As inflation rises and talks of recessions loom overhead, concerns of economic precarity are becoming more real.
Brokerage firm Nomura predicts an economic downturn across the eurozone, the UK, Japan, South Korea, Australia, the U.S., and Canada within the next 12 months.
For companies still trying to shore up their workforce against the Great Resignation, this presents a serious challenge: How do we continue to create an attractive employee experience if our People budget is dramatically cut? Should we invest in employee growth when we may have to downsize the workforce?
In the last major recession in 2007-2009, training budgets plummeted by 21%, according to a 2009 report by professional services firm Bersin.
However, companies who hope to remain competitive must find a way to focus on employee growth, even during a downturn. Economic hardship hurts everyone — but when employees feel support and investment in their careers, they’re more likely to lean into their roles, resulting in better outcomes for their teams and organisational goals.
Why Employee Growth Matters During a Downturn
“I cannot be emphatic enough; yes, you should absolutely invest in your people,” he said. “Building a team is a long-term investment, and it must ebb and flow with the economy.”
There are proven benefits to investing in employee growth — and these become even more critical during an economic crisis.
Investing in workplace development increases employee retention.
Usually, companies are more concerned with layoffs than retaining existing staff during a recession. And while no organisation ever wants to lose their top talent, surviving a downturn requires a loyal and motivated team who are dedicated to righting the ship as quickly as possible.
“Although the indicators show that the economy has started to slow, the truth is, unemployment is still incredibly low,” said Murdock. “Your people will leave if they don’t feel like you’re investing in them, and there are plenty of jobs for them to take.”
While you may be forced into layoffs, right now you need to make sure that your people are keen to stay with your business.
Not only will investing in growth encourage retention in the short term, it will likely also save costs over the long haul, points out Dr. Wayne Pernell, Leadership Expert at DynamicLeader, Inc.: “Turnover costs between 50% to 150% of a person's salary, so investing in your people can save your bottom line in the long run — especially when your top performers level up and become more productive!”
And, when it comes to retention, learning and development programmes are key. A 2021 report by Salesforce found that over two thirds of employees would be more likely to remain with an employer who invested in their growth.
Growth boosts employee engagement, which leads to higher productivity.
Salesforce’s 2021 survey also reported that 70% of respondents would be more productive and engaged if their employer invested in learning and development (L&D) programmes. During an economic downturn, companies need to feel confident that every employee is willing to put in their best work, to ensure the long-term survival of the business.
Employees who see that their employer is prioritising their growth and wellbeing are far more likely to feel that they’re “all in this together”, and do their best to help the company survive and thrive despite the economic crisis.
How to Get Executive Buy-in For A Development Budget During a Recession
While the People team may be convinced that employee growth is a top priority, it can be hard to convince the C-suite that spending on L&D is critical to the business during tough times. So, how can you get executive buy-in to invest in development, when they’re looking at a tightened budget?
1. Demonstrate the ROI of employee development.
When you’re proposing strategies to the C-suite, you need to be able to make a solid business case. Hunter Mefford, CMO at Advanced Recovery Systems, points out that many of today’s digital employee development platforms make it easy to prove that investing in employee growth pays off for the business. “Software tools spanning Marketing, HR, Finance, and Operations all offer means of up-skilling your workforce without the hefty expense of in-person training,” he said.
As well as demonstrating the value for money offered by digital training solutions, you could also show business leaders supporting evidence from research institutions. For example, Pew Research Center’s research on the Great Resignation found 63% of workers who quit a job in 2021 “no opportunities for advancement” as a minor or major reason for leaving.
And in Lattice’s 2021 career progression survey, 76% of employees said they would be somewhat or very likely to leave a role if they were dissatisfied with the progression opportunities available.
2. Focus on long-term stability.
The C-suite are likely to be thinking about both the short-term implications of an economic downturn, and the long-term survival strategy for the business. It’s crucial that they see employee growth as part of their long-term vision, not as a cost centre that should be trimmed when times get tough. Otherwise, they risk damaging the relationship between the employees and business leadership, resulting in a disengaged workforce.
Murdock also points out that this kind of short-termism may also mean that employees fall behind professionally. If your team isn’t learning new skills during the recession, it may be far harder for the business to remain competitive once it ends.
“You cannot show fear and allow that to manifest in how you are investing in your employees; they are your number one asset,” he said. “Slowdowns are always temporary, and the economy is cyclical. If you cut too deep on your workforce, you’ll be behind when things inevitably return to growth mode.”
