Ever since the economy came to a sudden halt in 2020, the traditional economic metrics have been tough to read. While some indicators suggest a recession for 2023, others defy expectations.
US GDP grew in the fourth quarter of 2022, yet the new year started with multiple high-profile stories of layoffs across industries, and economists continue to predict a downturn in 2023. At this news, the stock market rallied as the Fed signaled they would reduce the pace of interest rate increases - until the labor department reported another month of robust employment growth.
It's understandable if these mixed messages and uncertain economic indicators leave business leaders scratching their heads. After all, current trends don’t seem to follow the normal, well-known paths we expect to see with a recession on the horizon. Should companies hire more workers or lay people off? Spend on digital transformation initiatives or hold onto cash? Expand into new markets or focus on strengthening business in existing markets?
Whether the economy remains uncertain, rebounds, or enters a full-blown recession, some strategies can help your organization survive and even grow and thrive. Here are five your company should pursue in 2023:
Whether your organization cuts staff, maintains the status quo, or hires new people, it’s vital that your managers and leaders make an effort to strengthen ties with existing talent. Employees may not want to risk leaving a job during a recession, but if their experience isn’t great during the downturn, they may leave as soon as it’s over.
Employee experience doesn’t have to involve costly benefits or perks. In fact, much of employee experience connects to every employee's three human needs: to feel liked, competent, and independent in their roles.
Leaders and managers within the organization should reinforce the positive aspects of company culture. Continue to promote each team’s overall purpose. Promote healthy, open conversations. Avoid micromanaging and trust your people.
The current economic uncertainty looks very different from past cycles, largely due to the aftermath of the pandemic. In addition to confusing economic indicators, the impact on employees from the pandemic remains significant. People are exhausted, brittle, and sometimes fragile, and some feel that one more crisis will be too much to take. And it’s not just employees or team members who feel this way; leaders also have record rates of burnout.
In this climate, employees may have unspoken and unmet needs that they may be nervous about sharing. Make sure to communicate any company benefits that could help them weather the economic downturn. Resources such as an employee assistance program (EAP), mental health benefits, or even affinity groups that connect people could help everyone thrive through a recession.
When times and market forces are uncertain, it’s tempting to make decisions that only address short-term problems. Companies may be tempted to take a reactive posture that causes poor long-term results. A reactive posture might look like suddenly dropping prices, cutting a marketing budget to almost zero, or letting go of staff and piling extra work on those remaining employees.
Decisions made in “panic mode” are rarely productive in the long run. Remember, your “lizard brain” is designed to ensure survival, and it can misread the climate and suggest measures that will hurt the organization later. Make sure that any reactionary measures are aligned with long-term goals and strategies, not short-term fixes.
Even though unemployment rates have ticked up and some large organizations are trimming their workforces, long-term predictions about a global talent shortage remain steady. It always costs more to replace employees than to keep them, and if you have high-performing people at any level, it’s better to retain them through a recession rather than look for replacements later.
One of the best ways to keep good people and improve your organization’s long-term outlook is to continue pursuing development initiatives through economic uncertainty. Your people are your greatest asset and will be more likely to stay if they have ample development opportunities. In addition, your leadership development initiatives can help meet the challenges of the moment and prepare leaders for future challenges.
When times are uncertain, it can be difficult to decide which actions are the right ones. Scenario-based planning can help you assess and evaluate risks and opportunities more effectively and decide on appropriate actions for given scenarios.
Set aside time with key leaders and brainstorm different economic scenarios appropriate to your organization. What would happen if your supply chain were disrupted? What might happen if a competitor pulls back on production or goes out of business? If you experience a slowdown in sales, how can you minimize the impact on your employees? Play out these scenarios and apply appropriate measures to each one. Not only will you improve your long-term strategies, but you will also give the organization some sense of control over circumstances.
Whether the economy contracts, remains steady or grows, your organization will still need competent, talented leaders and team members in the future. By employing these five strategies, your organization will have a better chance of thriving - no matter what happens next.