If you’re a business owner or people leader, you’ve felt the crunch. No matter the size, industry, or ambitions of your organization, you’re not immune to the macroeconomic factors feeding frustrations in 2023.
We’ve been here before—not long ago, in fact—and we know that talent-first companies can withstand economic headwinds, persevere, and eventually prosper. When your business and people strategies are in lockstep, you run less risk of sacrificing your greatest asset (your people), in times of panic or protracted prosperity.
The good news? We can count on some things being cyclical. Even amid waves of layoffs, mixed employment data, renewed inflation concerns, and fissures in our financial markets, there’s less uncertainty now than there was three years ago.
In 2020, the unknown seemed to be all we knew. Impossible questions abounded:
- When will COVID-19 be contained?
- Can we make key business decisions quickly?
- How do we preserve our culture?
- How can we avoid going out of business during lockdown?
Three years later, companies can find comfort in the fact that markets eventually right themselves. Rebounds are inevitable, and recessions end. Not to mention: You’ve been through this.
You’re no longer navigating uncharted waters, propelled forward by an urgent need to lead your company to safety so it will endure. This financial crisis wasn’t dictated by a global pandemic. Sure, some of its fallout may be tied to decisions made during the COVID era. But there are fewer unknowns. And the path forward is one we know: The best way to take care of your people is—still—to ensure your company is resilient.
Let’s revisit what talent optimization looks like during a downturn.
You’ll endure by being agile.
While recessions impact most organizations, an HBR study found 9% of companies flourished after a slowdown. What did these companies’ senior teams do differently that you can learn from? They ensured agility and resilience – and they were clear in their communication.
“It is very important to convey clear and honest expectations going forward,” says John McGuinness, Chief Financial Officer at The Predictive Index. “Transparency is as important as financial results.”
In a crisis, your company’s survival hinges on its ability to mobilize and inspire your talent. Your decisions and actions determine whether your people will be an asset or a liability. Are they bought-in believers, or disengaged defectors? Ideally, your talent ensures adaptation by quickly developing and implementing a new operating model. But a variety of talent missteps can cause business failure:
- Employees aren’t aligned with the new strategy.
- Leaders are oblivious to employee struggles.
- Leaders poorly manage the impact of a reduction in force.
- Hiring teams don’t reevaluate job requirements and needed skills.
You must remain ready to pivot.
Talent optimization is a discipline for designing and executing a talent strategy that aligns with your business strategy. It utilizes quantitative “people data” and analytics to help you predict outcomes and make informed decisions. While it’s hard to manage panic and the impulse to make knee-jerk decisions, objectivity will be your saving grace.
The 2022 State of Talent Optimization Report reaffirmed a core tenet of the discipline: You can maximize performance by crafting an aligned talent strategy that empowers your employees to handle the execution themselves. The study found specific combinations of talent optimization practices translated to positive business results. For example, senior leaders at companies that practice talent optimization reported greater success with their strategic initiatives. Especially in trying economic times, when you need every advantage you can, improving outcomes by even modest margins is an enormous market differentiator.
“Pay attention to what is happening within the business and also within the economy,” says McGuinness. “The last 10 years have been good years. Many people working within [your] business have never experienced challenging years during uncertain economic times. COVID was a different type of challenge that we all needed to work through. An economic downturn is much different and can last for a long time. The recent banking issues will not make this any easier.”
Talent optimization enables your company to rapidly pivot in light of changing circumstances—so you can make tough decisions, fast and with confidence. While talent optimization is a solution for everyday business challenges, it’s exceptionally helpful in times of change and uncertainty. It’s a practical way to ensure agility and resilience.
Your top challenges are everyone’s challenges.
We often use the four aptitudes of talent optimization—Design, Inspire, Diagnose, and Hire—to provide a framework for how to adapt your business and solve the following challenges:
Reduction in demand: COVID-19 caused a sudden and massive slowdown in economic activity and a drastic reduction in demand for products and services. Businesses had to contend with late payments, paused contracts, supply chain ills, and stalled deals. While there aren’t lockdowns and social distancing mandates in 2023, many of the same risk assessments still apply, stymying demand for certain goods and services.
Reduction in spending: The reduction in demand means companies must adjust their cost base and investments accordingly. Conserving cash, temporarily rightsizing capacity, or permanently reducing headcount is necessary to preserve the core and keep operations running.
Supply and infrastructure disruption: Supply chains may break down, and canceled arrangements will cause additional business interruptions. While these are often necessary (especially when measures are in place to limit the spread of a virus), they mean more stress for workers, and they can threaten your organization’s ability to continue operating efficiently.
Uncertainty and fear: Uncertainty and fear can prevent employees from speaking up to share new ideas or innovate—exactly what organizations need during hard economic times. Fear can also drive down engagement levels and receptiveness to change.
The fallout from the Silicon Valley Bank dissolution may not bring the same unprecedented uncertainty as the COVID-19 pandemic. Even if it is a Black Swan event, its ripple effect is felt throughout our interconnected financial systems. As business leaders, you have an obligation to not only account for exposures, but to communicate any risk mitigation measures or actions you take in response.
Even if your company isn’t itself tied to SVB, others will be—perhaps some with whom you have partnerships or shared interests. And when credit lines and liquidity are compromised, fear of payroll pressure and people problems tend to follow. Get out in front of your people, and communicate clearly and calmly to alleviate their fears early.
“The plans you developed twelve months ago might not be the same plans going forward,” McGuinness acknowledges. “Be willing to adjust. Pre-hire activities and solutions will always be important. The next two years will be all about post-hire activities and solutions. Getting those right will be critical.”
Any action requires clear communication.
These are just a few of the many challenges you’re facing right now. You’ll need to take swift, difficult action to rise above them. You’ll need a solid action plan.
- How will you lead very different operations once your strategy has changed?
- How will you preserve your culture when employees are dispersed and stressed?
- How will you restore communication and collaboration in teams that have lost key members—or leaders?
- How do you help your mid-level managers not buck under the pressure of doing more with less?
Talent optimization is the key to ensuring:
- Rapidly realigned strategy and capabilities (Design)
- Adaptable operating model and culture (Diagnose)
- Resilient leaders, teams, and individuals (Inspire)
- Realigned jobs to accomplish more with less (Hire)
More importantly, talent optimization enables you to adapt to change and lead through turbulent times—so your business can come out on top.
Let the storm show your mastery.