Plan while you can: what can HR do now to prepare for recession?
1 Sep 2022
We are in strange and conflicting times. The latest CIPD labour market outlook reports that hiring intentions are still strong and will remain so in the next quarter, but at the same time the economy is slowing and the Bank of England predicts recession hitting in the fourth quarter of this year, but unemployment is not anticipated to rise above its current level until mid-2023. This is a different scenario to the credit crunch of 2008 when a recession suddenly and abruptly hit, seemingly without warning. The upside of an admittedly rather gloomy situation is that it should provide the breathing space for HR to work with business leaders to do some serious proactive work to plan for the downturn, avoiding knee-jerk responses that may cost jobs unnecessarily and hamper efforts to recover in any upturn. So, where should the priorities of HR be right now when it comes to planning? There are five key areas.
1: There is a real need to critically assess current resourcing activity and validate that it still makes sense. In other words, to ensure, as far as possible, that current recruitment drives for permanent staff are aimed at recruiting people and skills that will be needed through the downturn and any subsequent upturn. So, that means quickly and pragmatically assessing current recruitment plans and working with business leaders to ensure those plans are right in the context of an upcoming downturn. Key questions to be asking include, to what extent are the roles being recruited for business-critical? Are they likely to still be needed in the event of a drop in demand? Will they be critical in responding to any subsequent economic recovery?
2: HR can and should be forming a data-driven understanding of current workforce skills and developing a view on how flexible the current workforce is, or indeed could be, with the right investment in training. Developing greater functional flexibility across the workforce can facilitate redeployment across the business in the event of some work areas being impacted more by a downturn than others. It can also support maximising the use of existing staff, something which is incredibly useful at a time that is likely to bring recruitment freezes and restrictions on headcount.
It is also worth bearing in mind that with job-to-job moves slowing and likely to slow further as we approach recession and workers lean towards job security over the uncertainty of a move, it is largely existing workforces that businesses will rely on to get them through a downturn. Investing in existing staff is hardly ever a bad thing but may be a particularly good option right now. IES has previously captured examples of innovative practice in using workforce planning to enable greater agility in the context of organisations preparing for the run-up to Brexit.
3: HR should be working with business leaders to shape a view on the workforce implications of different high-level demand scenarios. What if demand drops by 1 per cent? What if it drops by 5 per cent? What about 10 per cent? What does this mean in terms of levels of staffing required? Engaging business leaders in conversations about demand can help develop a shared understanding of the likely impact of different changes in demand, as well as identifying options for adjusting staffing to reflect demand, that will enable continued performance in the longer run.
In the previous 2008 recession many organisations introduced reduced hours to retain valued staff and avoid layoffs that would have hampered their recovery. Some of the larger professional services firms introduced multiple voluntary flexible working options that proved popular amongst staff. For example, KPMG introduced ‘flexible futures’ whereby staff could choose to have one day a week off unpaid or between one and three months off at one-third pay. 83 per cent of the 10,000 strong workforce signed up to the scheme. Whilst not all organisations may have the resources of a KPMG, the point is that in the last recession, HR did innovate to protect jobs, livelihoods and support future business performance. It can, and should, do the same should this latest recession materialise.
4: HR should fight hard for early career opportunities such as graduate and apprenticeship schemes to be exempt from any recruitment freeze. Retaining these important talent pipelines is essential for the long-term future health of the business. As an example, in the last recession the UK Civil Service exempted its fast-track graduate scheme from a wider recruitment freeze, ensuring a future supply of talent further down the line.
5: Previous IES research on employer responses to the previous economic downturn in 2008 identified the important emphasis placed on engaging employees in the problem-solving process and identifying options to cope with a downturn in demand. That research highlighted the work of Jaguar Land Rover in initiating problem-solving discussions with employees following a drop in product demand.
Whilst the characteristics of a potential downturn in late 2022 may be very different from that of the credit crunch in 2008, there was much that was good and positive about the HR response in retaining jobs and skilled workers. This time, there is perhaps more time for HR to proactively plan and ensure they are well placed to support the business and individuals as, if not more, effectively than last time.
If you would like to discuss any issues around HR planning priorities, our consultants are here to help, contact: firstname.lastname@example.org
Any views expressed are those of the author and not necessarily those of the Institute as a whole.