Uncertainty is the only certainty.
This might sound bleak, but it’s the current reality.
Several shocks have hit a world economy already weakened by the pandemic: higher-than-expected inflation worldwide, which is triggering tighter financial conditions, along with further negative impacts on supply chains from the war in Ukraine.
As the immediate future remains unknown, organizations are grappling with understanding the new normal.
With any downturn, business leaders are likely to be asked to shift focus away from growth towards profitability and cash flow, while keeping a strict control on costs.
Meanwhile, workers worldwide are dealing with the rising cost of living, soaring energy bills and the highest inflation rates for decades, which is having a direct impact on employee wellbeing.
This worry translates into pressure on salary increases by employees seeking to offset the increasing cost of living. Yet at the same time, company bosses may be facing pressure to halt hiring and reduce headcount costs.
As organisations navigate ongoing uncertainty and unpredictability, business resilience really has never been more critical.
As caretakers of the organization, there are multiple ways HR can support the business and its employees while building business resilience.
In this article, we highlight five ways HR can respond during an economic downturn.
Here’s what we cover:
- 1. Manage fixed costs tightly
- 2. Increase total compensation through variable cost incentives
- 3. Offer flexibility as a financial incentive
- 4. Personalise employee experiences
- 5. Implement a financial wellbeing policy
- Behind every downturn is the chance to innovate
- Better prepared and ready for changing priorities
1. Manage fixed costs tightly
Your people are your biggest asset and therefore biggest cost – but keeping your top talent will pay dividends, as they could be the linchpins that are needed to successfully ride out the economic storm.
Also, factor in the cost to rehire and retrain, and weigh up if you can really afford to lose your shining stars to competitors?
If you’re fearful that valued employees might be at risk of being laid off, look at your data to see if you can create a strong business case for retaining them.
Any key performing indicators (KPIs) or productivity stats might be beneficial here.
Likewise, if their requests for a salary increase are going to cause them to leave, can you be smart and offer other incentives such as a four-day work week or a training course or qualification if there’s pressure on fixed costs?
Focus on productivity – ensure you’re paying for performance – and look at ways to boost employee productivity in a sustainable manner.
2. Increase total compensation through variable cost incentives
During economic turbulence companies often put a freeze on pay increases, yet employees will be looking for ways to boost their income.
Use bonuses, stock grants and other incentives to offset lower base salaries, and offer gift cards or equivalent (company branded items, especially clothing) to help maintain motivation.
Be open and transparent about pay and benefits, communicating how the grading system works, and how wage levels and salary increases are decided.
If employees understand what’s going on at the top, they are more likely to respond better than if they feel they are being kept in the dark.
Don’t forget to remind employees of existing benefits your company offers – cycle to work schemes, for example, can offset the high cost of diesel and petrol – and any discount platforms your organization is signed up to that offer reduced consumer goods.
Finally, consider wellbeing incentives, offer additional paid time off, and remember recognition and spot awards as additional ways of recognizing successes in your workforce.
3. Offer flexibility as a financial incentive
It might feel like your hands are tied if the powers that be have put a clamp on costs and financial incentives, but think outside the box and remember that flexibility is a strong bargaining chip for most employees.
A shorter working week – condensing someone’s hours into four days for example – or offering an employee the chance to work part time could hold a lot of weight with some employees.
Likewise, unpaid sabbaticals can be the perfect motivator for an employee who has been considering going travelling or taking some unpaid leave.
Although remote working and hybrid working feels like the norm, perhaps your company isn’t offering it as freely as it could? Investigate to see if there’s even more flexibility in the way employees work that could be offered as an incentive.
4. Personalise employee experiences
Paying attention to how employees are affected by the significant increases in inflation, food, and fuel prices enables HR to understand the sentiment across the organization.
You can then decide whether action should be taken at the organizational level or at a group or individual level to reduce stress and keep employees motivated, engaged and productive.
In fact, each employee may need to be managed slightly differently regarding the stress they are under, to keep them motivated and engaged, so creating personalized, tailored employee experiences is a smart move.
Adjust management styles and deploy situational leadership where necessary to suit individuals and teams or squads, and communicate early and often.
Being open and transparent in discussing company performance will make employees feel valued.
Providing employees with more autonomy in decision making where possible and creating a listening culture so you can act on feedback and communicate necessary actions or suggestions are all ways of generating personalized employee experiences.
Also look at offering stretch assignments, growth opportunities, and meaningful and worthwhile work, as well as automating low value or boring work.
5. Implement a financial wellbeing policy
Having a financial wellbeing policy that feeds into your wider wellbeing strategy will show your organization’s commitment to supporting employees with any money worries and concerns they might have.
It can be as simple as signposting your employees to independent money and debt guidance, making sure your staff are aware of all the benefits you currently offer, and normalizing conversations about money worries at work.
Just under 40% of adults (20.3 million) don’t feel confident managing their money, and 11.5 million have less than £100 in savings.
Helping your workforce know where they can access free, confidential, and independent money advice could help some of them plan, save and make better long-term decisions.
Look at ways your own organization can increase financial support to staff.
Some employers are considering commuter subsidies, hardship loans, support on maintaining pension and insurance contributions and counselling.
Behind every downturn is the chance to innovate
If 2020 taught us anything, it was how to deal with uncertainty in a constantly changing landscape.
HR leaders rose to the challenge and successfully navigated their organizations through the pandemic, proving their ability to be leaders of change.
In fact, 72% of HR leaders told us in recent Sage research that the global pandemic has helped them demonstrate their value and increase understanding of HR’s role.
Smart new ways of working, adaptability, flexibility, and business resilience are all just some of the positives to have come out of the last two years as companies innovated to adjust to the new norm.
The current economic downturn is no different – it provides the opportunity for HR and business leaders to continue to innovate and make positive changes.
Some might look to make bold, strategic moves, while others might strip back and focus on simple, cost-effective solutions.
Whichever camp you’re in, sitting still is not an option. Change agility is crucial and HR is perfectly positioned to lead the charge again.
Better prepared and ready for changing priorities
As HR and People leaders, adapting your organization’s culture to this new reality is critical.
The ongoing economic turbulence will impact individuals differently, including their relationship with their employer and colleagues.
These things are just some of the tools are your disposal to enable you to not only support your employees, but create an adaptive organisation that’s agile, flexible, and resilient, and one that can quickly respond to ongoing uncertainty and changing priorities.
Coupled with an agile, flexible cloud HR platform, you can enable rapid, data-driven decision making, easily tailor employee experiences for individuals and teams, and support changing global policies and local compliance.
Being prepared is always a smart move in uncertain times.
That much is certain.