Using Human Capital Strategies to Survive and Thrive in a Recession
In these tough times, it's more important than ever to maximize the value of your most important asset: your people. By understanding and implementing the right human capital strategies, you can survive and even thrive in a recession. Did you know that during the great recession, firms that invested in training and developing their employees weathered the storm far better than those that cut budgets and reduced their workforce. You can’t cut your way to growth. In an environment where 80-90% of market value is comprised of intangible assets, largely made up of or contributed to by human capital, it is illogical to assume that reducing your workforce is the most effective way to survive a choppy market. This is particularly true when you consider that the U.S. unemployment rate continues to hold firm at 3.5-3.7% -- lower than full employment.
When the market makes its comeback, and it will, the costs of replacing headcount alone will likely average greater than 100% of the annual salaries for each employee, once you’ve factored in recruitment costs, the vacancy period, and lost productivity due to training/on-boarding. Reductions-in-force also have other, unintended consequences, both personal and business, including issues of mental and physical health for the impacted employees and members of their families, brand and reputational loss, reduced levels of customer satisfaction, and lower performance, productivity and innovation among the remaining employees who struggle with survivor guilt and concerns over their own job security.
Layoffs should be a last resort. Consider other alternatives first and think carefully about INVESTING in your remaining workforce during the downturn. There are several key strategies you can use to maximize the value of your human capital:
- Develop a strong talent pipeline
- Create career ladders to encourage employees to expand their skillsets
- Encourage a culture of innovation and psychological safety
- Emphasize learning and development
- Engage your employees
Develop a strong talent pipeline
Identify the people you need to help your organization reach strategic goals. Ensure these people know they are part of your long-term plans. By building a strong talent pipeline, you will have the right employees to outlast the duration of a recession. In a strong employee market, it is crucial that your organization is planning, finding, and engaging the right candidates.
Create career ladders to encourage employees to expand their skillsets
When times are tight, you may need to figure out how to do more with less. Evaluate different roles in your organization for overlapping skillsets – you may be able to accomplish your strategic goals with your current employee roster if you redeploy talent. Employees are looking for more than just a paycheck, they want to expand their skillsets and grow in the organization and their career. You will both be better for the investment.
Encourage a culture of innovation
Necessity is the mother of invention. When the market is tough, and you need to find a way to navigate the storm – the best ideas don’t always come from the top. Give your employees a voice, solicit their ideas, and enable them to take calculated risks in culture infused with psychological safety. Encourage them to critique current processes and continuously improve. Your products and services will be better for it, and your employees will feel cared for and appreciated.
Emphasize learning and development
Earlier we mentioned leveraging career ladders to fill gaps in your workforce; ensuring your employees understand the opportunities to grow could be your saving grace. During a recession, it may not be possible to hire for certain capabilities. Emphasize the importance of learning and development to fill these gaps by giving internal employees a chance to learn, develop, and grow their skills to support these functions.
Engage your employees
Make your organization more than a place to collect a paycheck. Keep employees engaged and through times of uncertainty. Soon you’ll find that productivity and job satisfaction increase when employees are deeply connected to the work they do. Optimizing productivity and efficiency is crucial when every dollar needs to be stretched.
There are many other ways to maximize the value of your human capital. Most important is to be proactive and strategic about it. Infuse your contingency plans with human capital strategies. It might not always be the flashiest or headline making approach; but during economic uncertainty, it will help keep your strategic vision on the rails and moving forward. Find a partner to help you identify opportunities and implement a plan of action if you’re new to this way of thinking. The team at 29Bison is always ready to help. Need a thought-partner? Drop us a line.