The term hiring freeze may have a chilling effect on employers and employees, but there are times this difficult decision makes good economic sense. Hiring freezes can be workable and worthwhile when they are rolled out for the right reasons and communicated effectively.
The best way to manage a freeze is to consider the long- and short-term effects on productivity, headcount and morale. These factors can make the difference between a stop-gap freeze and one that creates more problems than it solves.
When to freeze
A short freeze can give organizations the breathing room they need to make wise decisions, rather than quick ones. Tom Moran, CEO of Addison Group, wrote to HR Dive in an email that aside from the economy, there are several reasons to consider a freeze. "[A] company may simply experience a slowdown, a poor product launch, product reductions, or costs outweighing ROI," he said.
If an organization is considering a freeze in response to daily market changes, it may not be the right choice. "One bad day in the market may cause people to react prematurely. However, it is important that companies evaluate this decision holistically and do not make a hasty decision," Moran said.
The market is always going to experience its ups and downs, and the decision to move forward with a hiring freeze is solely dependent on an organization's individual circumstances, Moran said. "Instead of reacting to the market, I recommend simply always being prepared. Invest in your employees and grow their skill sets. It is more cost-effective to promote from within than recruit from outside."
The annual cost of employee turnover can be upward of $500,000 depending on an organization's industry, headcount and other factors. "Imagine the money and time a company could save by simply putting people first," Moran said.
What kind of freeze do you need?
Organizations can choose a full or partial hiring freeze to suit their needs, and it may be pertinent to consider how a hiring freeze can exempt different departments. While they may not be looking to add more workers to their roles during a freeze, leaders might continue to use temporary or contract labor. These workers can help keep the work flowing during times when personnel needs are evolving.
Prior to rolling out a hiring freeze, Moran said, it is essential that the executives meet to define its parameters. Is this a complete freeze, with absolutely no new hires? Will the freeze be limited to those "non-essential" positions, or will it apply to everyone? How long will the freeze stay in place? Determining the answers to these questions impacts what a company does about in-process hires, too.
"For example, if a company decides to hire employees for essential departments only, then anyone interviewing for one of those roles should continue with the process. If the opposite is true, then candidates should be notified as soon as possible. Recruiters working with these candidates should be transparent and keep communication open with the candidate during the hiring freeze," Moran said.
Communicating with those candidates during the freeze can help hiring progress once the freeze is lifted, Moran said. Once the freeze is over, he urged HR departments and other organizational leaders to consider: "Did the candidate find a new job? Are they still interested in the role they applied for? What is their timeline for finding a job?"
Announcing the freeze
A hiring freeze sounds like bad news to staff members if the news is not communicated with tact. That being said, Moran doesn't believe it's necessary to formally announce or rollout a hiring freeze. "Instead," he wrote, "communicate to the necessary people, such as investors, analysts, and leadership teams. Just like with any communication, emphasize the why behind the decision."
Moran advised organizations to be careful not to set any specific timelines but to reinforce the message that as soon as the opportunity arises to hire, the company will do so. "Entering into a hiring freeze is a slippery slope between doing what is best for the company, managing expectations, and making sure your employees feel confident in you," he said.
A ripple effect
A hiring freeze can be a kind of limbo for existing employees, Moran added. Employees must manage a growing workload that may become too difficult and stressful. "In the short term, this can affect morale, while long term effects could include minimal career advancement opportunities, burnout and resignation."
Recruiters might have additional concerns, he noted. "For job seekers, a hiring freeze could send a message that the company has problems, such as poor management or financial struggles," he said. "In turn, this screams 'caution' to job seekers, causing applicants to slowly trickle in once the hiring freeze is lifted."
If a hiring freeze is required, Moran recommended reinforcing the idea that the company believes all of its employees are valuable and that future positions will open based on fit and need as soon as possible. "A company is essentially responsible for an employee's livelihood," he said, "so the last thing anyone wants to do is make current employees feel like they are in jeopardy."