A recession is a time of anxiety for everyone. Employers fear weakening consumer demand and employees fear layoffs. But there is a way forward—HR leaders can survive, and with effort and a dash of good luck, even thrive during a downturn. We invited Amy Letke, founder of Integrity HR, to talk about what HR leaders can do to lead the way. The following is an executive summary of Amy’s excellent webinar.
1. Build Engaged Employees
One of HR’s responsibilities is to keep employees excited, engaged and focused. Engaged employees make all the difference but it doesn’t happen by accident. It starts with great relationships. If you don’t have specific engagement tactics, now is the time to build those. What does that include?
- Behaviors that show trust and gives employees autonomy
- Leadership transparency and communication
- Fostering community and team building with events and peer recognition
And, if you’re cost-cutting, don’t cut the programs that build engagement. There are more jobs than people, so employees have the advantage. Engaged employees are highly motivated, will go the extra mile, and recommend your organization as a good place to work.
2. Maintain a Solid HR Infrastructure
A sense of continuity and safety can be casualties of a recession. No one knows how deep or long a recession will be. Here’s where HR can lead the way by keeping company policies fresh, current, and responsive to the needs of employees.
When was the last time you updated your time off requirements, remote work protocol, job descriptions, performance appraisals, merit increases or training policies? Review your policies and procedures now and make any necessary updates. At the same time, be nimble and open to adjustments as your business changes. Lastly, ensure you have a way to measure HR success. If you don’t have ways of tracking HR metrics, now’s the time to get that set up so you can demonstrate HR’s value is in difficult times.
3. Prepare for Change
No one knows which way the wind will blow, but you can make informed decisions with the information available. Not only should you have a plan for the worst-case scenario, but you should also have a trigger for knowing when to implement the plans you’ve made. Will you immediately move to a reduction in hiring or in downsizing? Or will you be able to identify opportunities in pay decisions? Additionally, as an HR leader, it may be helpful to review the following:
- What are your investment opportunities?
- What contracts can you consolidate? How can you smartly contain costs without damaging your business?
- What can you grow now before things get tough?
- How can we do more with less?
4. Evaluate Reskilling Opportunities
When times get tough, executives start paying close attention to every dollar spent. HR can help train this hyper focus in a productive way by spearheading the use of employee assessments. Think of these as reviews or appraisals meant to evaluate not only an employees’ current performance and productivity, but also their potential. What additional value could an employee contribute? What training or upskilling would make the employee both more engaged and more valuable?
Employees who cross train (i.e., learn new skills beyond their current job function) become increasingly more valuable. A recession is the perfect moment to get creative about career pathing. Look for win/win opportunities. The sweet spot is to find an area of the business that could use help (say, customer service) and an employee who has an interest in learning an applicable new skill (like designing customer service workflows). And as you’re looking to growing inhouse talent, don’t forget company leaders and other members of the HR team.
Learning-driven organizations tend to be more efficient, create more customer value and market leadership, and report higher customer satisfaction. Here’s a great whitepaper from Paycor on how to get started.
5. Revisit Rewards and Recognition programs
As mentioned, employee engagement during a recession is critical. One of the simplest ways to encourage engagement is through appreciation. Even though times are uncertain, we don’t want to lose sight of how we recognize and appreciate high performers. And rewarding good performance doesn’t always have to be expensive to be meaningful. (We actually have an article with 10 ideas for employee appreciation for any budget!)
Do you have a consistent rewards plan in place? Employees don’t always need public rewards, sometimes the importance is just in the recognition, especially in stressful times. Rewards and recognition programs don’t have to be costly; they just have to be intentional. It helps to promote predictability and stability.
6. Watch the Broader Employment Market
Remote work has created a very different talent pool. Now there are more jobs than candidates. As you consider the landscape of the job market, it’s important to know what will attract candidates in your industry, geography, etc. When creating your 2023 salary budget, to stay competitive you should take note that competitive pay, benefits and flexibility are likely going to continue to be expected from employees.
Think of an employee’s total compensation as a car that must be maintained every 7,000 miles or so. If your company hasn’t evaluated pay and benefits in a few years, chances are you’re not keeping pace with the market. A well-researched, well-reasoned and transparent pay philosophy is critical to earning the trust of your workforce. A Paycor survey of nearly 6,000 professionals found that 92% of business owners believe they pay women and men equally, but only 68% of individual contributors agree. When employees perceive a pay gap, regardless of whether it exists, they are 16% more likely to quit (Beqom).
Here’s what you can do now: Get into the habit of compensation benchmarking. Whether you rely on HR software, hire a third party, or do it yourself, benchmark pay against competitors of similar size and revenue base and keep current with industry standards. Anchor your pay philosophy in objective, timely data.
7. Manage Expenses
In economic recessions it is assumed that there will be cuts across the organization. HR professionals need to be talking with leadership teams NOW about how the business is performing. Preparing early can help those to have the lowest amount of negative impact on the organization.
One way to do this now is to look at cost reduction opportunities.
- Can you consolidate vendor and contractor relationships or renegotiate?
- Are you able to reduce labor costs or optimize schedules?
- How can you reduce discretionary spending?
These types of decisions can make a difference and alleviate early cash flow issues.
8. Monitor Culture and Infrastructure
Your corporate culture provides you with a unique competitive advantage. Do you treat it like that? Even if your culture is established, you may want to dig into it. Is it basking in the past or does your culture have room to grow and expand?
Dissect your culture using these five lenses:
- Discover — Why it may not be working today
- Understand — What, and who, are the top contributors to a high performing culture
- Increase — How can you effectively find, and keep, the “happy” people
- Maximize — Can you grow the performance of your leaders
- Celebrate — Celebrate who you are and how you got there
During stressful times (think COVID), communication becomes more important. If employees feel like they’re out of the loop, they’ll start speculating, and before long the rumor mill will be fully operational. If your business is feeling the effects of a recession, you can anticipate what the rumors will be: indiscriminate layoffs, offshoring, extreme budget cuts, etc.
HR can lead the way by establishing a rhythm of communication, whether that’s company-wide all-hands calls, town hall style in-person meetings, a company newsletter, or small group conversations.
A recession may mean your business has to change, but change can be managed, and the first step is open and honest dialogue. To get started, check out this article from Paycor.
10. Do it!
There are lots of actions that you can take to prepare for, and then weather, a recession. Maybe your company needs to do a lot of work in this area. Maybe they just need to tweak a couple of things. Regardless of where you fall on the spectrum the important thing is to take action now.
And you don’t have to go at it alone, Paycor has HR technology tools and support programs to help alleviate some of the burdens you face. Here are just a few:
- Paycor Pulse — Build employee trust by gathering and converting feedback into real insights to help prevent turnover and low morale.
- Learning Management — Make it easy to upskill and learn with personalized, self-paced training on demand and on-the-go from a desktop or mobile device. Offer ongoing training to employees willing to learn.
- Reporting — Show the value of HR with an innovative design and powerful, time-saving features.