Rolling with the recession: how HR can succeed

The twists and turns of a recession can be unpredictable, yet with the right preparation it’s another chance for HR to show its colours.

It’s 2007. The trade floor is packed with men in suits, talking quickly into mobile phones, impatiently watching the movement of stocks on monitors stacked in clusters of tens.

Fast forward 12 months. The same bustling floor is a wasteland of paper. The monitors flicker only for the attention of a cleaner slowly making his way around the office to sweep up the mess.

This was the fallout from the 2008 stock market crash.

In 2007, the US’ housing bubble, filled with sub-prime mortgages, burst, starting a chain reaction that would see the western economy fall to its knees.

Dial HR in an emergency:

Keeping internal communications open in times of crisis

The jobs most likely to bear the brunt of a 2022 recession

How to lead with data in times of crisis

Thousands were turfed out of their homes and banking titans found themselves teetering on the brink of bankruptcy – or, in the case of Lehman Brothers, shoved over the edge.

Today, the UK is staring into the abyss of another recession. On 30 August, Goldman Sachs predicted the UK economy could shrink by 0.6% in 2023 instead of initial forecasts of 1.1% growth.

Predictions from the Bank of England said the UK would be in a recession by the end of the year which could last five quarters into 2024 – the same length as 2008’s Great Recession, after which it took five years for GDP to recover.

However, the next recession is set to take on an entirely different shape. Rather than a stock market crash, select market inflation and high job losses, it would be characterised by stagflation – where inflation rises across the board, GDP growth slows, and the rate of unemployment increases.

It also comes during a talent shortage, and off the back of a pandemic, a shallow 2020 recession and the soaring cost of living.

It’s another potential crisis for HR to face up to. So what steps can the profession take to prepare? And will the recession offer more opportunities for HR to transform?


Plan ahead

One of the vital tools for tackling a recession, and persistent talent shortages, is workforce planning – a skill which is often eschewed by HR.

In a 2019 blog for the Institute of Employment Studies, principal associate and researcher Wendy Hirsch wrote: “Workforce planning seems to have the power to turn grown-up, highly skilled HR professionals to jelly.”

The reasons behind HR’s reluctance to do workforce planning Hirsch found were four-fold: either the business is rethinking its planning process; it’s in the process of getting a new HR information system; people want to wait for stability to start planning, or the HR team doesn’t have the technical capability to do it.

Shelley Thomas, group HR director at private health provider Spire Healthcare, argues that all of these reasons can be overcome by one simple fact: “Everything else is repeatable, isn’t it? You can copy products, you can copy services, you can copy infrastructure – the one thing you can’t copy is people,” she says.

“We need to be really efficient from an HR perspective, we need to safeguard the talent that we’ve got.”

To make it more manageable, Thomas recommends splitting workforce planning tasks into strategic and operational – strategic focusing on, for example, company direction and skills availability, and operational on planned and unplanned talent gaps and how that impacts succession, recruitment and skills development.

“I believe in the sentiment of treating your workforce as volunteers,” she says. “You have to understand each one’s motivations to do a good job of workforce and succession planning we can’t assume.”

Adding a diversity and inclusion (D&I) lens she adds, further complicates the process.

Groups underrepresented in society are typically those hit the hardest in a crisis. In 2021, the Trades Union Congress reported that black and minority ethnic (BME) workers had been hit much harder by job losses during the pandemic than white workers.

At the height of the pandemic too, the government also dropped its mandate on gender pay gap reporting. Just 2,440 businesses reported their data for 2020 compared with 6,150 in 2021, and campaign groups warned it would stall progress towards pay equality.


"Historically, a diverse workforce is more resilient in challenging times"


Having worked in HR throughout the 2008 recession, Thomas says D&I wasn’t a priority, yet it is what organisations need the most.

“People stopped worrying about equal pay, they stopped looking at inclusive recruitment practices because it was just more panic and you can’t engage keep your workforce committed, unless you keep that on the agenda,” she says.

