For a while at least, the economic outlook is grim. And for many businesses recession automatically means redundancies. But the last few years have shown that, even when times are truly tough, cutting jobs isn’t always the right option. Instead, you should make sure you’re equipped for the future, making your key people strategy during a recession retention, not redundancy.

Like any significant external factor, recession impacts business. But redundancies have long-lasting effects on culture, engagement and performance, so they can’t be your go-to solution. How you treat people in tough times is a window into what you’ll do in the good times. So set a precedent of being proactive and employee-focused before cutting headcount even enters your mind. Consider:

  • The impact of recession on company culture
  • Priorities for your people strategy
  • The importance of employee engagement and performance management
  • Benefits of better engagement in a recession
  • Alternatives strategies to redundancy

How recession impacts company culture

Long before you start talking restructure, employees are already thinking it. As soon as reports of an economic downturn hit, people worry about job security. Productivity drops, engagement falls and poor results become inevitable. But it doesn’t have to be that way. So recognize what recession will do to your company culture, and take active steps to counter its impact:

Lower morale

Employees worry about keeping their job, paying the bills, finding a new role in the current climate. And it all acts as a distraction. But it comes from not knowing where the business is going. Senior leaders spend time working out ‘the plan’, but they forget to communicate it. So people become disconnected. Turn this around – be transparent about the challenges and set clear OKRs (Objectives and Key Results) for the months ahead.

Employees feel less valued

When you’re facing recession, good work can get forgotten. So encourage managers and employees to celebrate achievements and applaud each other’s success. If you get used to doing that in tough times, it’s even easier when things improve. And before you know it, you’ll have a culture of recognition driving delivery and boosting employee engagement.

Broken promises from managers during a recession

The people strategy during a recession often includes stopping promotions, pausing recruitment, cancelling training. But the consequence is employees grow bitter about promotions disappearing and moan they must do more with less. So negative behaviors creep in and resignations rise. Yet quiet times are ideal for upskilling and improving collaboration. And retention’s essential so keep promotion plans in place.

Relationships are damaged

Everyone’s in panic mode while they work out the new direction. Strategy meetings take over and employees are pushed aside. So you miss employee concerns and minor barriers become huge mountains. Instead, use weekly check-ins to get employee updates and check on progress. And help managers identify concerns and the support they need to offer.

Long-term insecurity

Make redundancies once and employees become distrustful. They wonder when their turn will come. It creates a permanent undertone of insecurity that remains even when the economy’s improved. So make redundancies a last resort. Instead focus on relationships and retention as part of your people strategy during a recession. And consider opportunities to improve processes and use different skills, so you can make best use of the people you have.

Recessions are difficult and they’re bound to impact your company culture. But take steps to make that temporary and not a long-lasting change.

Priorities for your people strategy during a recession

Number one on the list – supporting your people. It sounds obvious, we know, but it’s easy to overlook them during a recession. Leaders focus on downsizing and driving sales in poor market conditions. But a recession’s similar to a global pandemic – there are opportunities to drive engagement and development, in spite of tough times.

Set clear expectations

A big criticism of businesses during the pandemic was employees not knowing what was happening. Recession’s no different. So tell people where they stand and what’s changing. And focus on goals and OKRs to give them direction they can drive.

Support flexible working

Many businesses now use remote or flexible working. Technology allows people to work from home and still be effective at delivering in their roles. So don’t enforce a return to the office. Instead offer something money can’t buy: time with family and friends. Take an approach of ‘how do we make this work?’ And make employee needs a priority, now and in the future.

Improve manager capability

The time to develop manager skills is now. Improve their communication and introduce weekly check-ins to encourage stronger relationships with their teams. They must understand the importance of reviewing progress and take action to remove barriers that slow employees down. And managers are a key factor in employee engagement. So make sure they’re capable of supporting their teams to achieve.

People strategy during a recession must include succession planning

Your best people are most at risk of leaving, because competitors will give them something you don’t: attention. Make sure you know who your key people are and create plans for their retention. Development, secondments, projects, skills. Look at what they need that benefits you and them, and get it in place while it’s quiet.

Why performance management and employee engagement are essential in a recession

A recession’s like the seat-belt sign being turned on during a flight. You know it’ll be bumpy for a while, but it’s temporary, and in the meantime you need to deal with the turbulence. So as HR Director, you must make the security announcement long before you need to act. And that means having great performance management and employee engagement long before there’s a problem.

But you may not be there yet, so you must take action now. And understand why employee engagement and performance management are key to your people strategy during a recession.

Clear vision and goals

Clarity is essential. It reduces fear of the unknown. It’s also the cornerstone of great performance management. The vision may need to change, but share that and adjust OKRs so employees know where they fit. And see engagement grow as they feel confident about their contribution to the future of the business.

