give yourself greater coverage for key roles and use appropriate incentives to make it happen. Remember that people need support in adapting to new roles and give them regular feedback.

Renegotiate Service-Level Agreements

Do more with the same is a great management mantra, but it isn’t always possible. Let’s face it, SLAs are agreed with the assumption of a steady state. Reality bites when you’re asked to make do, and so should your customers. If you believe that meeting SLAs is genuinely under threat then it’s best to come clean and renegotiate. It’s better to do this now rather than wait and see red warning lights on your management console.

If you don’t have SLAs for services you’re providing, then perhaps curiously it is a time to implement them. Setting the standard means you’re setting clear expectations. It’s often the case that when a service doesn’t have a SLA associated with it then the expectations of that service are the most unreasonable!

The alternative option is to increase recharges for these services. Presenting the option, at least, may help build the case for relaxing the SLAs.

Outsource ad-hoc, discretionary work

Even though you can’t recruit because of a Headcount Freeze, you can still make discretionary projects happen. If you have the budget but not the headcount, consider offering the work outside your organization by outsourcing it.

I wrote about Freelancer Marketplaces such as Elance and Rentacoder last week – these are labor exchanges where jobs are posted and then bid for on a platform. What I like about them is the breadth of potential suppliers of professional services.

Freelancer Marketplaces create genuine opportunities to do more whilst maintaining your headcount levels. Because you can buy services at a fixed cost, you can set budgets. The number of people it takes to deliver the project by the supplier is irrelevant (providing you get the results.)

All kinds of work can be commissioned through these platforms. I do recommend though that only standalone solutions are purchased that require little or no integration into existing technology.

Tips for using external suppliers through Freelance Marketplaces are:

  • Appoint a manager from your organization to buy and manage these services. This person might be a Project Manager, or a Vendor Manager already. Or try a Subject Matter Expert in the appropriate field with support from yourself.
  • The more complete and accurate your job posting is, the higher the quality of bids and finished product you will receive. Consider a job posting as a functional specification and business requirement, and include any restrictions on the choice of technologies.
  • If you need to use a local supplier, say this in the job posting. Elance, for example, allows you to specify the geographies in which you need supply from. Sometimes a face to face meeting is the best way of initiating projects, so specify this as a requirement.
  • Consider very small projects to start with, such as building an intranet application, whilst you build up your confidence in buying services this way. It limits the risk too.
  • Make the project completion contingent on successful testing!
  • Support your supplier as much as possible, but be wary of your own internal costs in managing the relationship.
  • Very important: remember that your organization has to maintain solutions after they have been built! Full documentation must be secured as a deliverable of the project, including the source if the solution has been programmed. Avoid solutions where your organization is then dependent on the supplier.

Action: Take a look at the discretionary yet high-value projects in your portfolio and consider whether you can lift and drop them onto an external supplier. The best ones are those which stand alone and don’t require extensive integration into your existing technology stack. Provide as much of existing documents (such as requirements and design) as possible. Appoint a manager whose responsibility will be to manage the purchasing of services from suppliers and be a single point of contact for them. Remember ongoing maintenance!

In conclusion a Headcount Freeze creates a management challenge but it isn’t an insurmountable situation. It is business, after all. These situations are typical in an economic downturn, so the lessons of the past can come to bear. The key is people effectiveness, so get your people doing the highest value activities, and if possible, outsource the rest.

  • Learn more about Elance
  • Learn more about Rentacoder

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2 thoughts on “How To Cope With A Headcount Freeze”

  1. Our boss use to tell us that, In theory, super soldiers are better than special soldiers. This becomes a fact when a headcount freeze is in place. Employees who had bee cross-trained to do different can definitely help the company to cope with the crisis.

  2. @Karen – cross-trained employees are often more flexible. Is it possible that they dilute their core skills though?

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