As interest rates rise and consumer spending habits change, rumors of a recession have started to emerge as a strong possibility for the coming months.
Regardless of whether a recession happens, the mere rumors of a recession can have a massive impact on our employees and their feelings about work, and managers should be considering how to adapt their leadership style to handle any economic worries by their direct reports.
On a high level, below is a list of things that typically happen when there are concerns of a recession:
◗ Companies go on hiring freezes or begin laying people off. Companies tend to hire based on what they believe they will need. When a recession strikes and their projections are incorrect, they are forced to change course and lay people off as they adjust their projections.
◗ Employee confidence diminishes. Strong economies with low unemployment help employees feel confident about asking for higher wages and greater perks.
◗ Teams are consolidated. Companies create departments and teams based on projected growth, but when economies start to slow, teams tend to be merged, people are laid off, and those remaining must pick up the additional workload.
Some companies and industries are going to be more impacted than others.
As a professional, I am a firm believer that you are an entrepreneur of your own life. When it comes to work, especially if you lead a team, it is critical that you do your own research to identify if the company you work for will thrive for the foreseeable future.
For example, one of the executives in our mastermind group works for a company that does COVID tests. This business model boomed over the past few years, but as fewer people get COVID tests, our leader has recognized that something needs to change for his team to continue working for their company.
As opposed to doing the same thing over and over again as business dwindles, he is being completely candid with his team. He has been identifying business opportunities that he and his company can pursue based on the infrastructure they have created over the past few years. Essentially, he is becoming an intrapreneur—a person who is pursuing entrepreneurial opportunities within a company.
This openness, honesty and candor has caused his team to feel excited about the work it is doing. Employees are still completing the tasks that keep the lights on, but they are taking the additional time they have from diminished business and putting that toward identifying new opportunities they can leverage and deploy.
Many of the ideas proposed won’t work out, but it is much better than doing nothing and hoping it works out. His team has greater clarity and understanding regarding the business’s health and prospects, and most employees are staying and trying to help find the new path for this business.
This team is still searching for the next business model that will reinvigorate its business, but this isn’t solely a task for the leadership team anymore. Now, the entire company can be a part of the solution.
When your team is feeling uncertainty regarding a recession, take these steps:
◗ Lean into the concerns and share openly and candidly why the company’s current way of operating won’t be affected by a recession or what you are doing to pivot and stay agile even if a recession does come.
◗ Incorporate your team in the innovation process when it comes to identifying ways to cut costs and increase revenue (laying people off has a very negative impact on employee morale and confidence).
◗ Understand the risks and benefits—because, if your team is unsuccessful at effectively pivoting, your employees will understand why they are being laid off. The benefit of incorporating your team in the innovation process is that they will feel they had a chance (an opportunity!) to help be a part of the solution that turned the company around as opposed to being left in the dark and then one day getting laid off.
The key when identifying the opportunities to innovate and pivot is to explicitly lay out the risk tolerance you have for ideas. You might not have a million dollars to test out every idea, but you might have $1,000, and that could be enough to garner some early datapoints of success or failure.•
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Mintz is founder of Ambition in Motion, a firm that helps companies increase employee engagement and collaboration by implementing corporate mentor programs.
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