The present scenario on physical health across the world is of extreme precaution due to Corona Virus. Similarly, there is a growing concern on the economic health of the global economy due to the cumulative effect of various factors.
The issues that continue to weigh down the global economy are trade policy uncertainty, geopolitical tensions, idiosyncratic stress in key emerging market economies, intensifying social unrest in several countries and weather-related disasters (IMF World Economic Outlook, January 2020)
“The global economy was in a synchronized slowdown and to 3% downgraded growth for 2019, its slowest pace since the global financial crisis. UN also has warned of weaker growth in both advanced and developing countries leading to a possible global recession in 2020.”
India’s economy slowed to a more than six-year low in the final three months of last year to 4.7%, according to government data released on 28th February.
With the global trade, travel, and transactions taking a hit due to the on-going Corona Pandemic, the economy may further take a plunge.
Effects of Slowdown on Organizations
The major sectors that contribute to the growth of an economy are Auto Mobile, Real Estate, FMCG, Manufacturing, etc. The global auto industry plunged deeper into recession in 2019, with sales dropping more than 4%. In the real estate unsold inventory currently stands at 42 months and FMCG companies have reported a decline in volume growth.
How to Prepare the Workforce during Global Slowdown
There were numerous recessions in the past, of different magnitude and intensity. Companies that survived through these challenging times are the ones that made contingency plans, thought-through alternative scenarios and prepared themselves against not-so-conducive market conditions.
Even now when slowdown seems to be affecting companies globally, business leaders need to gauge the extent of business impact, work on strategies to better position themselves and prepare the workforce accordingly.
Some initiatives companies could plan to prepare the workforce during global slowdown are:
Alternative Workforce Engagement
- Looking beyond layoffs- The first thing that companies tend to think during an economic downturn is to reduce the workforce by way of layoffs. Though this gives an immediate financial breather, it is not ideal in the long run. In the wake of 9/11, Southwest Airlines, unlike many other airlines, did not lay off employees or cut their pay. In fact, for 46 years since inception, Southwest never had a layoff and yet made a profit every year.
- Redeploy / Redirect the workforce –Redeployment and redirecting will ensure optimum utilization of human capital and utilization of existing resources to fill vacant positions. During the year 2008/2009, ICICI bank deployed some of its employees to other departments during recession and then, the next year when market conditions improved, these employees were given bonuses as a reward.
Spend Less, Save More
- Practicing frugality- During a slowdown, there is financial crunch everywhere. It brings lower sales and less liquid cash, therefore the need to be deft with financial management. A structured plan to practice frugality will prepare both the organization and employees to meet immediate financial challenges and safeguard against future unforeseen criticalities.
- Awareness of building an emergency fund- Educating workforce on cost-cutting, reframing financial priorities, the importance of maintaining financial buffer, emergency fund etc., will prepare them for better financial planning. Ideally, one should have an emergency fund to last for at least six months. Some studies confirm that only about 15% of the people maintain emergency funds.
Review Compensation and Incentives
- Aligning incentives to performance- Productivity or outcome based incentives, not only makes companies flexible, but also align the workforce to changing conditions. A national compensation survey study in US from 2004 to 2014 confirms that companies relied on performance pay more frequently during an economic slowdown.
- Shift from monetary incentives to R&R- Research has found that when employees were recognized, their motivation, productivity and engagement levels increased manifold. Hence, non-monetary rewards and innovative methods of R&R are best ways to keep employees motivated during economic slowdown.
- Reduced work time and pay- By introducing a short-work time policy and reframing compensation accordingly, employees will have option to retain their jobs. It also saves the hiring cost for the organization in the long run. 1% of the firms in France in 2009, shifted 4% of workforce to short-time work which benefitted both the workforce and the organizations.
- Reskilling and upskilling of the workforce – Training is a continuous process. But during the economic slowdown, companies can plan to train employees on different skills, because when existing competencies become obsolete due to advancement in technology or declining demand for product or services, new skills will keep them future-ready.
- Enhancing IT capabilities for digital transformation- During steady economic growth, the effort is towards improving productivity, sales, revenues etc., and not so much on enhancing IT skills. Also, economic slowdown does not necessarily stall the digital transformation and that is why it is in the interest of the organization to cater a portion of the budget and time for enhancing the IT capabilities of the workforce.
- Innovation across levels- To survive and stay relevant, during and after slowdown, companies need to put their workforce on constant R&D mode. The total revenue of Apple dropped to 33% during 2001 recession, yet they always transformed the product portfolio because they invested in innovation and prepared the workforce to think differently at every stage.
- Mentoring- If planned well, mentoring is one of the effective ways to keep the workforce motivated, which otherwise becomes time-consuming or difficult to accommodate during normal functioning.
Motivate and Inspire for Long Term Viability
- Agile thinking- Companies have workforce from diverse fields, backgrounds and capabilities. Keeping them together and creating a spark for agile thinking helps them to be creative, focused, do things fast and take decisions for any problems they might encounter.
- Keep the competitive spirit ignited- Economic slowdown brings immediate challenges of survival and growth. To maintain the competitive spirit, the workforce needs to be shown opportunities that they can seize to emerge stronger. Also, frequent, increased and positive communication will keep their morale high.
- Preparing them for disruptive changes- Not everyone in the workforce would be aware of the magnitude of the threat. Business leaders and HR should prepare the workforce to face the disruptive economy, which needs to be done so that they are better prepared to succeed in present circumstances.
Enhance Employee Volunteering
During the slowdown, contribution to CSR may be reduced. However, some programs can be sustained by encouraging employees to volunteer for social activities. This will not only promote good corporate citizenship but also employees rejoice to work for an organization that cares about the triple bottom line – People Planet Profits. Just like spring follows winter, prosperity follows economic slowdown. This is the law of nature. When global slowdown brings anxiety, concern, and disruption amongst the workforce, it is time for organizations to plan for ‘All is well’ kind of initiatives, so that everyone is able to wade through the unforeseen challenges.
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