The great debate. Is it a recession? Is it a cool down? And hey, what’s that all mean, anyway?
Between inflation hitting a multi-decade high and somewhere between 30,000 and 70,000 employees laid off since the start of 2022, things may seem dire. And while many of the so-called recession-proof giants may still have more cuts on the horizon, it isn’t time to panic.
First of all, economists can’t quite agree on whether or not our economy has faltered to the point of recession. Inflation seems to have finally leveled off. Consumer goods and gas prices are falling. And while making cuts to staff as a cost-saving measure might be appealing in such an uncertain time, it’s important for business leaders to exercise caution.
One of the things that came out of the economic dip and layoffs associated with COVID and the 2008 recession was that talent remembers. Any decision to eliminate positions, thus upending an employee’s financial safety and security, is painful. But the pain doesn’t just stop with the affected employee. In fact, even small layoffs can create fissures that cause substantial damage to not only employment brand, but also employee engagement and, consequently, long-term company profitability.
The Great Resignation was driven, in large part, by the realization that employees have a choice. Without a doubt, many employees chose to hunker down as the pandemic gripped the world in 2020. As the disease’s clutch began to loosen in the Spring of 2021, however, employees who felt overworked, undervalued, and who had, many times, witnessed the elimination of their peer’s jobs decided to leave. Companies that continued to focus on culture–particularly one of psychological safety and trust were rewarded with increased employee engagement and satisfaction in the “Great Resignation” that followed.
Loyalty rewards loyalty. There’s no surprise there. The fact is, though, it’s become far less common in today’s workplace. Indeed, layoffs are now an expected, knee-jerk reaction to economic uncertainty. Layoffs have increased 10-fold since the 70’s and have continued to inch upward since the aughts. In the 2008-2011 recession, 65% of US companies laid off employees. With numbers like these, loyalty has become special. Retaining staff through an economic downturn becomes a selling point for years after the dip. Employees and candidates notice when a company hangs onto its greatest asset–its people.
Tempted to cut? You might want to think twice. Layoffs have been shown time and time again to lead to significant declines in employee satisfaction, corporate innovation, and–according to one study–downsizing by even as little as 1% leads to a 31% rise in voluntary turnover the year following.
So, don’t let a temporary set back seduce you into a scarcity mindset. 2023 could be a landmark year of growth and opportunity. You (and your team) will be far better poised to take advantage if you can afford to simply practice patience.