Businesses expecting to expand despite fears of recession

The current economic uncertainty looming over the workforce would make some think that expansion would be a poor decision.

This is not the case, however, as according to studies, over three-quarters of companies are planning for growth in 2023.

In the annual ELMO HR Industry Benchmark Report, optimism is high as 76 per cent of respondents are anticipating expansion, up 50 per cent from 2022.

“The overall level of optimism was surprising given the fear of a recession globally and domestically, as well as the ongoing labour shortage,” said ELMO chief executive and co-founder Danny Lessem.

“But while job cuts in tech companies and professional services firms are in the spotlight right now, the overall surge in optimism when it comes to adding headcount is a good reminder that not all organisations will be impacted by economic uncertainty in the same way. While some sectors may be forced to downsize in 2023, either due to a potential recession, rising material prices and interest rates, others will outperform.”

Just 15 per cent of those surveyed expect their company to remain the same size this year, and only 7 per cent expect a decrease in headcount.

Far more are planning for growth, with 48 per cent anticipating 11 to 25 per cent of growth, and 34 per cent expecting growth over 25 per cent.

These figures are interesting as talent shortages still remain an issue for many industries. Recruitment was picked as the biggest challenge for 17 per cent of respondents.

Turnover is another key issue, with rates almost double what they were before COVID-19. ELMO said that the average Australian turnover rate for a new recruit on probation was 13 per cent. This figure sat at 7 per cent in 2019.

Mr Lessem continued: “The high new-hire turnover rate seems to be an outcome of the ‘bums on seats’ mentality of the last few years, without regard for the short- or long-term costs. HR is now telling us that finding the right candidates is their biggest recruitment challenge, and that suggests the focus has shifted from quantity to quality, in order to hire those who are truly right for the roles rather than choose someone without the necessary skills and experience.

“Given potential budget constraints this year and the need for high productivity as the economy slows, it makes commercial sense to hire well rather than waste money churning through new staff. We anticipate that hiring throughout the rest of the year will be much more deliberate.”

Jack Campbell

Jack is the editor at HR Leader.