Performance Management

Why Performance Management Still Matters in a Recession

June 7, 2022
November 7, 2023
Andy Przystanski
Lattice Team

In good times and bad, employees remain the constant behind your business’s success. During the pandemic, investing in your people wasn’t just the right thing to do — it gave your company an edge.

Still, recent market instability and whispers of a recession have led some businesses to slow their investment in people programs and rethink HR strategies for the year ahead.

Performance management shouldn’t be where you compromise. Feedback, goal setting, and career development don't just empower teams to weather storms but emerge from them stronger than before. We asked HR leaders to share their perspectives on how performance management can be your differentiator during crisis and uncertainty. 

1. Feedback keeps you firing on all cylinders.

After months of growth, companies are scaling back forecasts and hiring goals. Sudden pivots like these don’t just impact your bottom line — they’re emotionally deflating, especially for employees unaccustomed to working during a downturn. According to Catherine Castro, Senior HR and Recruitment Manager at 20four7V, circumstances like these permanently change cultures, for better or worse.

“When money is tight, it’s easy for employees to become demotivated,” Castro said. “After all, if fewer resources are available and jobs are at risk, it stands to reason that people will be less engaged, even over the long term.”

There’s ample evidence that receiving positive and developmental feedback impacts our happiness and motivation. For example, according to a recent study, 82% of employees consider recognition a crucial part of their happiness at work. A Harvard Business Review report found that 72% of survey respondents thought performance management was the most impactful way to drive engagement, notably when high-performing employees are recognized for a job well done.

“Focusing on performance provides a way to motivate employees by setting clear goals and expectations and giving them regular feedback on their progress. This helps keep them focused on doing their best work, even in tough times,” she said. “Above all, these programs show employees that you're committed to their success and invested in their growth.”

2. Crisis gives future leaders a time to shine.

“Leadership isn’t just tested during a crisis. It emerges,” according to Ann Piccirillo, Senior Vice President of People Operations at JDA TSG.

Piccirillo has seen the transformative role adversity has on high-potential employees throughout her career. Maintaining a cadence of feedback, goal setting, and career coaching can help individual contributors and budding managers blossom, setting your company up for success post-downturn or crisis.

In other words, doubling down on performance and growth during a crisis isn’t just about damage control today — it’s about thinking months, even years ahead.

“Developing these leadership skills is just as important to succession planning. Remember that it builds a strong talent pool ready to be promoted into leadership,” Piccirillo said. As shown by the surge in resignations six months ago, increases in voluntary turnover often follow a crisis. Losing high performers and managers during these resignation waves always hurts — having a solid bench of talent ready to step up softens the blow.

“It’s the high-performing talent who power you through economic downturns…Organizations that continually invest in employees, whether through continual feedback, setting goals, or upskill programs, are investing in their own future,” she said. 

3. Retention still matters during uncertainty.

Retention might not be your team’s chief concern in a downturn or crisis. Balancing budgets, change management, and keeping morale high may take precedence. After all, leaving a job — even one you’re unhappy with — comes at a risk when so few are hiring. But as several HR leaders pointed out to us, using the economy as an excuse to take your foot off the gas nearly always backfires.

“The truth is, employees are less likely to switch jobs during a recession. That could mean companies might invest less in development or other HR practices,” said Jessica Lim, HR Business Partner at MyPerfectResume. “However, I don’t think that’s the road to take.”

Lim stressed that retention is both a short and long game. In the near term, feedback, goal setting, and career development help you grow the talent that you already have. That empowers your business to innovate and succeed while the competition has its eyes off the road. “For your business, it means better employee performance today, which ultimately helps you achieve company goals,” Lim said.

But more importantly, Lim said, it sets you up for what comes next. Storms never last — and one day, external recruiters will again come knocking.

“Suppose employees see that you’re willing to put extra effort and invest in their development during an economic downturn. In that case, they will be more loyal to your company,” Lim said. “If you’re hiring, they may even serve as brand ambassadors for people outside your organization.”

4. Goal setting gives us clarity. 

The pandemic reintroduced us to a state of mind sociologists call “languishing,” or a malaise that clouds our focus and mutes ambition. In a New York Times column, organizational psychologist Adam Grant described it as:

"[A mental state] of stagnation and emptiness. It feels as if you’re muddling through your days, looking at your life through a foggy windshield…Languishing dulls your motivation, disrupts your ability to focus, and triples the odds that you’ll cut back on work."

Organizational psychologists like Grant have studied languishing for decades, usually in the context of health crises and recessions. In the same column, Grant advises individuals to turn to goal setting — a personal and professional best practice that gives us focus and a fast track to feelings of accomplishment. One university study found that the simple act of writing down a goal makes you 42% more likely to achieve it.

HR leaders including Lim echoed that sentiment, with the caveat that some goals are better than others. Specific, attainable targets (you can use the SMART goal method to gut check yours) lift spirits and give employees the clarity they need in times of crisis. “Setting clear, actionable goals helps your staff stay focused on their projects and gives managers better control of their team performance,” Lim said. 

In any market, investing in performance management isn’t just a best practice — it’s a prerequisite for business success. Lattice’s HR software empowers your team to easily share feedback, set and track goals, and manage performance reviews, and more. That makes for better aligned, more engaged, and higher-performing teams regardless of which way the wind is blowing.

An independent study by Forrester Consulting found that Lattice’s software had a three-month payback period and delivered a 195% return on investment. To read the full study, click here. If you’d like to see our platform in action, schedule a demo today.