2022 State of the Industry Report: The Great Reckoning—How the Pandemic Completely Upended the Career Transition Industry
Heavy hitters in the career transition industry are pulling out of long-standing engagements. Career transition support has been pared way back. In a stroke of ultimate irony, the industry that has responded when employers need to downsize is undergoing its own unparalleled downsizing.
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As the world’s largest and most experienced career transition firm, we’ve seen a lot of trends and tools come and go. However, the sheer magnitude of change unleashed by the COVID-19 pandemic has created conditions that our industry has never seen before. Everything we thought we knew about economic downturns was turned on its head. The result is nothing less than a seismic restructuring of the career transition industry.
Heavy hitters in the industry are pulling out of long-standing engagements. Career transition support has been pared way back. In a stroke of ultimate irony, the industry that has responded when employers need to downsize is undergoing its own unparalleled downsizing.
However, what hasn’t changed is the critical importance of career transition to companies facing change and transformation. The risks of a badly managed downsizing are numerous and severe: lasting damage to employer brand, expensive litigation and an erosion of engagement and productivity among the employees that remain behind.
In this special report, LHH takes an unflinching look at the state of the industry today, the changes that have occurred, and what it will mean for our clients going forward.
The pandemic: unprecedented change for the career transition industry
The best career transition firms have always relied on their innate ability to predict and respond to economic downturns. When recessions occur, many employers face the need to shed employees. Career transition firms know that demand for their services tends to increase in lockstep with the depth of economic downturns. In short, when displaced workers and employers most need us, we have always been there to help.
With this experience in hand, the career transition industry had every reason to expect that the 2020 COVID-19 pandemic, and the recession it triggered, would lead to a huge increase in demand for our services. And, at first, it all unfolded pretty much as everyone expected.
In many countries, there was an initial rush to lay off millions of workers as governments initiated public health lockdowns to stop the spread of COVID-19. Globally, more people were laid off in the first six months of the pandemic than during any previous economic downturn over the past 70 years, including the Great Recession of 2007-2009. But even though the job losses were swift and severe, career transition firms found there were few new contracts to be had.
How did the pandemic completely upend the nature of economic downturns? And in turn, how did that impact the career transition industry?
The first major factor was the pace of the layoffs. Social and economic restrictions that led to job losses were imposed so swiftly to control the spread of COVID-19, there was virtually no opportunity for employers to seek and deploy career transition support. The priority for employers and governments alike was to save lives, not necessarily jobs. Furloughs, rather than formal layoffs, put millions of workers into employment limbo. Nobody knew how long the restrictions would last and were holding off any permanent layoffs until the threat level was more clearly established.
However, just as quickly as people were out of work, millions were called back after employers started adjusting to pandemic restrictions. Remote work proved to be a salvation for many millions of working people around the world. Although industries such as travel, tourism, hospitality, and bricks-and-mortar retail were ravaged by pandemic restrictions, many other industries found seamless opportunities to recall workers and resume operation.
The number and duration of layoffs and furloughs was also impacted by government economic supports that were much more generous programs than those extended during previous economic downturns. In countries like the United States, stimulus checks, and enhanced unemployment benefits became proxies for career transition support. In other parts of the world, like the European Union, employers received financial support to keep workers on the payroll even if business operations were significantly curtailed.
The last factor that impacted demand for career transition services was the global skills shortage. Employers had already started reassessing the need for layoffs in a global labor market where there was a desperate shortage of workers with future-proofed skills. As it became clear, it was unlikely the skilled labor available on the open labor market would be sufficient to meet the needs of companies.
The result of all these forces was a seismic restructuring of the global career transition market.
The career transition industry tightens its collective belt
By April 2021, the career transition industry was, itself, forced to respond to the new and rather severe market realities. Many established human capital firms, big and small, began to drastically reduce both the size of their career transition operations and the suite of services they offered.
It was the ultimate irony: well-established firms with expertise in helping companies downsize or restructure through layoffs were suddenly laying off. Instead of providing a broader talent management perspective, these firms have become only concerned about a transactional relationship.
Right now, some of the world’s best-known career transition firms are shuttering regional offices, abandoning franchises, and drastically reducing the services they offer. Others are spinning off their career transition units as separate businesses. When a company puts out an RFP for career transition help, there are fewer firms to answer the call.
Think about that: at a time when companies are facing unprecedented uncertainty around talent management strategies, many of the biggest players in career transition are packing up and going home.
Even for many of those firms that remain, service levels are extremely impaired. Adjusting to the reality of social and economic restrictions, in-person assistance has largely been replaced by online portals. Support offered to candidates in transition became limited to the basics: resumé preparation, interview techniques and some help navigating online job boards.
