How to Prepare Your Organization for a Recession

Most organizations live and die by their EBITDA (earnings before interest, taxes, depreciation, and amortization) and maintaining a healthy profit margin. When the grumblings of a recession start, or the United States goes into a full-blown economic downturn like the Great Recession in 2008, the common knee-jerk reaction by many organizations, both big and small, is to scale down headcount in an attempt to reduce their bottom-line costs. This tactic is not only ineffective but has long-lasting detrimental financial implications that can last a lot longer than a recession would. So much so that a team of researchers from Auburn University, Baylor University, and the University of Tennessee found that companies that resort to layoffs during a recession are twice as likely to file for bankruptcy as companies that don’t.

The decade between the Great Recession and now has provided enough data to prove that the opposite tactic (retaining and upskilling the existing workforce instead of resorting to layoffs) is how successful companies like AT&T and Honeywell not only survived the recession but made a profit even during tough financial times.

With another recession looming, here are three steps your organization can take now that will lay the foundation to withstand economic uncertainty.

1) Upskill your existing workforce. Identifying, hiring, and training talent is expensive, so the best time to spend resources upskilling your existing workforce is when things are “business as usual.” Offer training and development opportunities in areas that will have the biggest impact. Skills such as leadership, communication, and forecasting are all great foundational skills to rely on during a crisis.

2) Adopt data-driven decision making. Financial instability is scary, but making sweeping organizational changes based on emotion is scarier. Use digital credentials to help identify the skills a workforce already possesses, which will make hiring outside of the organization less urgent. When a recession hits, digital credentials make it possible to know exactly what skills the existing workforce has and makes shuffling jobs and tasks between employees easier, helping avoid layoffs. Data shows that layoffs have a systemic and lasting impact on the workforce that survives them, and lack of morale that results in slumping productivity is just as costly as hiring new talent.

3) Implement new technology before money becomes tight. Transparent data into your workforce is invaluable regardless of the economic landscape and having those insights well in advance of turmoil will help organizations of any size weather a storm. Using tools that allow managers to get insights into performance metrics, productivity, and spending are all great ways to get a handle on a workforce before things get bad.

An organization’s ability to survive a constantly shifting economic landscape lies directly in whether or not their current workforce can help them make the transitions necessary to their success. Companies, both large and small, tend to prioritize short-term financial results over the long-term well-being of their employees - the same employees that are the lifeblood that enables a company to keep delivering the products and services that ultimately generate revenue and retain customers. Remembering that the economy ebbs and flows and will eventually turn around for the better is a great way to avoid panic and unnecessary drama in the workplace.


If you're interested in learning more about how to implement a digital credentialing program at your organization, fill out the form below and we'll be in touch. 

Contact Us

Topics: Human Capital Management, Corporate Development, Hiring

By  Patricia Diaz