On top of current challenges created by severe talent shortages and rising costs, many economists predict the potential for a global recession. Future-seeking leaders are preparing for possible recession by taking the following eight actions, without over-correcting:
During the early days of the pandemic, markets shifted from a “service” economy to a “goods” economy. Industries in travel, hospitality, brick-and-mortar retail and entertainment were immediately impacted negatively, while household goods, online retail, home improvement, distribution, telecommunications and content streaming were impacted positively. The current environment reflects the reverse as society shifts back to a number of pre-pandemic patterns and finds a new equilibrium. Future-seeking leaders understand and factor in how a recession will impact their industry, customers and people, including implications for sales, production, distribution and hiring.
Future-seeking leaders know they cannot take their eye off the ball in terms of hiring and retaining employees, while at the same time they understand that markets could pivot quickly. As such, they continue hiring with a focus on the most critical skills and jobs. Instead of hiring ahead of demand, they balance current needs for available talent and try not to over-correct in an environment where talent shortages continue to threaten operations. In industries likely to be negatively impacted by recession, leaders are more cautious, while leaders in other industries take a more balanced view.
Research shows that organizations increased salary budgets for 2022 in light of labor market challenges, with many raising budgets to levels not observed in over a decade. Future-seeking leaders in industries that are likely to be most negatively impacted by recession are holding tight on salary increase budgets and refining approaches on salary negotiations to reflect potential changes in markets in the second half of 2022. They are using variable pay (such as performance-based and retention bonuses) to address pay gaps rather than building fixed cost into salaries. They do so while remaining careful not to shift too quickly until they better understand market conditions.
Employers are prioritizing health care affordability and employee wellbeing in 2022. They expect health care costs to continue to increase due to inflationary conditions, as well as delayed and cancelled care during the pandemic. Future-seeking leaders understand rising health care costs affect different employee segments differently. In planning for a recession, they review factors impacting health care costs and programs including: lingering uncertainty about the trajectory of the pandemic, increases in health care trends associated with provider contracts and increased utilization, the compounding impact of inflation on health care costs, the impact of increased health care costs on lower-wage employees and actions the company can take to manage costs while supporting employees through health care quality, access and value.
Future-focused leaders build culture and programs that reflect what their employees need and want, creating great places to work. They support diverse and inclusive environments where employees are seen and respected with dignity and experience psychological safety in a disrupted world. Future-seeking leaders know that employees join and stay in organizations for an array of reasons: purpose and meaning of work, interaction with co-workers and leaders, health and savings benefits, flexible work arrangements, career and skill growth, and culture and values. During turbulent times, they reach out to employees even more frequently to gauge sentiment, listening to learn about what employees need. This helps leaders prioritize actions to support employees in the most impactful and cost-effective way.
Future-seeking leaders know that flexibility, which once was considered competitive advantage, is now table stakes. Numerous studies confirm that employees want the ability to choose where and when they conduct their work and are seeking employment opportunities that allow them to do so. Future-seeking leaders offer flexible shift schedules, and remote and hybrid work models wherever possible. This helps employees manage high fuel, transportation, food and caregiving costs, and provides access to a broader talent base.
Given demographic shifts and changing economic conditions, future-seeking leaders are updating workforce analysis based on revenue and operations assumptions under scenarios that build recession factors into models. They conduct scenarios under an array of revenue, inflation and turnover assumptions based on the circumstances of their industry and geographies.
Where talent shortages exist, future-seeking leaders are exploring more focused savings plans and phased retirement strategies to retain employees with critical skills and knowledge, while simultaneously exploring early retirement strategies for other employees in the event of a recession. They also consider cost-effective and low-risk “returnships” for recent retirees looking to re-enter the workforce, as well as for “boomerang” employees who left an organization voluntarily, then seek to return months or years later.
If an economic recession occurs, it will exacerbate the current challenges facing organizations. Future-seeking leaders are preparing for this possibility now by developing strategies to succeed across multiple scenarios.
A version of this article originally appeared on Forbes.com on May 31, 2022.
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