Understanding the trajectory of the Washington, D.C., metropolitan area economy, particularly for small- and medium-sized businesses (SMBs), requires a thorough assessment of the trends that unfolded before, during, and after the COVID-19 pandemic.
While some factors in the local business landscape have returned to normal over the past 24 months, one central element has not: the way SMB leaders hire, retain and develop their workforce.
According to the U.S. Small Business Administration (SBA), small businesses (those with fewer than 500 employees) account for over 98% of all businesses in the region. These businesses collectively employ nearly half of the workforce.
To contextualize the trends that have converged to define the local economy’s relationship with employment patterns—specifically flexible work arrangements—FlexProfessionals, a recruiting and staffing agency for experienced professionals headquartered in Fairfax, Virginia, has published the first in a series of quarterly reports on SMB Job postings in the D.C., Maryland and Virginia (DMV) region. The company has worked with over 1000 companies, placing talent for between 100 and 200 clients annually.
The FLX-100 Index, says Gwenn Rosener, the company’s CEO and co-founder, provides interesting and ongoing insights into the local labor market’s current state and future outlook. We caught up with Rosener to learn more.
Here is what she had to say:
Q: Before discussing what you have learned about the local D.C. Area as a workplace since the COVID-19 crisis, can you explain what you set out to do with the FLX-100 Index?
Gwenn Rosener: Certainly. The FLX-100 index is a quarterly report produced by FlexProfessionals that provides data and perspectives on trends in the Washington, DC, metro area, especially as they relate to flexible work arrangements.
As most people in the area know, the labor market has been like a roller coaster over the past few years.
We had the pullback in the pandemic. We had the great resignation and quiet quitting, followed by inflation and just a gazillion zigs and zags, ups and downs.
Like many companies, we’re trying to get a handle on where the economy’s going, what our market looks like today, and how it might evolve in the months and years ahead.
Much of the region’s hiring information is often based on lagging indicators.
Since we’re in the trenches of the labor market and things are still so unsettled, we have decided to offer a real-time window into – and perhaps even a leading indicator of – the attitudes and behaviors of job seekers and employers in the area.
Q: Excellent. Can you tell us a little about how you have seen job trends – specifically flexible job arrangements – evolve before, during and after the COVID-19 pandemic?
Rosener: It’s been incredible the changes that have unfolded in this region, especially when it comes to the flexible workplace.
Before the pandemic, “flexibility” typically referred only to part-time remote work – then known as telecommuting – and was relatively uncommon. Platforms like Zoom or Teams existed, but their widespread adoption was limited. Concepts like hoteling or executive office space were not prevalent, and remote work was often cumbersome and not seen as very productive.
These were issues that our company watched very closely because we have specialized in placing great talent in flexible working situations for nearly a decade and a half. Our history focusing on flexibility significantly predates the pandemic.
Pre-pandemic, most of our placements were part-time, with 86% falling into this category. This limited “flexibility” to individuals able and willing to reduce their hours — or forgo benefits. Most part-time positions did not offer significant benefits.
Only 9% of flexible job postings before the pandemic were full-time hybrid or remote. It was a small segment of the available employment opportunities.
With the onset of the pandemic, there was a surge in remote jobs as employers and employees adjusted to the crisis.
One of the interesting observations we made during the height of the pandemic was the resilience of individuals in part-time positions that we had placed. While employers grappled with the economic downturn by letting go of some full-time employees or seeing them leave to attend to familial responsibilities – like homeschooling or caregiving – our part-time placements remained steadfast.
These roles proved more affordable for employers to maintain, and the part-time employees had already established the flexibility to balance their caregiving responsibilities alongside work commitments.
Immediately following the pandemic, we witnessed a pattern of instability characterized by employers initially engaging in extensive hiring sprees, only to over-hire in 2022.
Our business experienced unprecedented success in 2022, with clients expressing a pressing need for workforce quantity over quality. This hiring frenzy was so intense that it seemed as though employers were simply seeking warm bodies to fill roles.
However, as we entered 2023, layoffs and hiring freezes became commonplace.
Today, the predominant struggle revolves around whether to bring employees back into physical office spaces, leading to considerable uncertainty and fluctuation.
Remote jobs have been the most affected category of flexible employment over 2023 and into the first quarter of 2024.
Our data reflects a significant decline in the proportion of remote positions, plummeting from nearly 70% in late 2020 during the pandemic’s peak to approximately 39% in the first quarter of 2024.
Another factor influencing these trends was the Paycheck Protection Program (PPP), which funded many small and midsize businesses in the region during the pandemic. These payments played a crucial role in enabling companies to retain employees on their payroll, which they may not have otherwise kept as revenues declined and cost structures were strained.
