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Leadership
7 Min Read

What is the Role of HR in a Recession?

Leah Bury

How HR Can Contribute to Business Growth In the Midst of Economic Instability

The last few years have certainly been a rollercoaster, and HR professionals have been tasked with managing the ups and downs — from the massive shift to remote work amidst the COVID-19 pandemic to the Great Resignation and beyond. Now, we find ourselves at the precipice of a potential recession. During times of economic uncertainty, spending on talent and HR is often first on the chopping block.

Many companies turn to cost-cutting during a recession, and they do so by making reductions in the workforce and overall divesting from talent in the form of pay cuts, benefit cuts, cutting back on training and development programs, etc. And historically, this tactic has not proven to be successful — but why? Because there are many hidden costs associated with this tactic that leaders sometimes fail to see.

Right now, we are arriving at a crucial moment, where business leaders must make difficult decisions about whether or not to invest in strategic HR as part of a long-term business growth strategy. Read on to learn more about the role of HR in a recession, and how HR can contribute to business growth even in the midst of economic instability.

HR Initiatives for Survival During a Recession

In an economic downturn, it is crucial to strike the right balance of cost-cutting measures  and growth-focused investments. But what does that look like from a people perspective?

With the following framework, a company can continue driving results with fewer resources — and actually set a foundation for continued growth when the recession passes.

Get Clear on Future-Critical Competencies and Roles

First, there needs to be a moment of pause. What does the organization need to be successful right now? What about in the future? Getting clarity on short-term and long-term company objectives helps leaders identify gaps that could warrant a strategy shift. 

And during times of uncertainty, organizational goal clarity is more important than ever. Goal setting helps pinpoint a “north star” for the organization to focus on. Without this north star, you risk spending time and resources on the wrong activities, and moving backwards as an organization.

Having goal clarity also makes it a lot easier to quickly communicate changes in strategy and provide the upskilling or retraining necessary to keep everyone aligned and on track to accomplish the company’s goals.

Identify your Top Performers, Retain Them, and Keep Them Engaged

A recession may not seem like the best time to invest in talent, but it is critical to not lose sight of investing in recruiting and employee development consistently, regardless of what the job market looks like. 

Although hiring budgets may be frozen or significantly reduced, it is important to note that economic downturns can actually be a great opportunity to bring on new talent. Due to mass layoffs, many high performers may be in the market for a new role, and may be willing to accept a lower offer that better matches what your organization is able to offer at this time. 

If there are roles in your organization that have been open for awhile, or if new roles are being created to meet new needs, now could actually be a great time to make an investment in hiring that pays off tenfold.

Furthermore, some companies may be considering cutting back on investing in employee development. But deciding to divest from employee development could greatly come back to bite you — even if not during the downturn, then after, when conditions improve again and employees are ready to jump at the first chance they get to leave an organization that has shown it does not prioritize their growth and development.

And finally, continuing to invest in recruitment and retention greatly contributes to the organization’s ability to grow a diverse bench of successors and future leaders. You always want to be prepared if a top executive or high performer leaves the organization, and by investing in hiring, growing, and retaining top performers all the time, not just when the going is good, you are setting your organization up for survival and stability even in the face of great change.

Turn Around Low Areas of Performance

One silver lining of an economic downturn is that reduced demand can actually give employees more capacity to focus on growth and development activities and identify opportunities for advancement.

By seeing this time as an opportunity to give employees space to invest in development, you are:

  • Showing that you value them and are invested in their career growth, which makes them more likely to stay with the organization, and in turn can result in savings from decreased turnover
  • Sending a signal that the organization is in good shape to weather the downturn and lessen employees’ fears about being laid off — which can increase motivation and performance
  • Developing employees and filling out the bench so that there is always an internal supply of capable and high performing employees to promote to leadership positions

Train Managers to Drive “Bottoms Up” Performance

Don’t leave managers hanging during this time — they are one of the top drivers of employee engagement. Instead, help them become better prioritizers, improve resourcefulness, and successfully support their teams through uncertain times.

How? By investing in skills training and coaching that helps managers learn how to leverage their strengths, set team objectives, motivate their team, drive performance, and provide coaching and feedback that fosters growth. 

This investment will empower managers to be the support that the rest of your employees need to make it through turbulent times — but it is an evergreen investment. The dividends of investing in your managers through training and coaching will continue to pay off even when times are good, and will go a long way towards building your bench of resilient leaders for the next time a downturn or challenging time occurs.

Use Real Time Data to Make Quick Ongoing Decisions

During times of upheaval, it is critical that leaders are able to quickly access data that can aid them in making informed decisions. Partnering with a people management software with robust data reporting functionality can make getting access to this data a breeze — so HR leaders can spend less time gathering and aggregating data, and more time making sense of the data and what it means for the future strategy of the organization. 

With access to data for quick, ongoing decisions, leaders are able to make decisions efficiently and measure the impact of those decisions through subsequent reporting and analysis.

Invest in HR Strategies to Support Business Growth with 15Five

Making the case for investing in strategic HR initiatives is always easier when you’ve got a holistic suite of products to cover your organization’s needs that are proven to be effective. 

That’s where 15Five comes in. Our solutions offer a richly integrated, evidence-based approach to employee engagement and performance management, to drive performance from the inside out. Whether you need support with employee engagement, performance reviews, goal setting, or manager training, 15Five has a solution for your organization’s unique needs.

Schedule a demo, or try 15Five for free!