January 13, 2023 by Andrea Rajic
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In 2022, economists predicted a potential recession, and that prediction seems to be flowing over into 2023. While the possible economic downturn has individuals facing inflation, job losses, and rising interest rates, companies are looking into budget tightening, layoffs, and downsizing.
So what can HR professionals do to try and make their companies recession-proof? In this article, we’ll dive into 8 essential strategies business leaders and HR departments can try.
During a recession, HR leaders often look into reducing employee rewards and incentives as one of the first cost-cutting measures. But cutting these programs in a drastic way can take a toll on employee engagement, retention, and job satisfaction of your team.
So while it’s a good idea to rethink and analyze incentive programs, you should approach them in a way that doubles down on benefits employees value while doing away with anything that doesn’t have a high ROI and isn’t aligned with business goals.
For example, start by doing a cost-benefit analysis and asses how much each benefit costs, as well as the administrative time it takes for People and HR teams to fully implement it. Then measure the impact each benefit has on the engagement, retention, and overall motivation of your employees to decide which perks give your company a competitive advantage and help keep your top talent happy and motivated.
You can also try obtaining data from competitors and other benefit programs in the industry to get benchmarks and compare offerings and costs other companies engage in, and see if you can improve your bottom line by focusing only on programs that are effective, easy to measure, and cherished by employees.
Want to replace some of your existing incentive programs with more cost-effective options? Check out our list of incentive ideas, with plenty of low-cost items to try out. See list >>>
Companies can also analyze the program by comparing it to other programs in the industry, benchmarking best practices, and identifying areas where they could improve. However, it’s vital to talk to employees before making any drastic moves — a survey is a good idea, and it can help you get a feel for which perks are essential for your team.
And finally, don’t cut or lower the essential benefits like paid time off or healthcare coverage, as these are critical for employee retention rates, and you wouldn't want those dipping in tough times.
Let’s face it — real estate is expensive. And long-term office leases can leave companies bleeding money, which isn’t ideal with a possible recession looming around the corner. After all, flexible and remote working arrangements leave little need for a fixed-term lease, especially if you have several company hubs across the country or the world.
In a financially difficult time, start optimizing expenses by reevaluating your real estate footprint and providing employees with flexible workspace options, which have several benefits:
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When the economy starts showing signs of a slowdown, many companies react swiftly by reducing headcount with layoffs to keep profitability afloat. While layoffs are necessary sometimes, we don't think they’re always the right idea.
During the Great Recession of 2008, many of the companies that laid off workers saw a decline in profits and growth after 1-2 years. It turns out they had difficulties hiring and onboarding new employees after the initial job market tightening.
In fact, this Gartner study shows that retaining and even hiring key talent is an essential part of a successful HR strategy in a recession. Zapier is a company that successfully manages what they call a “surplus capacity” in their recruiting team.
Their Chief People Officer, Brandon Sammut, recently shared their commitment to relocating and reskilling employees for different positions instead of laying them off.
So before you make any hard staffing decisions, see if any of the options below might better suit your company and keep it growing through this next recession:
As with real estate and benefits spending, People and Human Resources teams should look into other ways to reduce all non-essential spending while keeping employee morale high.
For example, even if you won’t be laying off employees, you might want to consider a temporary hiring freeze and save on the recruitment and onboarding of new hires, as well as their compensation and benefits.
Next up — company travel. Reevaluate all travel plans and expenses, including company trips to conferences and events and make sure to keep only the essential in-person meetups with clients and stakeholders, and move everything else to a virtual meeting tool like Zoom.
One exception you can make here is company offsites which bring your remote workers together in the same location once a year. Offsites are an excellent tool for engagement, retention, and relationship-building for your team members, who usually collaborate virtually.
Your cost-cutting measures don’t end here and can involve reducing company credit card expenses, cutting off non-essential perks and benefits, and keeping a close eye on the effectiveness metrics for all HR-related spending.
Want to know how other companies spend money on flexible workspaces? Download our report and find out how U.S. companies use flex spaces and how much they spend.
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There’s no shortage of people-management phenomenons in these past couple of years. From pandemic-induced burnout to quiet quitting and The Great Resignation, it’s a difficult time for People and HR managers to retain and engage existing employees.
Add a recession to the mix, and you can see why employee experience isn’t really optimal. To keep employees happy and keep retention rates high in a tight labor market, try these initiatives to promote engagement:
Bonus tip: Read our list of 18 ideas to keep remote teams engaged, connected, and happy.
Read guide >>>
Don’t leave your employees asking or worrying about your company’s recession plans. It’s the job of People leaders to be transparent, communicate effectively, and reassure employees when needed.
The first way to do that is to create an open-door policy that allows time and space for employees to ask questions from the HR team, leadership, or their direct managers. Leaving space for your team to raise concerns and ask questions builds a culture of trust and openness.
Don’t forget to share recession plans with employees, even if they contain layoffs or budget cuts. It’s always better to be open and clear about the company’s intentions, as that is less likely to cause anxiety and low employee morale.
A surefire way to ensure your team is happy, even in a recession, is to let them work remotely and with flexible schedules.
For companies, remote work opens the door to a broader talent pool, lower real estate spending, and higher productivity. For employees, it means a path to a better work-life balance, more time with friends and family, and more focused work.
Studies have shown employees are willing to switch jobs and take pay cuts over remote work, as flexibility becomes the #1 benefit workers worldwide are demanding. Employers who don’t adapt to the new reality and instead mandate a full-time return to the office may see their workers leave in the middle of a recession.
Remote work is a win-win for everyone, and if you haven’t switched to this model yet, now is a great time to give it a shot.
Every recession has a significant impact on HR and People teams, as they are in charge of implementing cost-saving measures like layoffs while trying to keep morale high and avoid burning out along the way.
However, by being proactive and investing in reskilling employees, keeping only the effective benefits programs, reducing real estate spending, and embracing transparency and remote work, People teams can help mitigate the negative effects of a recession and prepare the company for future growth.
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