Many experts are predicting that a recession could be a near-term reality for Australia. HR leaders can help their organisations prepare by focusing on strategic workforce optimisation.
The cost-of-living crisis spurred by rising inflation and high cash rate, combined with a decline in real wage growth and crippling national debt is setting the scene for a financially rocky year ahead.
Predictions of a national financial recession in 2023 are coming thick and fast (although, there are some experts suggesting that a recession is not inevitable due to very strong employment figures – time will tell).
In these circumstances, an employer’s first instinct might be to pull back on hiring efforts, or, in extreme cases, lay off employees. But Siobhan Savage, CEO and Co-Founder of Reejig, says we shouldn’t jump the gun too quickly.
In fact, she urges employers to remember that in 2020 some businesses had a knee-jerk reaction to the predictions of economic turmoil and made a swathe of redundancies only to aggressively re-hire just a few months later.
“And now you have to pay them more money than you would have had to previously,” says Savage.
From 2020 to 2021, the cost to hire an employee more than doubled, from $10,500 to $23,860, according to ELMO.
“There’s a feeling of uncertainty, again. The reality that [employers] are facing right now is they still can’t find people. And they can’t keep their people. And there’s also a narrative telling them that something else might be around the corner.”
Whether we face a recession or not, Savage believes there are some things HR professionals should be doing now to not only prepare for future market volatility but also to thrive in the future of work.
“Uncertainty is always going to be part of HR’s role. And it’s going to take a new level of skill to be able to scenario play in order to protect your workforce.
“There are ways of unlocking change and optimisation without doing things that will deeply impact your employment brand.”
The most successful businesses, she says, will be the ones who get in front of the issue now. Here’s how she suggests you go about doing that.
1. Get a read on people’s skills before times get tough
Let’s assume that the worst case scenario is going to happen. Australia goes into a recession and businesses start scrambling. You don’t want to have to let people go, but you’re also not quite sure how else to use your people’s skills.
The first thing you need to do is get full visibility of the skills in your business, says Savage.
That doesn’t just mean knowing the skills they utilise in their current position, but also learning about what they’ve done before working for you – or a capability they may have picked up during their time with your organisation.
“You should know who your people are, not just what their job title is. Everyone has a backpack of skills they collect over their whole career. In a scenario where you want to look at career advancement… or where you may need to redeploy people, you need to know what they can do.
“When you unlock that, you can solve almost any problem in your organisation.”
It’s time to sharpen your workforce planning skills, so you can be prepared should Australia experience a recession. Sign up for AHRI’s short course on 21 September 2022 to equip yourself with the skills to safeguard your people.
2. Develop a ‘zero wasted potential mindset’ in leaders
Now that you’ve invested in mapping out people’s capabilities, you need to develop what Savage calls a “zero wasted potential mindset” at an executive level.
“Businesses have net-zero energy strategies that we have to report on at a shareholder and board level. Very soon, you’ll see people become part of that story. It won’t be acceptable for you to fire thousands of people on one side of your business while hiring thousands on the other side.
“It’s the responsibility of the leaders, including the Chief People Officer, to make sure they create zero wasted potential ways of working.”
Use the data you’ve collected to assess your team’s gaps, and, often with little effort, mould them into a value add for another section of your business.
For example, say you’ve got a sales manager who you need to redeploy due to a sudden decline in demand for your product. By taking the time to get to know their full potential now, you might learn that they used to work in customer relations, and therefore could help field customer enquiries until sales pick up again.
Or perhaps they’ve previously studied mental health and, with a small amount of retraining, could coach and support staff through the emotional challenges often associated with a recession.
Read HRM’s legal guide to redeployments here.
Strategic talent and skills optimisation shouldn’t only occur when your business is in choppy waters. Savvy business owners are already building this mobility into their talent strategies, says Savage.
Agile, skilled and cross-functional workers will be the foundation of the future of work. Now is the time to start laying the tracks.
“Bench your talent in a way that you can move and optimise them into another role. HR and leaders should be thinking about this all the time.”
3. Promote stretch goals
Getting employees prepared to work cross-functionally doesn’t necessarily have to involve a costly training program. Savage suggests that promoting stretch goals as a common practice can help to make upskilling part and parcel of how work gets done.
“Give people the opportunity to step up,” she says. “Instead of hiring externally, use your data to assess who within your business isn’t too busy and give them a stretch opportunity.
“Do you know the amount of innovation that comes from giving someone a stretch opportunity? You’ll create this completely different culture within your organisation where innovation, giving people opportunities and taking a chance is what you’ll be known for, as well as saving money.”
“Businesses have net-zero energy strategies that we have to report on at a shareholder and board level. Very soon, you’ll see people become part of that story. It won’t be acceptable to fire thousands of people on one side of your business while hiring thousands on the other side.” – Siobhan Savage
However, this doesn’t mean simply piling on more work for people, she adds. That’s a recipe for burnout.
“I’m not saying pedal faster. I’m saying I might spend 60 per cent of my time doing my ‘day job’, but also, on the side, I love doing social media or marketing, so I spend some time working on that.”
Tapping into what people love to do energises them, she says. So when you’re doing your initial skills mapping, don’t just focus on what people can do or have done, ask them about what they love doing. What are the tasks that make time fly by?
“They’ll end up feeling like you know who they are, you’ve given them an opportunity, and their engagement and their sense of self-worth will rise.
“If you do that at scale, productivity goes through the roof, happiness goes through the roof, the business makes more money, you’re hiring less people. Win, win, win.”
4. Have a bottom-drawer plan
Of course, redundancies are often necessary in certain industries. Savage isn’t suggesting that all businesses made a wrong call when laying staff off when the pandemic first hit. She’s just saying that some organisations moved too quickly because they didn’t have a solid plan in place.
While she suggests having a clear view on people’s skills and progression opportunities at all times, she says it’s important to have a specific and detailed plan for how you’d move that talent if the worst happened. At Reejig, they call this the ‘bottom-drawer’ plan.
“Leaders need to be able to say, ‘Yes, we’re aware of the changing environment, but here’s what we’ve got in place.” And this needs to happen as soon as employees get a sense that the business might not be in a good position, if not before.
The HR leader should be across all the details of such a plan, because Savage says they need to be prepared to “tell CEOs which lever they should pull next”.
“That is exactly what the leadership team needs from the people team.”
This helps to keep employees calm, she says.
“They’ll think, ‘My CPO has designed a way of working where we are always putting our hands up for more opportunity, or moving folks around to create workforce agility.'”
“It’s not just about responding to an article in the news [about a recession]. It’s just your way of working.
“The best leaders, whether they’re the CEO or CPO, are going to be able to respond calmly in any scenario. But the key factor to being able to respond calmly is having a plan.
“If the worst case scenario doesn’t happen, even better! You will come out even stronger. The most innovative and competitive organisations will be doing all this right now.”