How HR Can Help Organizations Become Recession-proof
There’s growing anxiety that the U.S. economy is heading into a recession. Recent headlines have not eased those concerns, especially as some of the country’s largest technology companies announce layoffs as well as hiring slowdowns and freezes. Other troubling signs include two consecutive quarters of declining gross domestic product, record-high inflation, rising interest rates, a struggling stock market and cooling of the venture capital market. In 2023, it’s critical for employers to consider how to prepare for and build resilient, prepared organizations.
Due to HR professionals’ unique and strategically important positions, these teams can greatly impact whether organizations can withstand a recession. Although a recession cannot be prevented, HR departments can use the strategies outlined in this article to help employers prepare for and minimize the impact of a recession on their organizations.
Prioritize Employee Engagement
During periods of economic uncertainty, employees are likely to feel stressed. If organizations are forced to lay off employees, the remaining employees may be asked to shoulder additional responsibilities and greater workloads. As a result, employees may feel overworked, and they may worry about their futures and their employer’s stability.
Employee engagement and experience can be vital leading up to and during a recession. According to industry experts, highly engaged employees can help minimize a recession’s impact on organizations, as
they are more likely to accept negative work changes and remain loyal. HR teams can increase employee engagement by meeting with employees, listening to them, and addressing their concerns. Such measures can help maintain morale and employee productivity.
HR teams can also use technology to improve employee engagement. Tools and platforms—such as collaborative tools, social media, professional networks, and recognition and reward programs— provide organizations with new ways to strengthen employee engagement. There are many employee engagement tools and platforms to choose from, which can be beneficial during a possible recession as organizational budgets may be limited. By conducting research on different tools, HR professionals can find the employee engagement solution best suited for their organizations.
In most organizations, the HR department is responsible for communicating with employees. The possibility of a recession can bring uncertainty. Because employees will likely be concerned about their futures, their employer’s long-term viability, and how their work may change, HR teams need to find ways to keep employees informed about how the organization is performing and potential changes without fostering their worries. Creating a transparent workplace culture can help organizations weather a recession, as straightforward communication from HR can address and soothe employee concerns.
HR teams can facilitate transparency by meeting regularly with employees, conducting town halls and using frequent written communication. The department can keep employees informed on any of the organization’s potential challenges—such as layoffs, hiring freezes, and compensation and benefits changes—and help employees understand how a recession may impact their career growth. Additionally, HR can encourage others, such as senior leadership, to be transparent in their communications with employees.
Establish a Budget
Many employers responded to the recent labor shortages by increasing salaries, providing substantial bonuses, and expanding employee benefits and perks. However, with the possibility of a recession on the horizon, HR teams may need to rethink how employers address their attraction and retention strategies; for example, they may need to avoid bonuses, curtail salary increases and focus on maximizing employee benefits. Organizations that are prepared for a recession tend to develop a budget with an eye toward the future. HR departments can establish a budget that reduces organizational risk by avoiding unsustainable employee compensation and benefits strategies during times of economic uncertainty.
The more efficient an organization, the more resilient it will likely be during a recession. Organizations tend to stay one step ahead of an economic downturn by optimizing their resources and automating where possible. Automation enables organizations to increase employee productivity by eliminating manual tasks, allowing employees to focus on more important work that can directly impact an organization financially. Eliminating manual tasks also allows employers to reduce the number of entry-level staff and hire more skilled workers to help organizations grow and be more competitive. Additionally, automation can help organizations lower costs and reduce risk by using technology to perform time-consuming and error-prone tasks faster and more accurately than employees. HR departments can look for opportunities to improve organizational productivity by automating processes and implementing new technologies. This may include automating recruiting, onboarding and payroll to increase efficiency.
Prepare for Layoffs
Layoffs are often a last resort due to the potential negative impact they have on employees and organizations, but they may be unavoidable during a recession. However, HR teams can help by preparing for the worst. This may include selecting the right employees to lay off or developing strategies to offset the impact of layoffs. For example, voluntary reduction-in-force (RIF) programs, such as voluntary separation and early retirement programs, have the same goals as traditional layoffs, but they are designed to benefit both the employer and the employee. HR departments can implement these programs, as well as reduce or freeze hiring and relying on contract labor, to lessen the need for involuntary layoffs and minimize the negative impacts of this measure on organizations as a whole. Such negative impacts of layoffs often include decreased organizational productivity and proficiency, lower employee morale, and potential legal liabilities. Although voluntary RIF programs and changes in hiring can alleviate some of the strain of layoffs, HR teams must plan and carefully assess any potential legal liabilities before implementing one of these methods.
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