As the COVID-19 pandemic is spreading across the globe, markets are taking a hit. Additionally, the growth rate of the economy slowed last year because the trade war with China and other countries took a toll. Last year, the International Monetary Fund depreciated its objectives for global growth in 2020, when several major countries including Germany which is the home to Europe’s largest economy, were technically already in recession.
During a recession, many companies relinquish to the pressures of sustaining workforce costs amidst diminishing revenues. According to a report by the Families and Work Institute in 2009, nearly 75 per cent of employers manage a recession by cutting out holiday bonuses, scaling back on wage increases or conducting layoffs.
The role of a Human Resource Manager is evolving with the change in the competitive market environment and the realisation that Human Resource Management must play a more strategic role in the success of an organisation. HR Professionals mostly focus on personnel retention and talent management. They should also concentrate on building employees’ trust in leadership through honest, effective and frequent communication, regardless of the circumstances.
Even if a recession does occur, HR leaders should keep in mind that any loosening of the rigid employee demand will potentially be short-lived. Although a recession may temporarily ease the talent shortage in some areas, within a few years, the labour market will be as inflexible as ever.
Nevertheless, economic downtrends prompted by global health crises or otherwise often leave companies with little choice but to cut costs. Therefore, HR leaders should begin developing some plans ahead of time, rather than waiting until an actual recession comes up.
During the Great Recession in 2008, managers suffered extensively. As companies cut costs relentlessly to stay afloat, executives ended up with fewer resources and greater commitments.
The stress an employee tends to feel during a downturn reflects the feelings that may escort mergers and acquisitions. The best approach that leaders and managers should take during such a crisis is a rigorous commitment to open, consistent and honest communication and regular feedback. Managers have a crucial role to play in helping employees. They should discuss with their employees to understand how they work and how it is connected to the team’s goals and the larger organisation’s mission.
A focus on employee wellbeing has taken hold at many companies today, and for a good reason. Companies should concentrate on workers’ emotional, mental, social and financial health because everything is just as important as their physical health. All of these factors will be put to the test during a recession especially so as fears over COVID-19 continue to affect wellbeing. That’s something HR will need to keep in mind, even as pressures grow to cut costs.