Do Recessions Create More Resilient Workforces?
There are serious concerns in both the US and UK that the economy is heading for a recession. The UK saw its GDP shrink by 0.3% in April, with services, construction and production all declining. The picture in the US is even worse. The first quarter of 2022 saw the economy shrink by 1.4%.
But is a recession all bad news for organizations, or are there opportunities to unlock? Some say that recessions can give employers and employees the room they need to grow and flourish.
A Push Toward Greater Diversity
Recessions typically bring shifts in workforce dynamics. During the last recession in 2008, the UK saw a significant shift in how job seekers found work, with many finding self-employment as a way to earn more money. About 84% of new job creation from 2007 to 2014 occurred via self-employment opportunities.
In today's gig economy, there is a likelihood that the numbers will be even greater. And companies that know how to utilize this shift to their advantage may be better poised to come out ahead.
"A company not being able to hire 10 full-time people and instead utilizing 15 freelancers is a positive effect of a recession," said Michael Morris, CEO and co-founder of Boston-based Torc. "It's good for the worldwide pool of talent that's hungry for opportunity."
By tapping into contractual employees, an organization can increase its workforce and gain access to new skills and experience while at the same time reducing the pay demands. Using this model, organizations can become more diverse, seeking new ways to raise revenues.
Reskilling and Upskilling Opportunities
Research shows that employees continually seek learning and development opportunities. It is a key focus of employee engagement strategies, and organizations feeling the crunch of the recession may want to consider offering their workforce the chance to fill new roles by learning new skills.
Doing so offers two central advantages: On one hand, it saves companies the cost of a new hire, from recruiting to onboarding and training. On the other, it strengthens workplace culture and satisfaction by offering employees a chance to grow and demonstrating the importance leadership places on its current workers.
What's more, during a recession, because work opportunities tend to be more limited, job seekers often consider roles they would not have before. This means companies can afford more experienced staff, who, in turn, can pass on their knowledge and skills to other workers.
As employees add to their arsenal of skills, the organization benefits. A diversely skilled workforce helps improve productivity, reduce waste and increase human capital ROI — all of which are factors that can be crucial to surviving a recession.
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Lean Business Acumen
Recessions force most organizations to learn to work with fewer resources, from reduced staffing to budget cuts and diminished revenues. In such a situation, business leaders must learn to identify areas where they can maximize profits without increasing costs. Knowing how to effectively run a lean business is a significant advantage both during and after the recession.
"The company will have already figured out how to get by with a smaller team and will be able to put any new hires to work on tasks that will help the business grow rather than just keeping it afloat," said Sam Shepler, founder and CEO of Boston-based Testimonial Hero.
Keeping lean is key, but not all investments are off the table during a recession. Ben Johnston, chief operating officer of small business lender Kapitus in New York, said businesses can use this time to invest in technology.
"Investing in technology that improves employee efficiency also eliminates some of the monotonous and difficult parts of the job and may improve employee satisfaction overall," he said.
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Cultivating New Relationships
Cultivating beneficial relationships is key during an economic downturn. Organizations should ensure that staff invest time in building relationships with suppliers, customers and potential partners.
Reciprocal partnerships can help a company fill gaps across many aspects of the business. They can help increase efficiency, exploit economies of scale and offer products and services they couldn't alone.
They are also an excellent way to teach employees new skills. Connecting with experts, for instance, enables staff to learn from their experience, which they can then utilize within the workplace.
Another benefit of nurturing relationships is the ability to better understand customers' pain points. By gaining this knowledge, staff can find ways to solve issues more effectively, focusing efforts and investments on the most essential aspects of the business — and perhaps even helping organizations find new revenue streams.
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Reducing Overhead, Not the Workforce
In downturns, most organizations will first try to find areas where they can halt or cut spending. Labor often tops the list, whether that is by freezing hiring plans or reducing the workforce through layoffs and furloughs.
In today's digital workplace, however, organizations may consider reducing labor-related costs by turning to remote workers instead. Remote workers can be 47% more productive than their in-office peers, and remote organizations tend to have lower overhead costs, which can be a significant advantage in a recession.
Utilizing remote workers also allows companies to find employees across a larger geographical area. This means having better chances of finding key skills that may be in short supply within a locality.
Recessions are challenging moments and can be a breaking point for non-agile businesses. But they can also provide opportunities to shift operations and be better positioned for recovery.