3 things HR needs to think about in the event of a recession

For at least the past year there’s been a lot of talk about whether or not a recession will occur in the near future. Economists generally agree that the unprecedented run of economic growth for the past 10 years can’t possibly be sustained much longer, and signs of a slowdown are already looming. Some countries, such as Germany, are technically already in recession as trade disputes take their toll on export-driven economies.

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Regardless of whether a recession sets in next year, experts like Brian Kropp advise HR to be prepared. I’m writing the cover story for our Dec. issue on how HR can best prepare for an economic slowdown, and today I discussed the topic with Brian, who is Gartner’s chief of HR research. I’ve interviewed Brian numerous times in the past and he’s never failed to deliver cogent and insightful analysis. Today was no exception. I’ve summarized some of his thoughts below.

Budget Cuts

“Companies often pull back and cut spending during a recession. What we’ve learned from past recessions is that HR often assumes employees will lean in with you to help the organization get through tough times, when in actuality they often ‘lean out.’ In other words, they tend to adopt the mindset of ‘I’m not sure what to do right now, so I’ll wait to be told what to do and I won’t try anything new.’ So, one of the most important things that you, as an HR leader, can do is to ensure the workforce remains motivated and engaged so they continue to lean in with you.”

Hi-Po Risks

“When budget cuts occur, frontline managers often assume that they don’t need to worry as much about people-related issues. And, while job-search activities do tend to decline for the average employee, that’s not true for the high-potential ones. Their job-search activity tends to increase during downturns. After all, they’re typically asked to take on more work and responsibilities during such times without any corresponding increase in pay. These employees also tend to want to get ahead, and when they see the company struggling, they see less opportunity for doing so. At the same time, many companies see downturns as a great opportunity for poaching talent.”

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Employee Behavior

“We’ve historically seen that when companies go through any sort of budget-cutting process, you see a 30% increase in observed employee misconduct. By that I mean things like falsifying expense reports and ‘booking bad business’–in other words, if a customer says they might make a purchase, a salesperson will say ‘We’ll go ahead and count that as business’ when normally they wouldn’t. Part of it is there’s so much pressure on them to close deals and make money. We also see things like employees deliberately not reporting workplace injuries. Their thinking is ‘I don’t want to risk getting laid off if I report this injury.’ That’s why it’s really important for HR to reinforce the company’s values and ethics during times like these.”

We’ll be featuring plenty more from Brian and other experts in the Dec. cover story, so stay tuned.

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Andrew R. McIlvaine
Andrew R. McIlvaine is former senior editor with Human Resource Executive®.