Recently we detailed some of the factors that are leading many economists to believe that a recession may be just around the corner.1 Of course we don’t know exactly when the next economic downturn will strike, but we do know that it is a matter of when, not a matter of if. With this in mind, we thought it would be a good idea to present some strategies for businesses, and HR departments, to prepare for, cope with, and even thrive, within a recession.
Prepare for Recession in Advance
“The best time to prepare for a recession is when things are going well,” says entrepreneur and finance expert Marco Terry. “This strategy allows you to act deliberately, instead of reacting to circumstances.”2
There are no magic bullets or easy ways to cruise through an economic downturn, so sound management and careful planning are your best bet. Invest in technology that will help lighten the workload if staff need to be thinned. Hire based not only on current needs, but anticipated future needs, with an eye for multi-talented individuals. With menial work being automated and flexible staff members in place you’ll be better equipped to respond to the changing short and long-term objectives that may result from a soft market.
If possible, balance your spending with savings during boom periods so that a buffer will exist during hard times. Anticipate cash flow challenges as struggling clients take longer to pay their invoices. Negotiate favourable payment terms with your suppliers during good times that will serve as precedents during recession.
Transform and Capitalize During Recession
As any self-help book, religious text or wise grandparent will tell you, hard times breed strong character. For certain businesses, a recession can provide an excellent opportunity to refocus and actually grow their business.
Recession is always disruptive to industry, with certain weaker or less nimble players falling by the wayside. The next recession will play out amid shifting technological, political and social sands, making it fertile ground for those capable of reinvention or strategic tweaking. Remember, just as recession is inevitable, so too is eventual economic recovery. Those who are able to foresee the future of their sector and trim the fat, while still maintaining core services and investing in research and development will be in a position to thrive when the economy picks back up.
A recession also leads to a buyers’ market in terms of hiring. Quality individuals who may be hard to find during economic booms will become readily available. Companies in a position to acquire this talent during a recession will be in a great position to thrive during future times of prosperity.
Be Strategic About Staff Reorganization
If all else fails, staff cuts may be inevitable during a recession. Unpleasant as it is, it’s simply a reality of business. What’s important is to reorganize strategically, taking care to avoid making cuts you will later regret, all the while managing your company’s reputation and treating staff with respect.
Core to good decision-making will be a true understanding of your business operations and a thorough assessment of who provides the most value. Investing time and resources into performance and benefit metrics will allow you to make informed decisions on restructuring. Documenting performance related issues as they occur will also be helpful if layoffs become necessary.
Outsourcing certain functions of your operation may come at the expense of control and stability, but may provide increased flexibility during cutbacks. Scaling back on outsourced or temporary workers will also be less damaging to morale amongst your full-time permanent staff.
If it becomes necessary to reduce payroll, consider all possibilities. Layoffs, cutting pay, reducing hours or mandating time off are options. None will be popular with staff, but by considering the implications of each you can make the best decision for your company. Remember, as a staff member walks out the door, so to does their training and all other investment you have made in that individual.
Above all else, make sure that staff are treated with respect. Outgoing employees should be treated with dignity. Good communication with staff can reduce the need for gossip. If remaining staff are being asked to pick up the slack when numbers are thinned, even simple words of gratitude can be helpful.
Ultimately we would rather avoid recession, but, as this is not possible, we must learn to adjust and respond. When business as usual is disrupted, an opportunity is created for HR departments to prove their value through reliability and innovative thinking. By navigating stormy waters, HR can put companies in a position to thrive when smoother sailing conditions return.
1 Ketels, Martin ReevesKevin WhitakerChristian. “Companies Need to Prepare for the Next Economic Downturn.” Harvard Business Review. April 02, 2019. Accessed August 09, 2019. https://hbr.org/2019/04/companies-need-to-prepare-for-the-next-economic-downturn.
2 “Home.” Factor This. Accessed August 09, 2019. https://factor-this.com/prepare-for-economic-downturn/.