In recent years, Chief Human Resources Officers (CHROs) have faced a myriad of challenges, from the pandemic and the Great Resignation to economic downturns, political upheavals, and even war. Amid the looming recession, CHROs play a crucial role in ensuring employee job security, income stability, and steering the company strategically. Recognizing the pivotal role that employees play in a company's success, CHROs are instrumental in shaping organizational talent, strategy, and meeting business needs.

The pandemic prompted an unplanned transformation in the workplace, with CHROs leading the charge. Efficient organizations have employed various repositioning techniques to strengthen their positions during a recession. However, addressing the challenges faced by HR demands a significant commitment to stability amidst economic uncertainties. The CHRO's involvement in shaping the company's strategy is paramount, as employee productivity directly impacts business profitability and the achievement of organizational goals.

Defining Failure for CHROs in a Recession

As Harry Truman once stated, "It's a recession if your neighbor gets laid off; it's a depression if you get laid off." While recessions affect companies differently, certain challenges are predictable based on the business type and size. Recognizing potential post-recession failures is crucial, such as cutting costs excessively, facing inflated costs due to inflation, being outpaced by competitors in technology, losing market share due to higher product pricing, and competitors securing top talent at lower costs.

Creating a Recession-Resilient Business

A Harvard Business Review study highlighted that during the last four recessions, nearly three-quarters of American public companies with over $50 million in sales experienced declining revenue growth but increased profitability. The resilience of businesses during a recession is tied to the nature of the product or service they offer and how they meet customer demands. To weather a recession, CHROs can contribute significantly by addressing poor resource utilization, low engagement levels, and skill gaps promptly through automation, enhanced employee engagement, and fostering a culture of transparency.

Strategic Steps for CHROs During a Recession

1. HR Benchmark Spend: Despite reduced HR budgets, CHROs can advocate for critical HR investment opportunities by creating a benchmark based on HR operating costs. This involves identifying areas for over or under-investment, validating staffing levels, and recognizing areas needing reinvestment to achieve critical business objectives.
2. Review and Improve HR Functional Maturity: Utilizing tools like Gartner's maturity assessment, CHROs can assess existing capabilities and identify priority areas for improvement. This not only influences strategic efforts but also helps create a fact-based case for acquiring necessary budgets and enables cross-functional planning discussions.
3. Ensure Flexibility and Adopt Creative Staffing Approaches: CHROs should develop strategies for moving employees where they are most needed, considering workforce demographics and future requirements. Creativity in enhancing the employee value proposition, such as alternative work schedules or 30-hour workweeks, can help attract and retain talent during a recession.
4. Demonstrate Gratitude and Empathy: Recognizing and appreciating employees who take on additional responsibilities during challenging times is crucial. Expressing gratitude, offering advancement opportunities, or even simple gestures like an Amazon gift card can boost morale. Additionally, showing empathy toward laid-off employees and offering support for potential reapplication fosters a positive workplace culture.
5. Leverage Employer of Record (EOR) Services: In times of crisis, CHROs can benefit from Employer of Record (EOR) services, which provide flexibility, expertise, and quick action. EOR solutions handle legal changes for globally distributed teams, manage HR and compliance needs, and facilitate recruitment, contributing to cost efficiency and resilience during economic uncertainties.

The Path Forward

In navigating the uncertainties of the workplace, a recession-proof strategy requires collaboration among C-suite leaders, including CHROs. Establishing clear communication pathways, fostering collaboration and engagement, and leveraging available technologies are essential components. Recognizing the critical role of CHROs as crisis-resolution points, companies can create preventive roadmaps and robust contingency plans for a truly recession-proof business.