No one knows for sure but it’s safe to say there’s anxiety building again that the U.S. economy could tumble into recession this year. While a recession impacts organizations of all sizes, medium and smaller businesses often have limited resources and face a tougher time of it when the economy stalls. As a result, these businesses often must make difficult financial decisions to stay competitive and, dare we say it, stay alive when a recession hits. That’s why it’s critical for all businesses, regardless of size, to consider how best to prepare for a downturn.
What follows are several tips to help businesses prepare for and minimize the impact of a recession on their organizations.
- Re-evaluate Compensation Strategies
Many organizations raised salaries, awarded bonuses, and expanded employee benefits in response to the labor shortage. However, some may need to re-evaluate their spending on employee compensation in the months ahead. Retaining key employees is always important, but if things get serious, cost-reduction measures to consider include slowing or even freezing pay raises, trimming bonuses, and re-evaluating your employee compensation and benefits strategies. These savings can help organizations establish a cash reserve to weather financial storms.
- Prioritize Employee Retention
Prioritizing employee retention leading up to a recession can help all businesses save money since the costs of recruiting and training new employees are extremely high. One strategy that employers can use to improve retention is to strengthen employee engagement.
During periods of economic uncertainty, employees are likely to feel stressed and concerned about changes to their workloads, their futures, and their employers’ long-term viability.
Businesses can strengthen engagement by emphasizing workplace culture, boosting communication, providing flexibility, finding ways to improve workplace efficiency, and encouraging employee feedback.
- Assess Organizational Talent
Ensuring organizations have the right staff in place is vital during a recession. An aspect of this is to identify and retain key employees, those who have a tangible impact on their organizations’ success and are difficult to replace. These employees can help employers drive business, maintain focus and reach their goals even during periods of financial difficulty or uncertainty.
In some cases, outsourcing or relying on contractor labor can help organizations run more efficiently. Layoffs, of course, may be unavoidable during a recession. By closely evaluating their talent needs in advance, businesses can be prepared if they are forced to downsize.
- Establish Communication Channels
Establishing effective employee communication channels is essential when preparing for a recession. The possibility of a recession can bring uncertainty, and employees will likely be concerned about their careers and the long-term success of their employer. Business owners will want to find ways to keep employees informed without unnecessarily fueling their worries. Employers can do this by providing employees with honest, accurate and timely information.
- Automate Internal Processes
The more efficient organizations are, the more resilient they will likely be during a recession. By optimizing their resources and automating where possible, businesses can stay one step ahead. Eliminating manual tasks allows employees to focus on more important work that can directly impact an organization financially, which can be critical to a business’s success during a recession.
A recession can have serious impacts on businesses of all sizes. Fortunately, by properly preparing for a recession and developing preventive strategies, businesses can be better positioned to minimize the financial hardships of an economic downturn. Indeed, successful business owners who prepare ahead of time to help them weather the storm can emerge even stronger afterward.
The Mahoney Group, based in Mesa, Ariz., is one of the largest independent insurance and employee benefits brokerages in the U.S. An employee-owned organization, we’ve been providing our clients with the confidence to face whatever lies ahead for more than 100 years. For more information, contact us online or call 877-440-3304.
This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.