To help you get ahead of a potential recession, we asked HR leaders and small business owners this question for their best insights. From including DEI in your recession mitigation plan to reducing your vendor spending, there are several tips that may help your HR department prepare for a possible recession.
Here are 12 ways HR can get ahead of a potential recession:
- Include DEI in Your Recession Mitigation Plan
- Be Transparent
- Provide Internal Mobility and Reskilling Programs
- Train Your Managers Beforehand for Hard Conversations
- Ensure Job Openings Are Truly Needed
- Support Your Team
- Spring Clean Your Expenses
- Assess Your Company’s Financial Stability
- Invest in Organizational Design
- Ensure HR is Prepared to Make Cuts
- Make Priority Investments Now
- Reduce Your Vendor Spending
Include DEI in Your Recession Mitigation Plan
Diversity, equity, and inclusion (DEI) programs are not just a “nice to have'' during an economic downturn; they are mission critical for business survival and success. First, the same business benefits that DEI initiatives bring to organizations in good times--increased revenue and profitability, better decision-making, greater innovation–enable organizations to weather tough times like a recession.
In fact, a study by Great Place to Work found that companies that invest in DEI efforts significantly outperform companies that don’t, both during a recession and for years after. Second, DEI programs are a great retention tool: for companies that may soon have to make some difficult decisions around compensation, visible DEI initiatives like company-wide training and leader-led conversations that foster inclusion and belonging help employees feel valued and keep them engaged. In short, DEI initiatives and education are crucial for getting ahead of, and thriving in, a recession.
Be open and honest about the possibilities. If you are an established brand who has navigated an economic downturn before, can you take a look back to what happened? Were there layoffs, pay cuts or other measures that had to be taken? If so, communicate your past experience with employees. If you’re chartering new territory and have little experience in this area, it’s still best to let employees know if you suspect big changes could be coming.
Provide Internal Mobility and Reskilling Programs
Internal mobility not only improves retention and increases engagement, it can also make your organization more agile to adapt to shifting business priorities. Restructuring or reskilling your current talent base can help you respond faster to unanticipated challenges that may arise, as well as prepare your workforce for future roles rather than laying off workers.
Train Your Managers Beforehand for Hard Conversations
One way to prepare your business for a potential recession is to train your managers for any changes your organization may make. For example, if your company reaches a point where they must make lay-offs to your labor force, you should strategically and intentionally prepare your people managers for those meetings.
When it comes to necessary reductions in your company’s headcount, there are right and wrong ways to go about having those conversations. Managers must receive the resources, training, and necessary permissions to negotiate with employees empathetically and fairly to drive the best results. When companies skimp on training their managers, the potential for significant consequences from a recession increases exponentially. For your business’s reputation and the satisfaction of your employees, prepare for every course of action to mitigate the potential consequences of a recession on your business.
Ensure Job Openings Are Truly Needed
Analyze and evaluate each job opening in the company to be sure those roles are necessary. Recessions affect the bottom lines of businesses and, therefore, profitability. Ensuring that vacant roles are crucial to the company will prevent the need to terminate them in the future or during a potential recession.
Support Your Team
Recessions affect all of us, not only the upper management and C-level employees. Workers at all levels can find themselves coming under financial as well as external pressures, just when you need them most. During a recession, you cannot afford to lose key workers, so take some time now to ensure that all your staff are well equipped to deal with any extra pressure that may be coming down the line. Make sure that you have support in place to help with emotional, mental, and social pressures in addition to financial advice, and that your workers are encouraged to use these services. By supporting your team through these potentially difficult times you will be rewarded with loyalty and a determination to pull the business through.
Spring Clean Your Expenses
With the threat of a recession looming, now could be the ideal time to have a spring clean of your expenditure. Leaving it until the recession hits could result in your costs spiraling out of control, or could see you running around frantically trying to find ways to save a few dollars. Closely examine the compensation and benefits packages being offered to employees, and weigh them against the value they bring to the company. Check that any extra expenses being paid are justified and necessary. Bear in mind that savings made in the short term may not be beneficial in the longer term; closely examine each saving for its impact on the business.
Assess Your Company’s Financial Stability
If you're like most employers, you're probably wondering how to prepare for the possibility of a recession. Here's my best tip to help HR get ahead of the curve and protect itself and its employees. Assess your company's financial stability. This includes reviewing your company's liabilities and assets, as well as considering any potential changes in government or economic conditions that could affect your business. This also includes reviewing your staffing levels and policies. Are there any positions that may become vacant due to a recession?
Invest in Organizational Design
With inflation outpacing production and growth, HR can no longer rely on hiring individuals to solve organizational problems. Instead, HR needs to look inward, treating their employees as an investment, and making sure their talents are being utilized to the maximum degree.
Before laying employees off to save costs - a move that could be more costly in the end, given the cost of recruiting and training - consider how your organization is structured, and what changes could be made to enable success. If this is done successfully, employees will feel doubly grateful - both for keeping them in the organization and for maximizing their talents and strengths - and will foster long-term loyalty. In the long run, such a move will pay huge dividends.
Ensure HR is Prepared to Make Cuts
In a recession, top executives get ready to make cuts to stay afloat and they're going to consult HR before they do. That means HR should be up-to-date on evaluating operations and employee metrics so that they know which people and departments are crucial for business and where to make potential cuts.
HR also has to have a plan for the human element: how to ensure that any layoffs are conducted with the highest level of respect and the lowest amount of negative impact on mental health, company culture, and overall morale. The most difficult part of financial decisions during a recession will always be the human element, and that's the portion that HR has to manage while making sure that employees feel appreciated, heard, and informed.
Make Priority Investments Now
HR can get ahead of a potential recession by intentionally investing in people. Given COVID-19 and its impact on the workforce, workplace and marketplace, HR has had a unique bird’s eye view into the realities top of mind for people — from entry-level employees to executives.
HR should consider short and long-term opportunities and assess where investments can be made to address challenges or fuel opportunities. As one example, workplace investments like learning and development tend to be cut as a cost-savings measure during economic turmoil. If your organization is looking to skill up employees or expand developmental opportunities, consider organizing those efforts in Q3 and Q4 and as a best practice, ensuring as much recorded, repurposed content as possible. Further, get in a habit of requesting toolkits and learning guides that can be leveraged in the future.
Reduce Your Vendor Spending
With a recession on the horizon, it is important to get in front of your spending. Now is the time to start assessing your vendors. Is there a cheaper option available that will meet your needs? Can you renegotiate contracts? Is this something you can do in house? At Risas Dental, we moved to a recognition vendor where every cent invested goes to the employees. If you don't use the tool there is no expense. We have created our own in-house catalog of tenure gifts rather than paying a vendor a markup to manage it for us. New vendors may offer exciting options, but can your business sustain through the recession and if it can't, is there flexibility in your contract to pause the service? These are important considerations as you prepare for the future.