By Lisa Taylor
“Is anyone else worried about the recession?” This question has been floating around lunch, Zoom, and boardrooms like a stubborn ghost that keeps you up at night.
We’re heading into recession before we’ve fully gotten out of the COVID-19 crisis. Supply chains are unreliable. The global implications of the war in Ukraine continue to mount. Organizations are under pressure to demonstrate how they will address climate change in their business and sector over the next five years.
Most of us haven’t been through the trifecta of down markets plus high inflation plus labour shortages. The last time Canada experienced significant inflation was in the mid-1980s, and few of the people who led us through that period are still part of the workforce. That experience, that institutional knowledge, is largely gone.
Your first instincts need not apply.
Recessions usually create favourable hiring conditions for employers. Labour becomes cheaper and easier to find. People are motivated to keep their current job and, if they’ve lost their job, they are desperate to find new work.
But assuming this recession will lead to an employer’s marketplace may not be wise. In recent months, I’ve heard top executives predict that an economic downturn will lead to less resistance from employees to return to the office. “They’ll come back in because they’ll be afraid to lose their jobs.”
Predictions like this are outdated.
This recession will be different. Labour markets are tight and finding great employees is a challenge. Where economic downcycles used to hold employees in place, this is no longer a sure bet. We’ll need to manage through this cycle in an employee’s marketplace, at least in the short term, and that means prioritizing the very spending we’ve been trained to consider as discretionary: training, travel, and social gatherings.
Gartner’s Jackie Wiles explains, “Cost-cutting initiatives and deinvestment can damage employee experience, which is critical for employee engagement and productivity. Understanding that impact can help you avoid rash decisions that could damage key talent outcomes in the long term. This is especially important today, when certain talent is scarce and costly.”
Treat people-related expenditures as investments, not discretionary costs.
Investing in your talent is a smart move, even if it feels counterintuitive. As we emerge from the pandemic, in a recession, with high inflation, only experienced and engaged people can do the creative navigation and real-time adjusting that organizations will require.
The costs of turnover, including being short staffed, recruitment, training, and time-to-productivity change the calculus of what falls under discretionary spending right at this moment. Wiles cautions, “Knee-jerk action to reduce costs can have unintended consequences for the longer-term health of your organization.”
Solutions that come from trying something new
The past few years have not been business as usual. The coming months will continue to be unusual and difficult to predict. In uncertain times, the tendency is to pull back. To slow down. To wait and watch.
This recession is not like the last, and smart organizations will keep their eyes on the horizon, investing in what is difficult to restart or rebuild. Before pulling back on employee-related expenditures such as professional development, leaders should zoom out and take a longer-term view.
- How can you start getting ready, right now, for when the economy bounces back?
- What purchases or upgrades can you put off while energy, transportation, and material costs are high?
- What low-cost/high-impact activities can you do with your team to enhance motivation, engagement, and commitment to find innovative solutions to new challenges?
It’s okay to admit that even thinking about navigating a recession leaves you exhausted.
The last two years have taken a toll on everyone. In the earliest days of the pandemic, I noted how many senior leaders were coming to me with a confession. Even as their teams needed them, leaders weren’t sure they wanted to stay in their jobs long-term. In June 2020, they were already tired.
At the time, I wrote about embracing career ownership in disruptive times and I didn’t worry so much about the immediate, short-term consequences of the burden of leadership. Instead, I worried about the phase of the pandemic that we are in right now, when the crisis had passed, but the stress and pressure remained.
In quiet discussion with our clients, we’ve learned just how often people have taken on a heavier burden to assist and support coworkers who were showing signs of burnout and distress. It’s all taken a toll and we are battle-weary. In today’s environment, addressing workforce challenges is both urgent and important—and so is focusing on employee well-being, engagement, and supports for leaders. Cutting back on what keeps people connected, fosters creativity, and provides support won’t generate the savings previously enjoyed.
The looming recession may feel like a horror movie we’ve seen before. But recovering from the pandemic while also addressing the trifecta of down markets plus high inflation plus labour shortages ensures it is actually a genre-bending new release.
Here’s a big spoiler alert: the organizations that capitalize on these challenging times and emerge stronger will all have one thing in common. They’ll focus on their people.
If you’d like to know more about how your organization can stay ahead of trends and create a workforce-focused competitive advantage, reach out to us and check out our consulting services.