It's no news that the global economy is taking an uncertain turn. Running a business has become costly, especially for those operating from physical office spaces. Adding to the challenge, consumers are spending more conservatively. Thanks to steadily rising interest rates, lifestyle expenses are diverting towards mortgages and rents. Now, businesses of all sizes are taking measures to protect themselves financially by laying off staff and cutting costs. 

In a fascinating contrast, many businesses, especially those affected by The Great Resignation are now scrambling to fill vacancies in their work forces. The challenge, then, is that the costs of training and retaining new hires add up fast. With tough financial times on the horizon, businesses are now in limbo trying to decide whether laying off employees would help them stay afloat.

To lay off or not to lay off

The downturn in our region isn’t isolated. Other economies are struggling too. China’s zero-COVID policy caused extensive delays in supply chains. Though the policy has been dropped, its impact is expected to last and reverberate around the globe. As the world’s largest producer of consumer goods, China and its supply chains are incredibly important to all businesses in the pacific. The US is echoing the same problem. As the country marches towards a weakened economy, we're likely to see an impact on currency values and international trade.

For most Australian and Kiwi businesses, these global events will affect operations one way or the other. It may seem like the most viable solution is to downsize your business and let some of your most valued people go. However, as many businesses have already discovered, laying people off doesn't guarantee a better financial performance than sticking with your employees. In fact, layoffs can severely affect employee loyalty and diminish the morale of everyone still employed. Layoffs should be a last resort, and even then, they must be handled with proper consideration, communication, and support. Unless you have a genuinely just cause, such as a severe loss of demand that's resulted in losses, consider alternative measures, like reprioritising.

A largely underrated tactic, reorganising priorities and projects is a good way to evaluate your current situation and plan for the immediate future. Don't resist change—many businesses choose to lay people off because they don’t want to face the possibility of drastically changing their business process. However, history is filled with the success stories of companies that pivoted to stay relevant. Motivate your staff members to be versatile. If you have a small team, brainstorm ideas about what you can do to restructure effectively. Some people may have to take on more responsibilities, while others will have to take on the responsibilities of a different role or department. 

Realistically, interdepartmental change can be frustrating. It's best to give everyone some freedom to choose new roles and responsibilities. If they decide another team will be a better fit, send them off to their new manager with a positive reference. Offer additional training opportunities to those willing to move to a different department or speciality. Even in a tough situation, giving employees flexibility will reflect well on you. That way, even if employees choose to leave, they will retain their respect for you and your business. 

Hiring staff during a recession

If you lost employees during the Great Resignation, you might be looking to hire in the hopes of optimising operations before a downturn. The biggest mistake most businesses make when hiring during a downturn is over-hiring before deciding which projects should truly be a priority. This is why reprioritising is helpful. It's best to speak to your existing employees first, and determine which roles and responsibilities can be filled by your current workforce. 
It’s also worth checking in with your existing team to ensure they’re not overworked. Too often, businesses overload existing staff to avoid hiring. However, that may be more harmful than helpful. During the restructuring process, consider what you will lose by overworking existing staff or by not hiring enough staff. This may help you determine your next steps.

Once you’ve decided how many staff members you need to hire, consider what you’re prepared to offer them in the long-term. In a competitive labour market, hiring the right person is challenging, and it’s easy to over-promise in order to attract candidates. Be realistic about your business situation and what you can offer. Don't hire with only the short-term in mind.

Retaining staff through a recession

Most businesses can't afford to lose key employees at any time, least of all in times of turmoil. To retain employees, it’s important to build and maintain an employee-first culture within the organisation. This type of culture could include remuneration, job perks, paid and parental leaves, and opportunities for training and growth. People should be happy to work with each other, and for you, in an environment they’ll want to stay in long-term. The benefits you should offer will depend on your industry, your competitors, and what your business can comfortably afford. 

It's helpful to be flexible where you can be. The pandemic taught us all that employees can still be productive when they're working remotely and with flexible hours. Be open to negotiating with your teams to find a solution that works for the individual employees as well as the larger organisation. Consider every person's situation individually and be sure to involve your team in decisions that affect their everyday work.

Parting thoughts

COVID-19 changed the way people looked at work-life balance. While most people work more hours than they used to, they've also recognised the value of spending time with family and loved ones. Unlike other social trends, this shift to flexible working will likely remain popular. As global economies slow down, it's more important than ever to have staff who are loyal to you and want to work for your business. The best way to achieve that is to promote an honest, transparent, and employee-first culture within your organisation.