Recession readiness: The case for looking beyond cost cutting
How businesses can stay resilient during uncertainty
Companies are reeling from the economic uncertainty caused by the pandemic fallout, the war in Ukraine, talent shortages, and high inflation. And whether it’s mass layoffs in tech or the collapse of Silicon Valley Bank, there is always a new threat to economic stability. The looming possibility of a recession makes this economic environment even more volatile.
Being recession ready is a critical priority for executive leaders. Ninety-three percent of CEOs are preparing for the U.S. economy to enter a recession, according to a survey conducted by The Conference Board. Just over half (55%) of those surveyed think a recession will be their company’s biggest global challenge in 2023.
Employees and the threat of a recession
Leaders are clearly focused on what is necessary to prepare for a recession, and most are taking action to manage the organizational uncertainty that comes from economic uncertainty. But what about employees? How do they view the possibility of a recession and what impacts do they expect? We surveyed more than 1,000 full- and part-time employees across the United States to find out. Here’s what we learned:
Employees—especially women and Generation Xers—worry about a recession
Sixty-one percent of employees are worried about a recession. More women (68%) than men are worried. Across generations, more Generation Xers (ages 41 to 54) say they are the worried (67%). And should a recession occur, one-third of employees are worried about being laid off.
61% of employees
are worried about a recession.
Employees’ confidence in employers’ stability, growth, and leadership is falling
Thirty-two percent of employees feel less confident in the overall stability and growth of their organizations than they did six months ago. One in four employees do not have confidence in the leadership of their organization. When it comes to their own job security—and that of their family and friends—34% of employees are less confident than they were six months ago.
32% of employees
are less confident in their organization than they were six months ago.
Employees are staying put, yet burnout remains an issue
With 84% of employees more likely to stay in their jobs should a recession occur, a recession could be a counterbalance to the impact of the Great Resignation.
Employees’ intention to stay isn’t necessarily a signal that they are satisfied with their job. Nearly half (46%) still report that they are experiencing worker burnout, largely due to increased workload. Of those who are burned out due to staffing shortages, 83% are covering workload for unfilled positions. Also, 53% of burnt-out employees say workload is the cause.
84% of employees
are more likely to stay in their current job if a recession occurs.
With employees watching, there’s power in being proactive
The results of our survey suggest that employees are tuned into the possibility of a recession—and to how leaders in their organization are responding.
The typical recession playbook includes “defensive moves” to cut costs and drive operational efficiencies. Yet, research on corporate performance published in the Harvard Business Review reveals that companies that thrive through a recession balance these defensive moves with strategic investments in future growth.
This “balanced approach” has not only proven to be successful, but it’s more agreeable for employees. If cost cutting is all that they see during uncertain economic periods, employees are likely to worry about job security and increased workload, and team morale will suffer. At the same time, they are likely to lose confidence in their company’s ability to emerge stronger from a recession. All of these factors can result in lost productivity and decreased workforce performance, which negatively impact an organization’s bottom line.
History has shown that leading companies often make bold moves during a recession. McDonald’s changed its business model to serve more customers faster during the recession that followed World War II. Target redesigned its stores to carry more food brands as customers spent less on discretionary items in 2008. And companies like HP, Hyatt Hotels, Airbnb, and Square were all launched during recessions.
Getting recession ready: Where to focus
To strike a balanced approach to recession readiness, Eagle Hill recommends incorporating a mix of five strategies that begins with scenario planning. Click here for the full playbook on how to prepare your business for a recession.
A great test—and a great opportunity
Times of economic uncertainty test companies—and the C-suite—like no other. The best way to be recession ready isn’t only to follow the traditional playbook of defensive moves. Now is a time when companies should take the offensive too. Those that emerge strongest from this period will create their own recession-ready playbook, balancing a mix of strategies to turn economic uncertainty into new value and organizational opportunity.
These findings are from a workforce survey from Eagle Hill Consulting conducted by Ipsos from February 7-10, 2023. The 2023 Eagle Hill Consulting Workforce Employee Sentiment Survey included 1,393 respondents from a random sample of employees across the U.S. Respondents were polled about employee sentiment across a range of topics.
The burnout findings are from a workforce survey from Eagle Hill Consulting conducted by Ipsos from February 9-13, 2023. The 2023 Eagle Hill Consulting Workforce Burnout Survey included 1,001 respondents from a random sample of employees across the U.S. Respondents were polled about burnout and vacation.