3 HR Changes To Make Right Now To Recession-Proof Your Business

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When Tesla CEO Elon Musk ordered his employees back to the office –– or else –– this spring, the news went viral, but it also signalled the beginning of a power shift that’s being felt across industries.

As more companies look to tighten their belts with the economic downturn, business leaders are looking at cost reductions and reevaluating pandemic-era perks and policies. In turn, many employees must brace for a new reality.

Like it or not, everyone’s going to have to adjust. The workplace we’ve grown accustomed to is transforming, with power dynamics shifting back into management’s court. The harsh reality is that for many employers strategic decisions trump extras. Millennial and Gen Z employees facing their first economic slump are watching with trepidation –– just 28% expect the economy to improve in the next year. Overall, 80% of employees say they fear for their job security should a recession occur.?

The truth is difficult to hear, but important to acknowledge. It’s now critical that leaders prepare for the coming challenges mindfully and strategically. Too many companies forgo workforce planning until it’s too late, but there are three looming HR challenges employers can anticipate and plan for to emerge from the downturn with a stronger team.??

Challenge: Unsustainable incentives

Solution: Shifting from perks to purpose?

Over the past two years, employers used bonuses, lavish trips and other incentives to attract and retain talent in an ultra-competitive market. As the economy shifts downward, they are likely to be among the first expenses to go. Meanwhile, fast-growing startups that incentivized hires with equity packages are facing reduced valuations, reducing the allure of options and RSUs.?

Here it’s critical to remember the obvious: employees are motivated by several different factors. Compensation is one consideration; as are intrinsic experiences, like opportunities for professional development, relationships with coworkers, esteem and company culture.?

Finally, there’s the bigger (and less tangible) idea of purpose. Having a mission (even if it’s simply “to entertain the world,” as Netflix professes) can empower and inspire. Smart employers leverage this trio of tools — pay, experience and purpose — to bring out the best in their team.?

And, when it does come to incentives, be strategic, not scattershot. Make good use of data-driven people analytics to identify sustainable incentives that tap into employees’ values while helping the organization achieve its goals. For example, companies that offered stipends to help employees set up home offices during the pandemic may be able to scale back.

Challenge: Reduced upward mobility

Solution: Lateral movement and retirement incentives

In a recession, older employees often delay retirement until the economy regains its footing. Indeed, one-quarter of U.S. workers in a recent BMO Real Financial Progress Index survey said they’re postponing retirement plans.?

This can create frustrating bottlenecks for ambitious younger employees. One solution is to offer lateral growth opportunities. The organizational benefits of lateral mobility are well documented and include cross-functional collaboration, innovation and cohesion.?

We encourage career trajectories that look more like a lattice than a ladder, with opportunities to move up, sideways or diagonally into different departments. Big players like Facebook and Amazon take a similar approach within their organizations, and Google’s Bungee program allows employees to try new roles by filling in for colleagues who are on leave.

Meanwhile, retirement incentives (even during a downturn) can make financial and cultural sense, offering an exit for those who stayed out of economic necessity while opening up opportunities within the organization. Analysis shows that voluntary early retirement packages are more favourably received than layoffs, and the costs are also quickly offset by saving on senior workers’ typically higher salaries and benefits packages.?

In lean times, one of the worst mistakes a leader can make is calling for arbitrary reductions — like across-the-board budget cuts or laying off the younger, newer employees who represent the next stage of the company’s growth. Above all, informed workforce planning is essential to ensure your staff includes a healthy mix of new, developing and seasoned employees.

Moving forward, many (if not most) roles may be best suited to the office, while some may not. Policies grounded in this reality will help bridge the employee-employer divide.

Challenge: Return-to-office tensions

Solution: Flexibility within guardrails

Mr. Musk isn’t the first (and won’t be the last)?to take a firm stance on remote work, but his pronouncement struck a collective nerve. Remote work is a sensitive topic for many. Personally, I’ve always been a firm believer in the power of collaboration that comes with in-person work; but regardless of individual preferences for or against, return-to-office decisions need to be made with strategic business goals in mind.?

Moving forward, many (if not most) roles may be best suited to the office, while some may not. Policies grounded in this reality will help bridge the employee-employer divide.

We like to think of this in terms of “impact to work,” rather than “productivity.” For people leaders, for example, an office presence helps build community and culture, and fosters learning. On the other hand, solo contributors may find remote or hybrid schedules offer more time for focused work.

Instead of imposing strict lines between in-office and remote employees, consider offering flexibility within guardrails. For instance, we give “primary” and “secondary addresses” so that folks who spend most of their time in the office still have the option of logging a few days from home, and vice-versa.

Economic storm clouds spell new HR challenges for companies. Coming on the heels of a “boom time” for many sectors, this transition will feel especially abrupt. Employees who are used to the unusually strong leverage we saw during the Great Resignation should brace themselves for a more sustainable balance of power. This is the core truth of a free market economy.

But no recession lasts forever. Even when market realities are weighted against us, nuanced, people-centered leadership can pay rich dividends. Wise leaders understand that, met or unmet, employee needs impact business outcomes. Indeed, an organization cannot run without people.?

Thanks for reading! I'd love to hear what you’re seeing in your own industry, so feel free to pop into the comments below. For more news and ideas around people data in the workplace, be sure to?subscribe.

(A version of this post originally appeared in?Fast Company)