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 global inflation, which is causing tighter financial conditions, as well as additional negative effects on supply chains from the Ukraine-Russia war.
Organisations are struggling to understand the new normal as the immediate future remains unknown.
With any downturn, business leaders are likely to be asked to shift their focus from growth to profitability and cash flow, while maintaining strict cost control.
Meanwhile, workers are dealing with rising living costs, skyrocketing energy bills, and the highest inflation rates in decades, all of which have a direct impact on employee wellbeing.
In fact, 54% of South Africans are unable to make their money last until the end of the month, and 57% say that financial stress has had a significant effect on their mental health.
Employees want to make up for the rising cost of living by asking for pay increases. At the same time, company executives may be under pressure to halt hiring and cut headcount costs.
Business resilience has never been more important as organisations navigate ongoing uncertainty and unpredictability.
As caretakers of the organisation, HR can support the business and its employees in a variety of ways while also building business resilience.
In this article, we will look at five ways HR can respond during a recession.
Here’s what we cover:
- Manage fixed costs tightly
- Increase total compensation by implementing variable cost incentives
- Provide flexibility as a financial incentive
- Personalise the employee experience
- Focus on financial wellbeing
1. Manage fixed costs tightly
Your people are your biggest asset and also your biggest cost. Keeping your best people will pay off, though, because they could be the key to making it through the stormy economy.
Also, think about how much it will cost to hire and train new people, and ask yourself if you can really afford to lose your best people to competitors.
If you’re worried that some of your best employees might be at risk of being laid off or quiet quitting, look at your data to see if you can make a strong case for keeping them on. Any key performance indicators (KPIs) or statistics on their productivity could be helpful here.
Also, if their requests for a raise will make them leave if turned down, can you be smart and offer other incentives, like a four-day work week, a training course, or a qualification, if fixed costs are high?
Focus on productivity, make sure you’re paying for performance, and look for ways to sustainably boost employee productivity.
2. Increase total compensation by implementing variable cost incentives
During rough economic times, companies often stop giving pay raises, but employees will still look for ways to make more money.
Use bonuses, stock grants, and other incentives to make up for lower base salaries, and give gift cards or the equivalent (company-branded clothing, for example) to keep people motivated.
Be open and honest about pay and benefits. Explain how the grading system works and how wage levels and salary increases are decided. If employees know what’s going on, they’re more likely to do their jobs well than if they think they’re being kept in the dark.
Don’t forget to remind employees of the benefits your company already offers. For example, hybrid or remote working can help offset the high cost of fuel. You should also let them know about any discount platforms your company is part of that offer cheaper consumer goods.
Lastly, think about wellness incentives, offer more paid time off, and don’t forget that recognition and spot awards are other ways to recognise your employees for their hard work.
3. Provide flexibility as a financial incentive
If the people in charge have put a lid on costs and financial incentives, you might feel like you can’t do anything, but think outside the box and remember that flexibility is a strong bargaining chip for most employees.
Some employees would be very interested in a shorter work week or the chance to work part-time, like reducing their working days to four instead of five.
In the same way, unpaid sabbaticals can be the perfect way to get an employee who wants to travel or take some unpaid time off to do so.
Even though remote and hybrid work seems like the norm, your company might not be letting you do it as much as it could. Check to see if there are ways to give employees more freedom in how they work that could be used as an incentive.
4. Personalise the employee experience
HR can understand the sentiment across the organisation by paying attention to how inflation, food, and fuel prices are affecting employees. Then you can decide if you need to take action as an organisation, group, or individual to reduce stress and keep employees motivated, engaged, and productive.
In fact, depending on how stressed they are, individuals may need to be managed in a slightly different way to keep them motivated and interested, so it’s a good idea to give each employee a unique experience.
Change the way you manage and use situational leadership when needed to fit the needs of individuals, teams, or squads, and talk to people early and often. Being open and honest about how the company is doing will make employees feel like they are valued.
Personalised employee experiences can be created by giving employees more freedom in making decisions, when possible, and by creating a culture of listening, so you can act on feedback and let people know what needs to be done or what suggestions have been made.
Also, think about giving people challenging tasks, chances to grow, and important and meaningful work, as well as automating low-value or boring tasks.
5. Focus on financial wellbeing
Having a financial wellbeing policy that fits into your overall wellbeing strategy will show that your company is willing to help employees with any worries or concerns they might have about money.
It can be as easy as pointing your employees in the direction of independent money and debt advice, making sure they know about all the benefits you already offer, and normalising conversations about money worries at work.
More than half of middle-income earners in South Africa spend their salary within five days of getting it, and 59% of their money goes to paying off debt. However, some of your employees might be able to plan, save, and make better long-term decisions if you let them know where they can get free, confidential, and independent money advice.
Look at ways that your own organisation can increase financial support to staff. Some employers are considering commuter subsidies, loans to get employees through hard times, payday advances, help with keeping up with pension and insurance payments, and counselling.
Every downturn offers a chance to innovate
If there was one thing that 2020 taught us, it was how to deal with uncertainty in a world that is always changing.
HR leaders stepped up to the challenge and led their companies through the pandemic, showing that they could be change leaders.
In fact, in a recent study by Sage, 72% of HR leaders said that the global pandemic has helped them show their value and help people understand what HR does.
Smart new ways of working, adaptability, flexibility, and business resilience are just some of the good things that have come out of the last two years of business innovation.
The current economic downturn is the same. It gives HR and business leaders a chance to keep coming up with new ideas and make positive changes. Some might try to make big, strategic moves, while others might try to keep things simple and focus on low-cost solutions.
No matter which camp you’re in, sitting still is not an option. Agility is important, and HR is in a great place to lead the charge.
Better prepared for shifting priorities
As HR and people leaders, it’s important that you change the culture of your organisation to fit this new reality.
People’s relationships with their employers and co-workers will be affected in different ways by the ongoing economic turmoil.
These are just a few of the tools you have at your disposal to not only help your employees but also build an organisation that is adaptable, agile, flexible, and resilient, and that can quickly respond to ongoing uncertainty and shifting priorities.
With an agile, flexible HR platform in the cloud, you can make quick decisions based on data, make it easy to customise employee experiences for individuals and teams, and keep up with changing global policies and local compliance.
When things aren’t clear, it’s always smart to be ready.
That much is certain.
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