Guest Comment: It's time to melt the great Australian headcount freeze

Much has been written over the last 18 months about headcount freezes in Australia. Local firms and multinationals alike have implemented various cost-cutting measures, and the dreaded headcount freeze has grabbed numerous headlines. Press releases are issued, PR agencies employed and rhetoric thrown out. The public are extolled the advantageous of such a strategy: "prudency”, “protecting existing jobs” and “weathering the storm” are all used in equal measure.

But if you take a more holistic approach to evaluating these strategies, you may come to a different conclusion. I am not saying that headcount freezes are always a bad idea. The above phrases are used for good reason and are applicable in many cases. But problems arise when a company takes a “keeping up with the Jones” attitude or employs a blanket freeze instead of evaluating each business unit on its own merits.

Without sounding too nationalistic, there is little point in a multinational based in New York, London or Frankfurt handing down an executive decision to cease all expansion and recruitment for what may well be a profitable arm of the firm in Australia or the wider APAC region. All business units are not the same and there must be a clear distinction between profitable ones, or at least those with strong potential, and those that are operating in more stagnant markets with fewer growth prospects. In fact, a focus on these more positive business units is imperative to support the organisation when more traditional markets are faltering.

Forget following the leader

My second point focuses on firms who undertake a decision merely because a market leader has taken it first. This is a "damage limitation” mindset: follow the herd and hope that someone else has taken the correct lead. While it may be a more courageous option, business owners, both private and public, should favour a management style that has confidence in both them and the business’ ability to grow and be prosperous. This is not about going against conventional wisdom just to be different; it’s about deciding on a headcount freeze on its merits and not being afraid to make what may be the tougher choice.

Finally, there is a purely economic reason that anyone who has been involved in recruitment within our industry will have experienced over the last 12 months. Many business units will naturally need to expand despite a headcount freeze. The way around the freeze is to hire on a contract or temporary basis; sometimes for several years. Yes, there are advantages of such a strategy – reduced benefit payments and flexibility to name but two – but there is little substance in an argument that suggests that this is economically preferable.

Most of the advantages of using contractors are included in the charge-out rate even before an agency gets its fee for sourcing a candidate. There are also the longer-term intangibles of employee attachment, intellectual property ownership and on-boarding costs.

Companies that have locally-based management should make objective heading decisions, based on business performance. To block out market “noise” and make strong decisions is to differentiate a firm. Such actions can ultimately provide the competitive advantage that firms constantly strive for.

Ian Slattery, consultant, Beaumont Consulting

The views expressed are those of the author and not those of eFinancialCareers.

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