Digital transformation can reduce employee retention costs

Persistent inflation, rising prices and other key macroeconomic factors are driving businesses to prepare for the impact, as experts predict the US economy will decline at least slightly in early 2023.

Companies are examining workforce cuts as a way to potentially cut expenses or restructure businesses ahead of a leaner economic era – recent reports reveal that banks like the USAA are downsizing their banking divisions, for example, a number of big-name tech players. Amazon, Peloton, and social media platform Meta for cutting staff or freezing hiring.

Still, keeping one’s cash flow and minimizing cash burn is critical for companies facing such economic pressures, while for companies looking to save money, workforce reduction is often “penny wise and pound stupid”, Matt. armaniCEO and partner of accounting and consulting firm Armanino LLP he said in an interview.

Many companies expect their workforce to decline before the upcoming recession – 80% of hybrid-employed and fully-faced companies, respectively, indicated their intention to lay off staff during the economic downturn, according to a study published Thursday by freelance platform Fiverr.

However, the rising costs of hiring, training and retaining new employees make “reducing the workforce a very, very costly way to try to find savings,” Armanino said.

“Our advice to businesses is to apply a lot of foresight before they cut their workforce,” he said, noting that it may take employees now to cut — it may not be too deep or too long — just to hire them now after this potential recession. Increase spending for companies as they struggle to rehire and rebuild.

The country’s economy contracted for two consecutive quarters in the second quarter after a 1.9% decline in the first three months of the year, meeting the unofficial definitions of recession by 0.9%. Experts are divided on how long a recession will last, though they predict a shift to such a period, and they theorize anywhere from the entirety of next year to just a few months.

Along with rising prices and ongoing supply chain issues, businesses are currently facing battles for top talent in a tight labor market, which puts a higher premium on employee retention. Payrolls soared by 528,000 in July, while the unemployment rate fell to pre-pandemic levels of 3.5%, refuting some recession fears, but likely failed to persuade institutions such as the Federal Reserve to ease their planned rate hikes to meet the 2% inflation target.

That’s why, according to a recent PwC report, 38% of business executives identify talent acquisition as the biggest risk – it lags slightly behind cybersecurity, with 40% of leaders agreeing it’s number one. risks faced by organizations.

The study also found that sixty-three percent of managers change or plan to change processes to address workforce shortages.

Taking steps to invest in technologies like artificial intelligence (AI) that can take on time-consuming or repetitive processes rather than reducing a person’s workforce can help businesses more successfully survive an economic downturn. Investment in processes such as digital transformation “often has an immediate impact on labor costs and savings,” Armanino said. Deploying technologies like AI can provide a short-term return on investment for the business, in addition to helping to save costs, he said.

“Businesses that shut down these initiatives because the economy is slowing are increasingly missing out on opportunities. [from] our perspective,” he said.

Investing in key technologies or tools along with a balance between skilled workers can help firms cut costs while protecting cash flows.

“I think the key is where human capital can be applied to things that are uniquely human in nature that require judgment, skill and emotion.” said Armanino. “Where are the repetitive processes that can be standardized and potentially automated? That’s the real question businesses are looking at.”

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