Are we in a recession or not? Based on the latest jobs report, we are not. So the question is, why are we acting like we are? The data just doesn’t support it when unemployment is at 3.5 percent, the lowest it’s been in 50 years.
The cooling-off period is reminiscent of 20 years ago when the dotcom bubble burst. At that time, the technology sector was the main casualty and it looks like history is repeating itself to a degree. We are seeing many tech companies laying people off, hiring freezes, and there are talks of conserving because venture capitalist money is drying up. The sugar high tech enjoyed is over and those companies that over-invested are course correcting and in some instances clumsily so.
Organizations and their leaders should be circumspect now, because frenzied over adjustment is not helpful as it contributes to igniting and/or deepening the severity of the eventual recession. The name of the game should be transformation instead of panic.
A transformation mindset
Organizations need to look at their roadmap, understand the people they need to get there, and align all engines of the business to that endeavor. There is more than one way to save resources, one is cutting and hiring freezes or the other is efficiency. Unfortunately, companies typically go with the former, job cuts, because being efficient requires discipline everyone doesn’t necessarily have. It also comes down to understanding all trade-offs and choices that come with either option. I’m a proponent of efficiency and believe applied discipline helps in building for the short and long-term.
That’s where transformation comes in — look at daily processes in the pursuit of efficiency, namely in employee engagement and reducing attrition.
Employee engagement is everything
Gallup defines employee engagement as the involvement and enthusiasm of employees in their work and workplace. Employees are one of the most valuable resources as they power the company and the more engaged they are, the greater the impact they can have. It’s important to always keep employee sentiment top of mind.
There’s something I always say, ‘talented people always have options’ meaning if companies don’t tend to their needs, they’ll leave for more stable places. It’s important to understand the current market may be anxiety-inducing for those earlier career staff. Especially if many of the staff have enjoyed a bull market for much of their careers and may not have the experience of a bear market. And despite layoffs, we are very much still in a hot talent market and there’s almost nothing worse than losing key talent.
The one thing all companies can largely control is the employees’ experience, so make it better. Over and over in my career, I’ve seen many companies under-invest in employee experience, and as a result, talent leave. A great employee experience runs the gamut — onboarding, employee resource groups, benefits and perks, the performance review process, development opportunities, community and connection, the culture, and much more. If you skimp in those areas, you undercut your ability to retain your people when you need them more than ever.
Retain and gain
Employee engagement and retention are directly related since an engaged workforce positively impacts retention. And the other dynamic companies control is when and how many people they hire.
There’s something called turnover intention which is the moment an employee decides they want to voluntarily leave their current company. It’s something every company needs to watch closely and try to help reduce that intention. And one of the most effective tools in operational efficiency is workforce planning that is aligned to the company roadmap. In 2021 we saw some companies overhire and chase unrealistic moonshots and those very same companies are now realizing that they overplayed their position and are being forced to shed roles.
Early in my HR career, we had to perform a large-scale reduction in force (RIF). It wasn’t a pleasant process, but it was necessary. Layoffs and RIFs are terrible and I view RIFs as an exercise of last resort. And what I recall from that RIF was that the cuts were too extreme and it hobbled our plans making us less efficient. This bear market should be an era of efficiency because if you exact efficiency now, your company will emerge in a stronger position.
And then there’s the cost when staff leaves earlier than expected, it saps morale, creates a loss of institutional knowledge, unsustainable workloads as existing staff absorb the departing employees’ work, and can create a greater turnover intention of existing staff.
It’s more than just recruiting well, it’s about taking care of the employees you have and ensuring they have the environment to be productive contributors to the long-term plan.