“We know that, historically, a diverse workforce is more resilient in challenging times including economic downturns. Focusing on diversity when times are difficult strengthens our companies and that’s our job.”

Building a resilient workforce:

Embrace failure to build resilience

Why employee resilience is the future of work

How to cope with a loss of control

Tania Garrett, chief people officer at software company Unit4, is also concerned the consistent high competition for talent risks exacerbating shortcomings in D&I.

“Six months ago everybody was really taking their time, making sure that they had diverse candidates and were working hard to make sure that from a D&I perspective, your recruitment efforts were underpinning that,” she says. “I worry that those sorts of things fall to the side when [new challenges] bubble up.”

To mitigate the disproportionate impact recession could have on select groups, 2022 HR Most Influential thinker Aggie Mutuma, CEO of Mahogany Inclusion Partners, advises HR to make sure leaders are aware of the impact and ways they can help.

She says: “In the context of the ‘great return to the office’ HR can ensure the organisation has a keen understanding of the impact this has on already underserved communities – and coaching them to factor this into decision-making.”

Mutuma recommends over indexing on communication about benefits that help staff save money and improve their health.

But, she says, it’s not HR’s responsibility alone. The groups hardest-hit by an economic crisis are often those that are paid the least, so without solving pay inequity she says it’s unlikely HR can avoid impact altogether.

“I believe that the responsibilities lie with finance teams to raise flags and make the business aware of fiscal changes on the horizon, then HR teams to assess the impact on the workforce and ultimately the board to assess all the insights and then agree the organisational approach/budgets to support,” she says.

Another area, key to workforce planning but often overlooked in a downturn, is learning and development.

HR consultant Katy McMinn says: “It’s so short-sighted. We need to, obviously, get through this period, but we need to be ready to go again when things pick up.

“If we do stop, and we do stop investing in people’s development, we’re going to fall behind. We’re in danger of not having the skills to be able to be ready to go again.”


Ready for the drop

Though uncertainty prevails, the one thing HR can count on is that there is nothing the profession needs that it doesn’t already have at its fingertips.

After 2008, University College Dublin’s Bill Roche asked HR leaders: “Did you have to throw the textbooks out the window? Were the shocks so profound that you almost had to go back and reinvent how to do HR?”

He says: “The answer universally was no.”

HR’s core transactional skills, such as how to handle pay and reward, and how to be agile in the face of downturn, will remain important in future recessions, as will ethics. Roche says: “Some HR leads have said to us, we had to be very careful not to allow line managers to cut loose and think they can use the recession to resolve all their anxieties.”

Ultimately, Roche says, it will be a question of balance: “One of the things that was important was that soft HR [communication, wellbeing management] wasn’t driven out by hard HR [a focus on bottom line, moving to command and control leadership].”

Thomas agrees, she says: “The combination of the softer elements of caring for people and a grittier approach from HR – getting those two things right, is going to be critical.

“And rather than turn to HR as the first function that needs to be trimmed down in a recession, it’s actually the ones that have a strong robust HR strategy that will ensure the ongoing viability of a lot of businesses.”

One of the advantages of a predicted recession, Thomas adds, is that HR can get ahead through preparation.

“A recession tends to be a bit of a slower burn; people have been talking about it for a while,” she says. “You’ve got a little bit more time to prepare because it’s slower to get there.”

It can be difficult to juggle priorities when crisis strikes, says Thomas. Getting the basics right will help buy the time and space needed to continue with more strategic tasks that might otherwise fall of the agenda.

“We could be faced with a recession and a pandemic simultaneously so, look at everything that can be online and done remotely. All of that prep work can be done now, which gives you then the head space to say, ‘Okay, how do we maintain our people and then keep them engaged and committed through a prolonged recession?’” she says.


This is part one of an article which appears in the September/October 2022 print issue. Click here for part two.  

Subscribe today to have all our latest articles delivered right to your desk.