Global Workforce and Recession: A Light in a Dark Place?

What do the Arab Oil Embargo, Dotcom Bubble, the US Sub-Prime Housing Market, and COVID-19 all have in common? For one thing, they were contributing factors to some of recent history’s most crippling global recessions. At face value, the disparity between these topics makes it seemingly impossible to predict the next downturn. Yet there are a number of textbook indicators – often in combination – that signal the onset of a recession, such as rising inflation, unemployment, or volatile interest rates.

Today, some of these pressures are arising due to the increased turbulence of our times, such as the invasion of Ukraine, China’s zero-COVID policy, skills shortages, surging food and energy prices, supply chain issues, and more. Lately, the visibility of these market stressors has induced economists and business leaders to brace for a recession.

While there’s no playbook on how to field a recession, one pattern of business strategy is to contain costs and postpone new investments. And when organisations cut back on spending, past experience tells us that expensive expats are a common target. So, what does this mean for Global Mobility programmes? By some, indiscriminate cost cutting is viewed as a blunt response as it can jeopardize recovery and progress in the long run. Over time, many Global Mobility functions have recognised this and evolved their programmes to employ sophisticated strategies for cost saving without sacrificing other priorities.

Here is a simplified look at how some organisations have responded to previous downturns:

1. Compliance Efficacy: Often in the first instance, organisations look to structure their Global Mobility programmes in a way that best optimizes their compliance efforts which thereby contains overall risk and liability. Global Mobility functions may apply a range of measures to achieve this, such as reclaiming tax credits, limiting the proportion of tax-equalised deployments, or leveraging tax efficient benefit schemes.
2. Policy Optimisation: Once effective compliance management is established, organisations look to evaluate the purpose of deployments and the value behind them.This requires Global Mobility programmes to design, broaden, and modernise their policy suite in a way that best serves their organisation’s business and talent objectives. These efforts can manifest as prioritizing business-critical over employee-initiated deployments or scaling back policy provisions (and even still, organisations struggle to ensure that their employees are equalised).
3. Operational Efficiency: With the foundations in place,organisations look to continuously enhance the engine behind their Global Mobility programme. Possible focus areas include remodeling service delivery (e.g., offshoring to shared service centres), tightening service level agreements across vendor relationships, and implementing technology to drive automation and insights from analytics.

But our markets have since grown more complex. There are new - even unfamiliar - factors challenging business strategy that will only be compounded by a recession. So, naturally, organisations will need to plan and respond quite differently. The global skills shortage is one of those factors and now a top concern for business executives¹. When joined with cost pressures, this issue of talent scarcity is expected to differentiate a future recession from those of years’ past.

With employees now at the forefront of discussion, most organisations – regardless of industry – will need to adapt their approach in terms of how they attract, develop, and retain talent. Some are exploring options to differentiate their value proposition from the market and enhance overall employee experience, while others are adopting measures beyond this. For example, some of the biggest names in business are slowing their external recruitment practices to invest in maximizing the value and productivity of their existing talent instead. But how exactly is any of this achieved, in practice? The simple answer is by aligning the Mobility and Talent agendas. But, for most organisations, doing so will require a paradigm shift and the infrastructure in place to make this happen.

Throughout history, people have mistakenly claimed that the word “crisis” bears the meaning of “danger” and “opportunity” when written in Chinese characters. Still, this widespread linguistic misconception holds value in the context of this blog. A recession will undoubtedly bring great hardship to most, so any initiative to mitigate these conditions should be first priority. With an appropriate mixture of foresight and action, however, a recession may also be an opportunity to embrace the new era of talent and accelerate your Global Workforce agenda. Our team brings these challenges and opportunities to life in a recent article for the summer issue of International HR Adviser magazine².

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¹CEO Survey, Fortune / Deloitte, Summer 2022
²Accessing Global Talent – Embracing the New Era, IHR Adviser Magazine, Summer 2022