HR Daily

HR leaders ill-prepared for economic downturn

30 August 2019 1:04pm

HR is the function best placed to help organisations survive an economic downturn, but only if leaders ensure their teams are ready to respond, according to a global leadership specialist.

Research by executive search and advisory specialist Russell Reynolds Associates suggests very few CHROs are prepared for a downturn or recession, despite economists predicting a 20–25 per cent chance of a recession within the next 12 months.

"They realise that it's on the way but very few have actually prepared their teams to respond," says global diversity and inclusion lead Tina Shah Paikeday.

"It's actually critical for the head of HR to think about how to identify key talent gaps for the senior executive team and CEO, to be able to make sure that the level of agility is there around the skill sets that are going to be needed in the downturn."

Agile leaders critical

Shah Paikeday says agility is the number-one skill an organisation requires its leaders to have, to navigate the business through the complexities of restructures.

"Being able to think critically about those areas that might still need longer-term investment, despite the effect on capital, will be important to continue to preserve," she says.

"And I strongly believe that in an economy that will change dramatically due to artificial intelligence and other factors, agility will have more and more of a role to play going forward.

"Whether it's in direct response to the downturn or otherwise, companies would be well suited to invest in that for the long haul."

Don't neglect culture

Shah Paikeday says HR leaders should be thinking about the impact a downturn could have on the culture that they have worked hard to establish in their organisation.

"Culture takes such a long time to build up in a positive way. A misstep during a downturn for short-term reasons can dramatically impact it," she warns.

"You don't want one quick action to destroy all of that work that has gone on for multiple years.

Shah Paikeday says diversity and inclusion must also be kept front of mind when considering cost-cutting and retrenchments.

"I've watched companies weather prior cycles and they've removed diversity inclusion programs and stopped funding employee resource groups, and that has a significant impact on those diverse populations.

"The role of the chief diversity officer in maintaining some of that diversity I think is going to be critically important, because typically those who are different from the norm have been hired last in the organisation," she says.

"So when layoffs are required, they're typically the first to depart from an organisation. The signal that it sends in terms of the importance of the diversity is really important for culture preservation.

"[Employees] remember what happened last time. It sends a signal about what's important to the company."

Shah Paikeday says an organisation with a diverse workforce will be more resilient during a downturn.

"When you have diverse voices around the table and you're navigating uncertainty, there's a lot of research around the fact that novel problems are best solved by a diverse perspective," she says.

"Inclusion is the way to draw out those diverse perspectives as opposed to most cultures in which everybody is agreeing and there's a group think model to decision making.

"Inclusion unleashes the power of diversity and I think it's even more important when circumstances are ambiguous, or during a downturn."

Intergenerational knowledge transfer

It will also be valuable for HR leaders to draw on the experience of employees who have been through tough economic times before, Shah Paikeday says.

"There is a large part of the population, including many Millennials, who just haven't seen the resilience that had to be exhibited through a downturn – recognising that cycles will come and go," she says.

"Intergenerational transfer of knowledge I think is important, and also affecting the workforce in different ways today.

"With many of the retired population coming back to work because of the longevity of life now, it kind of puts increasing importance on the ability to navigate the cross-generational relationships, whether it's for reasons of the downturn or because we see that influx of ageing workers coming back into the workforce as well."

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