Global political stability has weakened over the past few years. Political uncertainty leads to economic uncertainty as the OECD is lowering global economic growth forecasts to historical low rates. Trusting the historic inability of economists to predict a recession and believing in the pattern on how they fail to do so, we should actually prepare for one right now!
How to prepare for something we do not know how it will hit us? Most of our businesses do not yet really understand how Brexit or global trade wars will affect us locally where we are.
We, HR leaders, have a few tools in our bags though, that we can rely on:
- Our experience: we have lived similar scenarios multiple times through our career and can reflect on lessons learned to prepare better this time
- The community wisdom: knowledge sharing can hardly be any better than in the HR community
Having discussed with several senior representatives of the HR community and looking back at my own lessons learnt, I am sharing my thoughts on how we could define our agendas for the next year on the key topics hereafter:
Learning and Development
No surprises here. If the business is preparing to navigate through troubled water, then let’s save our time right away and resist investing time and effort in preparing for large development programmes for 2020. Any budget allocated to those will be the first target of our CFOs when it comes to identifying opportunities to save cost.
Instead, promote a development programme focused on the use of internal resources, knowledge sharing and collaboration. If activities slow down, you will find a far greater commitment from the different areas of your business to participate actively than in times where they are struggling to deliver their own agendas. Use this to your, and your company’s, advantage!
If your organisation is obliged to run some regulatory and mandatory trainings on an annual basis, and if those are included in your HR budget, then you may wish to try to transfer this budget to your Compliance and Risk colleagues. They will be in a better position to defend their necessity.
Talking about budgets, preparing for a difficult year is a unique opportunity to position yourself as a credible and foreseeing leader by submitting a budget already reduced compared to previous year and by highlighting the areas that might be further reduced if business does not develop as planned. Some executives might play the game of overcharging their budget submissions, just to give in to cutting requests later on without really challenging themselves. Do not be tempted to play likewise – it does not pay off.
You are managing a vital part of your organisation, although at the same time often undervalued for its impact on the business. By demonstrating sustainable thinking, you will gain credibility as a business partner from your CEO and CFO and your voice will gain in weight for future debates on topics you will want to introduce to support the business in a sustainable way.
Do not cut your recruitment budget yet though. Keep it in line with your organisation’s headcount forecasting. For any recruitment activity planned in relation to development activities, you may wish though to clearly categorise your budget impact, so that you can easily adjust your budget when those activities are put on hold during next year. Keep an interest in how those initiatives develop and look for early signs that the decision process is slowing down. You can then anticipate any impact on your resource allocation plan.
Reward and benefits
2019 might have been a good year for your business and people will be expecting a variable recognition in line with your results – which is perfectly legitimate. There will be a similar expectation for base pay adjustments, both from your people and your managers. On base pay however, you should discuss your 2020 business forecasting scenarios, including the more pessimistic ones. Simulate the salary cost budget on the basis of a) a more generous base pay adjustment budget, and b) a less generous one. Then challenge your executive colleagues on which consequences they would need to take in both scenarios if the pessimistic business forecasting scenario kicks in mid-year. How many jobs would need to go? How disruptive would this be? It might be wise to manage expectations and prepare your management population for little flexibility on base pay increases, so that there will be one voice into the organisation.
If this proves to be a difficult exercise, then 2020 could also be a good year to review your reward and benefits policies. They should allow people not to be confronted with situations where the gap between their expectations and what can be done is all too big…
We have seen in the years 2008 and following, the last financial crisis, that many companies stopped running their performance management programmes. Most of them with the rational that there will be anyway no budget for bonuses… That is wrong in 2 ways:
- How can, in difficult times, managing the organisation’s performance all of a sudden no longer be of importance? The opposite should be the case!
- If the approach of performance management is perceived as mainly serving the allocation of bonuses, than it is plain wrong! Performance management should only focus on aligning the efforts of all to the business objectives and as such delivering superior performance of the organisation
2020 should be a year of particular focus on performance management, including reviewing the approach to align efforts on what really matters. This is the area in which HR can deliver the most valuable contribution to the business in difficult times.
Communication is key in times of uncertainty. Do not let a communication vacuum be filled with rumours and speculations that are born next to the coffee machine – those are rarely of a nature to boost engagement and increase confidence.
Tell people how the organisation is preparing for a slow-down in business growth. Let them know and make them feel that their contributions are valued, especially if you know you cannot do so financially.
Give them opportunities to get involved in addressing the business’ challenges – you will need every idea, initiative and good will to get what really matters delivered.
When budgets are getting tight, the pressure to review the way operations are organised increases. We have all been there – being asked to deliver more with less.
2020 might be the year indeed to take a new look at the market and consider outsourcing of HR operations – it is an offering that has developed considerably over recent years and some truly value-adding propositions are available.
Some of its key benefits are:
- Continuity of service
- Best practice
- Peace of mind
- and time to focus on the things that matter!
Preparing the next year’s agenda is each year a different exercise for HR. It needs to be adapted to the business’ challenges and context. But it is also a great opportunity to demonstrate the value HR adds to an organisation, even and especially in difficult times.
The good news is that, however hard an economic slowdown or even recession is affecting your business, HR will have work to do. Anticipation and preparation will be key to being successful.
Align your agenda to what lies ahead – start now!