As the PPP funds were depleted by 2023, and any surplus vanished, budgets tightened considerably. Consequently, some of the businesses we collaborate with experienced a delayed contraction due to the exhaustion of their PPP funds.
Q: With the pandemic now—hopefully—in our rear-view mirror, what factors drive flexible work arrangements? Do you see these dynamics stabilizing?
Rosener: Post-pandemic, there has been a notable shift in employee attitudes towards work. Many employees have come to appreciate the value of flexibility, enjoying the relief from distractions and increased focus that comes with working from home. They’ve cherished the extra time spent with family and feel more productive in this setup than in the office.
This newfound sense of empowerment among employees is evident, with many now insisting on retaining remote work options.
We’ve observed this trend prominently among our candidates. They steadfastly resist a total return to the office and are willing to decline otherwise appealing offers if they lack a remote work component, even if only for some hours of the week.
The situation with employers is a bit more complicated. During the pandemic, most of them posted job openings and said they were “temporarily virtual” until the end of the pandemic, after which they planned to move back into the office.
But that is not happening because employees are refusing to do it. As a result, we’re seeing most employers adopt a more nuanced stance on the remote and hybrid work equation. They’re starting to loosen up a bit. They are reevaluating the criteria for certain jobs and certain candidates.
Hybrid work is turning out to be the ideal arrangement. It gives employees most of the flexibility they want. It keeps them productive, but it also keeps teams connected, keeps them collaborating and helps them get folded into an intentional corporate culture that many of the companies out there are trying to rebuild.
Q: As you reflect on the data you’re sharing with me, what does it say about the state of the regional economy, especially among the small and mid-sized businesses you serve?
Rosener: If I were to sum it up in one word, it would be “cautious.”
Many small and mid-sized businesses are still grappling with the aftermath of the tumultuous labor market. They’ve experienced employees leaving during the frenzy of 2022, and some have made questionable hiring decisions amidst the chaos.
On top of that, they’re contending with the ongoing debate over in-office versus remote work, compounded by concerns about inflation, interest rates, and the political landscape.
We are consequently witnessing a tendency among businesses to hunker down and await more stable conditions before committing to significant initiatives.
Beyond this, I would say there’s a pervasive lack of trust between employers and job seekers today which is driving employers to elongate their hiring processes. The distrust seems to be driven by two factors.
First employers have been burned by high turnover or hiring missteps during the volatile years of the pandemic. In addition, much of the vetting is now conducted remotely through Zoom interviews and electronic assessments.
For these and other reasons, we have seen the level of engagement and commitment between employers and job seekers diminish, fostering an atmosphere of uncertainty and hesitancy on both sides.
While thorough vetting is essential, excessively drawn-out processes risk losing top candidates to competing offers.
It is unfortunate because distrust and churn only serve to prolong the hiring cycle, underscoring the prevailing atmosphere of caution and wariness—a lingering aftermath of the labor market’s recent upheavals.
Q: What are the potential implications of everything we have discussed, including the trajectory of the flexible work arrangement movement, for job seekers and employers?
Rosener: I believe flexible work arrangements are here to stay. They are undoubtedly becoming a permanent fixture in the workforce, and this realization is becoming increasingly widespread.
Businesses that embrace and integrate flexibility into their organizational structures—rather than resisting it—will likely gain a competitive edge in the labor market. This strategy is particularly advantageous for small businesses, which often have more flexibility in offering such positions than larger corporations.
As we’ve observed in numerous instances, small businesses can attract employees away from less adaptable work environments by leveraging flexible work options.
For example, we recently assisted an accounting candidate seeking greater flexibility due to her company’s insistence on a full return to the office. Despite enjoying her current role, she prioritized flexibility and was willing to explore other opportunities offering remote work options.
We connected her with a mid-sized accounting firm that had adapted to post-pandemic realities by offering increased flexibility. The firm recognized the importance of retaining top talent in a competitive market and readily accommodated her needs, ultimately securing her as a valuable addition to their team.
This case is just one of many we encounter regularly, where job seekers actively seek out or prioritize positions with flexible work arrangements.
Smaller, midsize, and even larger businesses with flexibility have a prime opportunity to attract and retain top talent by offering flexible work options.
Additionally, hiring part-time employees can be a strategic move, especially in times of economic uncertainty or during periods of recovery.
Businesses can effectively manage costs and scale their workforce by hiring part-time professionals such as marketers, accountants, or recruiters. This approach has proven successful for many smaller businesses, serving as a flexible and agile hedge strategy in unpredictable economic landscapes.
