Michael Benedek is CEO of Datonics, an online data company and pioneer in the integration of audience data into programmatic platforms.
There has been a lot of uncertainty over the past several years, and companies are still contending with an unpredictable environment. From the steep drop at the start of the pandemic to the huge boom that followed, the “Great Resignation” and now a somewhat stagnant economy with a relatively low unemployment rate, there are few reliable indicators for business leaders to plan with confidence.
In July 2022, the unemployment rate of 3.5% was the lowest it had been in 50 years. Many businesses are continuing to hire, with more than double the forecasted job growth in July. Simultaneously, some sectors are experiencing a bit of a contraction. The tech sector specifically has experienced rounds of layoffs in recent months. As of August 2022, 38,000 workers in the tech industry have been laid off.
With such economic uncertainty, how can business leaders best prepare?
Preparing For Business Contraction
According to Harvard Business Review, ensuring a proper approach to a reduction-in-force (RIF) is so essential that companies should invest in training for employees to be prepared for such a scenario. Complications and unintended ripple effects can arise when an organization does not see the value in such training, as it is both time-consuming and costly for managers. In such cases, managers should seek out mentors who have prior experience in handling RIFs to give guidance on proper procedures.
Having a script is important. Conversations can quickly become fueled by emotion, and staying on message in a genuine manner is vital. One way to practice is to enlist a fellow team member to help roleplay. In this practice, managers should envision the worst-case reactions from employees and develop strategies to deal with these heightened emotions. Managing the employee’s emotions is not the objective, but being compassionate goes a long way. Being direct in communication will help employees cope, and steering away from vague language that leaves employees confused about where they stand is essential. A written follow-up will also help to send a clear and consistent message.
To help those who are being laid off, it’s important to be empathetic and view the situation from the perspective of those impacted. What will their top concerns be? Is there financial compensation in the form of severance or bonuses, and will their benefits stay intact?
Having the conversation in a comfortable environment is also worth considering. A private space that allows employees to express their emotions is beneficial. So, too, is a well-suited time, such as a Friday—so they have the weekend to decompress and process.
Shopify showcases a good example of this process. Earlier this year, the company forecasted a 10% global reduction. Shopify’s CEO acknowledged the uncertain times in an email to his staff and clearly expressed that those who are in roles of “recruiting, support and sales” are in jeopardy of being laid off. Shopify included specific severance details: 16 weeks of pay plus one week for every year of tenure at Shopify. Additionally, Shopify is offering career counseling, interview support and resume-building help to those who may lose their positions.
Preventing RIFs And Conservative Growth Planning
For many companies, a reduction may not be the best solution, as it may stifle growth in the long term—especially in this uncertain economy, where unemployment remains low. Other strategies such as temporary reductions in salaries can be good measures to adopt. Another approach can be to onboard new employees as part-time workers.
Keeping employee motivation and engagement high is key to fostering long-term growth. One way to ensure employee satisfaction is by introducing and continuing to implement workplace flexibility and keeping remote work intact. Being understanding of employees’ work-life balance as they are navigating uncertain times will go a long way in fostering a productive environment and loyalty.
Another strategy is to prioritize recognition and reward procedures. When employees are appreciated for their hard work, incentive levels rise, and they are more motivated to produce at a high level. Recognizing good work on a regular basis boosts employee spirit.
Conservative Growth Planning
Investing in your business when attempting to be conservative in spending may seem like a contradictory approach; however, by thinking smarter and evaluating your business’s needs, it could be the right one.
Tough times present an opportunity to shift, adapt and rethink business models.
Investing in new technologies can be one way to ultimately reduce larger costs and automate systems while still remaining conservative in spending. Simultaneously, investing in professional development for your leadership team will help them tackle obstacles more effectively and efficiently in the future.
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