Great manager-employee relationships

Build stronger connections between managers and employees through regular communication. Weekly check-ins allow employees to provide updates and raise concerns. And managers give feedback and remove barriers to success. So mutual trust develops while employees get support to move them forward, even when external challenges are applying pressure.

Company culture needs monitoring by HR in a recession

Recognizing success gives people a boost and great performance management allows managers and employees to celebrate wins as they happen. It encourages a company culture that supports small achievements as well as big. And people are motivated to keep going and collaborate as they all share the success.

Better development opportunities

Most employees want to develop, but they don’t want to manage. Yet, for many, management’s the automatic next step. So use monthly reviews to help managers learn what’s important to employees. And talk about career aspirations and development goals. Then you can create opportunities that support their needs whilst ensuring you meet the organisation’s goals.

Although recessions are hard to navigate, they’re an opportunity to focus on your people. And if you do it well, the potential benefits far outweigh the costs.

How engagement benefits your people strategy in a recession

In an ideal world, you’d have high engagement before the recession hits. But the last few years have dragged even the most committed employees down. And impending economic challenges won’t help matters. Yet it’s critical to understand employee engagement in the midst of a recession. As the stronger the connection of your employees, the more likely the business is to survive and thrive.

So consider the benefits and make sure your people strategy in a recession has employees at its heart.

Communicate more as part of your HR strategy in a recession

Greater engagement comes from employees knowing where they stand. Clear goals offer security your competitors aren’t providing. And a vision that everyone collectively works towards. So make sure communication’s at the forefront of your activity, and bring employees with you as you ride out the current storm.

People are more productive when they’re engaged

Higher productivity is linked to greater employee engagement. And in a recession, productivity’s key. You need to make the best out of every opportunity so you can keep going in the quiet times and flourish when they improve. Using weekly check-ins helps proactively identify issues so managers can remove blockers before anything grinds to a halt.

Good mental health means less risk of burnout

Improved wellbeing leads to lower absences, better performance, and lower risk of burnout. As managers build stronger relationships, they spot concerns, inside and outside of work. Then offer appropriate support. So wellbeing improves and commitment to the business increases as employees get help to address their issue.

Help people be more resilient during a recession and beyond

Building better resilience is good for business. The last few years have shown change can happen all at once. So you need people who can handle difficult situations. Giving individuals clear and regular feedback helps them focus on successes. But also allows for self-reflection. And as people get better at understanding themselves and dealing with challenges and set backs, their resilience improves.

Proactively identify risks using systems data. Missing check-ins or falls in sentiment can be early indicators of an issue. So check the reports you receive and look for any concerns. It allows you to be proactive and offer support to managers who may be struggling themselves.

The alternatives to redundancies

It’s difficult to find alternatives when business is slowing down. And in some cases, there really will be no option but to make redundancies. Here, however, are some ways to think engagement first before reducing headcount (although contracts may dictate whether they’re all possible in your business):

Delay new hires, not promotions

Retaining engaged employees is worth the effort. Nothing will hit engagement more than being told something you’ve been working towards for months has suddenly been shelved. Instead, look at delaying recruitment or start dates for new hires.

Encourage taking leave (paid and unpaid)

Employees accrue holiday regardless of the amount of work, so encourage them to take a well-earned break as it will get busier as things pick up. For people who are able to, allow the option of an unpaid career break, so they can pursue something important to themselves for a while.

Consider flexible and part-time working options

Job shares, shorter working hours, or temporary adjustments to working patterns might be feasible for some employees. So be open about the options, encourage applications and benefit from any knock-on cost savings.

Look at secondments or re-training

Offer secondments to key employees in departments that are still performing well. Look at skills you’ll need as things improve and re-train while business is slow. Your actions now secure future business growth, so develop the people you need while they have time to think and learn.

There are, of course, other options, like pay freezes, cutting benefits or laying people off. But they aren’t about engagement, they’re pure cost-cutting measures. And engagement is a long game that’s built when times are hard.

Preparing for the future

As the old saying goes, people won’t remember the words, they’ll remember how you made them feel. And in a recession, your focus is to make employees feel valued and supported. They need to know redundancy is the last available option and that you’re focusing on retention and what the future holds.

Improving communication and retaining your key people are critical to success beyond recession. So you must take action now to put those foundations in place. And develop the skills you’ll need in the next few months and years.

It makes driving performance and engagement key activities for HR in spite of a recession. But it can be hard to support managers and employees to stay motivated and deliver. So if you’re struggling to know how to approach it for your business, just know there’s help for you too.