Unfortunately, the career transition firms that have responded to current economic conditions by withdrawing and retrenching into other solutions ignored the fact that in many ways, career transition is needed more than ever before. Not necessarily traditional career transition; but there is a growing appetite for a new approach to career transition that is tailor made for the challenges we face today.
Career transition expands to include talent mobility
It’s well established – career transition has always been the right thing to do, both for individual and organization.
As individuals obtain critical support in their transition to a new job, organizations have an opportunity to protect their brand as an employer of choice. That will help boost recruitment and retention of top talent, avoid legal costs, and ensure that those employees who stay with the organization remain engaged and productive.
It is essential and rewarding work to help individuals who found themselves facing one of the most disruptive and emotional experiences of their lives.
However, well before COVID-19 arrived, forward-looking career transition firms realized that workforce management strategies were changing, and layoffs were falling out of favor as the primary tool for workforce transformation. A global skills shortage was rendering traditional fire-and-hire strategies obsolete. Before transitioning workers out of a company, employers need to know if impacted employees can help to fill other skill gaps within the organization. Employers suddenly needed career transition firms that were fluent in redeployment, internal career mobility and re-/upskilling.
There will always be transitional moments where jobs are lost and the individuals most affected need expert support to find a new and, one would hope, better job. But for those firms that did not succumb to attrition, the whole concept of career transition was undergoing its own transition.
The true visionaries of the career transition industry already realized their task was no longer focused solely on helping people move from one employer to another. The definition of career transition was expanding to include guidance for individuals transitioning to different and better opportunities in their careers, either with their existing employer or with an entirely new organization. Career transition was transforming into something more strategic and nuanced.
Employing new practices and technology, career transition has emerged with a broader and more ambitious mission: future-proofing workforces and helping individuals find jobs that are truly meaningful and rewarding.
The new career transition for a new age of lifetime employability
Like so many industries, data analysis and validation has changed the very nature of the career transition industry. Forward-thinking employers don’t want to start laying off people before they know exactly who it is they employ, what they can do and what kind of skills their organizations will need well into the future.
Whether it’s internal career mobility – trying to transition from one job to another within the same organization – or transitioning to an entirely new employer, the leading edge of career transition matches an individual’s career aspirations and drivers with future-proofed employment opportunities. The new career transition is not just concerned about the “time to landing,” the industry’s terminology for the time it takes to go from layoff notice to viable employment somewhere else. The new career transition is about finding the hidden value in every candidate in transition.
It's also about finding new ways of tackling the skills shortage. Let’s face it, if there were enough skilled workers looking for gainful employment to fill the skills gap that most employers are facing, then they’d go out and hire them to replace those with outdated or mismatched skills. But there isn’t enough skilled talent to go around. And that is prompting many employers to take a much broader view of talent management, one in which they look first at internal talent mobility before downsizing.
Employers didn’t need career transition firms to help them become attuned to the cost benefits of a broader transition strategy.
When you combine the costs of separation and severance with recruitment costs, the value of internal talent mobility becomes crystal clear. Talented workers who may be badly matched in their current jobs or attached to roles that are being phased out by technology, can still provide value to their employers by transforming to acquire new skills. But that can only happen if you have the expertise to divine the strategies that unearth untapped value among your existing workforce.
Better value from existing talent. Better cost control. And better engagement. The future will always involve scenarios where traditional layoffs will be needed. But today’s dynamic labor market means that employers need to utilize a much broader array of solutions for effective talent management. And to do that, they will need a partner that has an end-to-end talent management insight, from recruitment, through development and – if necessary – outplacement.
Career transition is an expertise, not a hobby
In a world that is defined by uncertainty, you must always retain the ability to manage downsizings. But while layoffs may still be necessary in some instances, in many others, layoffs may not be the best option. There are a host of other options available to employers before turning to layoffs: internal mobility, re-/upskilling, redeployment. The best career transition firms have a deep understanding of this important progression in talent management.
The key point here is that partner firms cannot abandon career transition practices and hope to remain fluent in areas like internal talent mobility. The two strategies are inextricably linked and must be managed by a partner that is fluent in both.
The hard reality is that some of the world’s biggest career transition providers have been hit hard by current market conditions and no longer have the resources or retained expertise to manage complex transformations. These firms, even if they claim otherwise, are no longer making investments in account management support and technology to meet the emerging needs of customers.
Restructuring or transformations that often trigger transitions are often chaotic, emotional challenges. At a time like this, LHH knows that organizations need stability and detailed oversight, not additional chaos.
So, at some point in the future when your organization needs to at least consider layoffs as part of a broader talent management strategy, you’ll need to ask yourself two important questions.
Do I want to work with a fair-weather firm that drops in and out of career transition as economic conditions change? Or do I need the wisdom and guidance of a firm that never lost site of the importance of career transition?
At LHH, we believe the choice is not all that difficult.