I have learned a lot about the role of HR in recession, cost-cutting and other organizational impacts over the years. This is the second of a two-part article on the role of HR during hard economic times. It is especially for those in HR who might be facing a recession for the first time in their careers. While it covers several key topics, it is not exhaustive. I’m looking forward to hearing from other who may have similar experiences or different perspectives!
Start before a recession begins
In the first part of this article, we looked at ways HR can begin contributing to a recession response. The CHRO and HR Business Partners/Managers have a unique role to play to help balance the need to meet company targets while furthering company values and employee experience. Starting with the company strategic plan and a team including finance and strategy can help formulate actions to mitigate the risks. Involving people managers and employees early on will help manage anxiety while supporting employee-led actions.
If you must reduce headcount…
But what if simple cost-cuts aren’t enough? Referencing the strategic plan and future workforce development are even more critical if you must consider impacts to headcount. Should you take an x% reduction across the entire workforce, or take deeper cuts focused in specific areas? My experience is that the second option is more effective in maintaining the company strategy and reducing overall impact to the employees. As the scope of impact becomes clear to senior leadership, detailed planning is the next step. Respect and integrity are core to managing this process.
It takes a lot of preparation for a reduction-in-force (RIF) to go as smoothly as possible. After identifying the impacted groups and timing, making decisions on specific people comes next. It is critical to have clear, documented criteria for people selection. Potential criteria can include performance ratings, specific skills, years of service, or other relevant points. This helps avoid criteria that is unimportant or even illegal, like age (at least in the U.S.). Consultation with unions or Worker’s Councils may be required. Have your employment lawyer review the process and selected exits to prevent adverse impact and reduce the chance for litigation.
The world has recently seen some high-profile examples of how NOT to announce a layoff. In one example that continues to get worse, mortgage lender Better.com informed 900 people of their separation during a group Zoom call in December 2021. Then in March 2022 they confirmed they laid off additional employees and accidentally notified them via their payroll app. At best, examples like this show companies that do not understand the impact of these actions to all employees. At worst, it shows companies that just don’t care.
No one likes hearing they no longer have a job, but everyone wants to be treated with respect in the process. The best practice is to have the first conversation between the manager and individual impacted, with someone from HR present. This requires a lot of logistics to schedule meetings, produce documents, arrange additional security, and prepare managers. Always have a short script prepared and have the line manager lead the discussion, with HR available as a witness as well as support if needed.
Support your people managers
Don’t underestimate the importance of training managers in advance! This may be the first time they have ever had to let someone go. Even if they have done it before, the reaction from the impacted employee can vary significantly. There are online resources available that give video examples of reactions and ways to deal effectively with them.
Realize that people will be processing financial impacts as well as emotions like loss, grief, and/or anger. Being upfront about next steps, giving ample severance and notice, offering references, having EAP providers on-site, providing outplacement support or job training…all of these can help people with the transition. Don’t forget to leverage federal, state, and local resources that offer additional support. Just remember that people pay attention to how co-workers are treated! The respect you show (or don’t) will be clear. Remaining employees will see how you deal with people in a tough situation. This will also show up in Glassdoor or other public forums, impacting your employment brand.
Don’t forget the “survivors”
It’s also important how you treat the people who are not directly impacted by the reduction. Bringing teams together to let them know what has happened and next steps is critical. ‘Survivor’s guilt’ is real, as is the potential for higher workload to make up for fewer hands. No matter what you CFO says, I don’t ever recommend reducing or eliminating planned merit/pay increases. Controversial thought…you may consider to lay off a few more employees if that means you can keep up with raises for the remaining staff.
It is key to keep the remaining team motivated and see that things will not stay this way forever. There is a higher risk that top talent may get nervous and look for opportunities elsewhere. Consider using motivation or stay interviews to see what is important to each individual employee. A personalized retention strategy that involves stock, additional bonus/training, and/or career progression can help actively manage the risk for people you don’t want to lose.
HR Leading with integrity and respect
In summary, I see HR’s biggest role in a recession is to uphold Integrity and respect. They must consider both the company impact and employee wellbeing in the path forward. Tough decisions WILL come. Difficult trade-offs WILL come. HR can hold the space to make sure the company is being as honest as it can about what is going on, and at the same time giving respect to all parties involved. It is a difficult situation to navigate, yet the company and employees can come out stronger at the end. Even impacted individuals can use the situation as a fresh start, even if not the way they would have chosen to go about it.
If this is your first time as an HR leader going through something like this, please reach out to someone who has done it before. I can promise you will learn some things that will help you, your business, and your employees.