How to prepare for a recession and come out thriving

Interest rates are rising, consumer spending is slowing, and inflation is gnawing away at your customers' disposable income. Signs that the US is heading for recession are mounting fast.

When the economy sputters, the first thing employers look to slash is big expenses like labor costs, which can account for up to 70% of total business costs. And right now, that’s what many American firms are doing: Peleton just axed 2,800 jobs, Netflix laid off another 300, and online car dealer Carvana fired 2,500.

But there are ways to make ends meet in lean times and stay poised for when things heat up again.

Here's how to prepare for a recession and come out stronger on the other side:

Get a handle on involuntary churn

We've all heard of 'last in, first out.' But even as recession looms, workers feel confident enough to jump ship in record numbers, with 4.4 million walking out this April alone. Workers changing jobs saw a 5.3% pay hike, against 4% for those staying put. You can't afford to lose top talent in a stiffening market, so consider how to look after your workers better. Raising pay and benefits will be tough but could be necessary. Consider performance-related hikes, especially for top hitters, as well as intangible perks like flexibility and time off.

Use contingent workers

With the average cost-per-hire at nearly $4,700, you'll want to avoid expensive recruitment programs. Post-COVID, workers expect a wide range of benefits, from access to healthcare to 401(k) to paid leave. Despite the many myths about temp agencies, reputable staffing partners can help you provide all these while eliminating the risks of hiring in uncertain times. Whether you're chasing one worker with a highly niche skillset or need a thousand hands on deck to fill an unexpected order, contingent workers could be the flexible solution you need to prepare for a recession.

Train your people 

It might seem counter-intuitive, but recessions are a good time to invest in training, especially the on-the-job variety. Why? Because your opportunity cost is as low as it's going to get. You're taking people off operations when things are quiet and building their skills for when the good times roll again. (Adecco has hundreds of free courses open to associates).

Double down on data and digital transformation

Data can help you rein in costs and generate more money as you prepare for a recession. Leverage analytics tools to better understand and respond to fast-moving threats and market opportunities. Prioritize 'low hanging fruit' transformation projects like process automation, data-driven decision-making, and employee augmentation software that takes a load off your workers.

Rethink your chain of command

Decentralized firms adapt more quickly to swings in demand. In the Great Recession, decentralized firms outperformed, with their sales falling 3.6 percent less than those of centralized firms. As you prepare for a recession, resist the urge to control everything. Empower your workers, solicit their feedback, and bring decision-making power ever closer to employees interfacing with your customers.

Promote wellbeing

Recessions can be brutal on workers, financially and emotionally. Make every manager a mental health advocate and promote financial literacy among your workforce. Utilizing temporary staff can alleviate the strain on your existing workforce, especially as many still struggle to vanquish pandemic fatigue.

Build capabilities

What are your skills gaps? Could employees in low-margin areas be reskilled to take on more digital tasks or join sales in the fight for new business? Are there undiscovered leaders in your ranks who could step up? Focus on capability-building around future-fit skillsets rather than just filling jobs. An impending recession could be a great time fill your most persistent talent holes as the labor supply looks set to shift back into balance.

Look beyond layoffs

As the US economy faltered in 2009, 2.1 million Americans lost their jobs. Yet, the companies that emerged strongest were those that relied least on layoffs. Employers often underestimate the downstream costs of redundancies, which hurt morale when companies can least afford it. Ask your employees to consider job-saving alternatives like shortened hours, internal gigs, job shares, and reassignments. This way, you do right by your workers and retain invaluable tribal knowledge for when demand surges back.

Adecco's flexible staffing solutions can boost your flexibility and productivity as you prepare for a recession by getting you the talent you need – thoroughly screened and well looked after – right away.

Talk to us today to learn more about our contingent staffing services.