5 Ways to Invest in Employee Growth on a Tight Budget
Even if you secure senior leader buy-in for maintaining a strong L&D programme for your employees, you may well be facing significant People budget cuts. Here are four practical strategies HR professionals can use to support employee growth without breaking the bank:
1. Build growth through connection.
To get the most out of your employee development programme, prioritise training programmes that also foster a sense of camaraderie and connection between employees. That way, you can build company culture, encourage team loyalty, and support employee learning at the same time.
In good times and in bad, Murdock recommends company-sponsored “Lunch and Learns.” “These allow our employees to come together over a nice lunch, receive some professional development, and give people within the company an opportunity to learn from each other,” he said. “The camaraderie within the group builds the culture, the lunch shows the company cares and is still invested, and the content proves we want our employees to grow.”
Pernell agreed, but added a note of caution.
“Team-building events and opportunities should include a variety of in-person and virtual options,” he said. “Most employers get it wrong by inviting only remote workers who are local for after-work get-togethers and in-office parties or events. This is exclusive and demoralising, showing preference for those in office and local.”
For these collective learning opportunities to support your culture, they must be truly inclusive, especially if you have a hybrid team.
“Instead, build travel and lodging back into your budget so as to be fully inclusive. Since most employers are downsizing on cost-per-square-foot expenses, travel and lodging for events can have a bolstered budget. The pay-off is tremendous.”
2. Remember that employee recognition doesn’t cost a thing.
While there are many formal employee recognition programs offering perks and benefits for top performers, employee recognition can be as simple as taking a moment to congratulate employees on a job well done or offer specific positive feedback. Pernell advised all managers facing an economic downturn to “take time each week to acknowledge your team members’ unique contributions within the organisation.”
Employee recognition doesn’t only boost engagement and retention, it also encourages employees to work on their own growth.
It helps employees to understand which behaviours and skills earn them praise, so they know where they should focus their own development efforts.
Plus, by motivating employees to improve their performance, employee recognition encourages everyone to proactively seek out learning opportunities which will help them grow professionally, creating a steady, upward cycle of development.
3. Encourage mindful management.
Managers are key to employee growth. A recent Gallup survey found that “at least 70% of the variance in team engagement is explained by the quality of the manager or team leader.” Better management will have as much of an impact on employee growth as many high-cost training initiatives.
Pernell advised managers to work with their direct reports to foster a culture of growth and development, regardless of the economic situation:
“Giving employees the freedom to work on projects on their own time and fuel their own interests is a great way to keep up morale. Balance this with checking in to ensure that employees have what they need to complete their tasks and assign specific tasks and subtasks with intention and deadlines. Additionally, offer encouragement by sharing why you chose them for a specific task, giving them a sense of ownership and pride in the work.”
Managers can use 1:1s or developmental reviews to have meaningful conversations about career development throughout the year.
4. Promote emotional development to avoid burnout.
If you’re planning to invest in employee growth during an economic downturn, it’s key that you invest wisely. Dr Brandi Baldwin, CEO at Millennial Ventures Holdings, advises employers to invest in their employees’ skills in stress management and overall wellness, not just their professional development. This holds true in general, but many employees are currently facing current financial pressures that make it particularly important:
“Today's employees are stressed, worried about the recession, and disgruntled about inflation. They are bringing this baggage in with them everyday to work. Employers should invest heavily in wellness-related resources. In addition, employers should instruct managers to consider ways that they can provide additional flexibility to employees. For example, they could allow their teams to leave early on a Friday, or simply encourage employees to take their unused PTO.”
5. Use technology to optimise the results of your growth initiatives.
Investing in your people can sustain your business during a downturn — but only if your development programme has been designed to deliver real results. Otherwise, you risk spending much-needed resources on employee growth, without seeing the outcomes your business depends on for survival: employee motivation, productivity, retention, and performance.
A platform like Lattice grow can make sure that you’re not wasting your Human Resources budget during a financial crisis. For instance:
- Competency matrices make growth crystal clear to employees, by directing them to where they should focus their development efforts.
- Tools and templates make it easier for managers to support employee growth with valuable one-to-ones, mentoring, and performance reviews.
- Individual development plans empower employees to drive their own growth and take advantage of every career development opportunity.
Putting People First Helps Your Business Last
A people-first strategy is a pivotal approach that’s worth the long-term investment, especially during an economic downturn. Even on a tight budget, you can still provide your employees with ample opportunities to grow and develop — whether through mentorship, digital technology, or a non-monetary recognition programme. Regardless of approach, investing in your people during a financial downturn is the best method to ensure that your business continues to thrive.
To learn more about how investing in growth drives bottom-line impact for businesses, download our ebook, How to Use Performance Management to Inspire Employee Growth.