However, the National Bureau of Economic Research, the agency that decides whether or not a country has officially entered a recession, is holding off when commenting on America, citing the bleak economic situations across the world as the main reason for the negative GDP growth. Whichever way you want to take the news, it’s hard to ignore the facts. With an inflation rate reaching upwards of 8.6% and people across the States struggling to keep up with payments, the economic circumstances look pretty dire. Of course, this expands beyond individuals, also impacting businesses at almost every level. With a decrease in sales and overall profit, businesses have to cut back on spending to stay afloat, with this having a knock-on effect on employees. Over time, wrong decisions made in a recession can cause the total breakdown of a company, with losing too many important players completely disrupting internal operations/. In this article, we’ll prepare your company for success in a recession by exploring your strongest asset in this period – a robust HR team. We’ll comment on how an HR team can prepare you for a recession and help you to come out on the other side in a much better situation. Let’s get right into it.

What Happens To Businesses in a Recession?

As the economic situation worsens across a country and the purchasing power that each individual has begins to fall, people will naturally have less disposable income to spend on services. With this, almost every industry is instantly impacted, with the total amount of sales coming in dropping in line with the reduced purchasing power. Although most industries are impacted, food, accommodation and leisure, construction, retail, and trade are those that suffer the most dramatic consequences. With the lack of sales coming in, all businesses will then start to experience a much-reduced cash flow, putting a stop to expensive business projects or the entire hiring process for many companies. The worse this gets, the more likely it is that companies will have to lay off some of their employees, using the annual salaries to then create cash flow within the business. With the loss of employees, the internal operations of the business will radically shift, causing problems for those employees still working. The impacts of organizational changes can be felt long after a recession subsides, with the increased cost of hiring and training new employees often eating into any profits a company creates in the months and years after a recession.

How Can an HR Team Help During a Recession

An HR team acts as a central force that has access to all of the information and data that surrounds employee activities. From production rates and internal rankings to information about certain processes, they have everything at their fingertips. From this unique vantage point, HR teams are actually in a prime position to make smart decisions to help businesses during a recession. There are three main areas that HR teams can focus on

Restructuring Before ReplacingOffer FlexibilityOptimize Technology Where Possible

Let’s break each of these down further. 

Restructuring Before Replacing

Many business owners see recessions as a time to lay off as many employees as possible, using their salaries as a point of savings for the business. While this may be necessary in some cases, this could actually lead to a lot more problems down the line – as well as an unforeseen cost. When you lay off employees, while you might be saving money in the short-term, you create the need to retire and retrain new staff members once you have the available money. The process of recruitment, onboarding, and training can often cost a large sum, especially considering that new employees may not begin to produce value for your business for quite some time. Layoffs should always be the very last option you turn to.

Offer Flexibility

A huge part of working through a recession is the increased pressure that employees are going to experience. Even without a reduced number of individuals in a team, the increased pressure of deadlines and speeding up production to keep numbers high will eventually lead to burnout. One of the best ways that your HR team can support employees during a period of recession is to offer much more flexibility with work. Employees that get their work done from home are 47% more productive, with the added flexibility allowing them to mold their workday to their own energy ebbs and flows. Offering flexibility on deadlines, with suggested days and not specific hours, can also create more room for working without added pressure. HR teams should do everything they can to reduce stress for employees, helping to keep motivation and engagement as high as possible.

Optimize Technology Where Possible

One of the most effective performance management strategies that HR teams can offer is implementing tech tools to optimize or automate business processes. By discussing with employees, HR can find areas where they’re spending lots of time on seemingly manual tasks. With the whole world of SaaS solutions out there, there is almost certainly a platform that will help automate low-skill or manual tasks. With this technical support, your employees will have a reduced workload, feel less pressure, and be able to produce high-quality work, even during a recession. 

Final Thoughts

A recession can be a scary period for businesses, and an even more terrifying one for employees that aren’t sure about their job security. HR teams perfectly toe the balance between employee and operational management, having access to both sides of the story. With this power, HR teams are then able to make effective decisions to keep the workforce as happy and effective as possible. Instead of instantly turning to layoffs, HR teams should attempt to optimize their use of technology to support staff. Beyond that, full transparency across the company allows employees to openly discuss their current working situation, with the support that HR can offer being vital for ongoing success. While a recession is fairly impossible to avoid at this point, the repercussions aren’t. Working with your HR team to boost employee engagement will go a long way in a moment of economic downturn. 


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