Friday, 05 May 2023 00:56
Recession-proofing Strategies for Small Business & HR Teams
Written by Kristen RussellA recession is a prolonged and pervasive reduction in economic activity that can last for several months or years. Amid a recession, organizations of all sizes and sectors usually experience decreased sales and profits stemming from changing economic environments and consumer behaviors. While these behaviors can threaten the financial stability of any organization, large businesses are often better positioned to weather a recession because of their substantial revenues, excess reserves and expanded access to a wider range of credit markets. On the other hand, small businesses may be particularly vulnerable during an economic downturn, as they generally lack the additional capital necessary to offset extended periods of loss. As a result, when a recession occurs, small businesses are more likely to have to make difficult financial decisions to avoid issues such as insolvency or bankruptcy.
Although a recession can’t be prevented, HR teams’ strategies can greatly impact whether their organizations withstand such a downturn. Specifically, HR teams can ensure their organizations are sufficiently prepared for a recession by taking steps to limit related ramifications and maintain financial stability. To promote financial stability among their organizations during an economic downturn, HR teams should consider the following recession- proofing strategies:
• Revisit compensation and benefits strategies. HR teams may need to rethink how their organizations will address attraction and retention struggles, while maximizing every dollar. Recession-proof organizations tend to develop their budgets with an eye toward the future, thus requiring HR teams to revisit compensation and benefits strategies. Minimize the impact of layoffs. Layoffs can create risks and negatively impact business operations by decreasing productivity. HR teams may be able to minimize the need for layoffs by implementing a voluntary reduction in force, slowing hiring or freezing it entirely.
• Stay transparent. The possibility of a recession can bring uncertainty, which could lead to employee retention and operational challenges. Creating a transparent workplace culture can help organizations limit recession-related ramifications and ease employee worries.
• Prioritize employee engagement. Highly engaged employees can help limit recession-related labor challenges for organizations, as they’re more likely to accept negative work changes and remain loyal. By increasing engagement, HR teams can help maintain morale and productivity.
• Manage health care costs. As budgets shrink during a recession, finding cost- effective solutions can allow organizations to maintain affordable employee benefits.
A recession can have serious impacts on small businesses. Fortunately, by properly preparing for an economic downturn, HR teams can help their organizations be better positioned to minimize financial hardships.
CLICK HERE to download our Small Business Bulletin.
CLICK HERE to download our Small Business Bulletin.
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Best Practices
Kristen Russell
Kristen founded Fall River Employee Benefits as the culmination of her insurance industry career as an actuary, underwriting executive & consultant. As an Assistant Vice President at Great-West Healthcare (now part of CIGNA), she managed a $1 Billion block of health insurance. She also worked as a Senior Consultant at Reden & Anders, consulting to insurance companies and large employers throughout the country. Ms. Russell received a Bachelor of Science, Business Administration in Actuarial Science, is a member of the American Academy of Actuaries and achieved Fellowship in the Society of Actuaries through a rigorous nine-year series of exams.
Kristen grew up in Iowa but has lived in Colorado since 1993, currently living near our office in the Lower Highlands neighborhood near downtown Denver. She enjoys bicycling, hiking, traveling and has a special passion for non-profit volunteering. She is married to an incredibly talented photojournalist, has two adult stepdaughters and an adorable Border Collie/Lab mix named Chaco.