HR leaders can play a key role in helping their organisation weather an economic downturn, however, the majority of CHROs are unprepared for such events and need to take action in order to improve organisational resilience and help survive through a recession.
Economists globally are predicting a 20-25 per cent chance of an economic downturn or recession within the next twelve months, and a recent research report found that HR is largely unprepared for such an event.
This is particularly the case in Australia where the impact of the global financial crisis was less pronounced than elsewhere in the globe, said Dee Fitzgerald, a consultant in the leadership and succession practice at executive search firm Russell Reynolds, which conducted a survey of 534 C-Suite executives (including 43 CHROs in the Asia-Pacific region).
It found that 98 per cent of respondents believe a recession is coming while a further 65 per cent anticipated a downturn would have a moderate to significant negative impact on company performance.
The research found that only 4 per cent of all executives within surveyed organisations are ready for disruptions, and only 12 per cent of CHROs indicated their team is well prepared to respond to a downturn.
“While most deem that a recession is inevitable, only 9 per cent of CHROs surveyed would describe themselves as well prepared to manage through an economic downturn,” said Fitzgerald.
CHROs are even less confident in the level of preparedness of their teams, with only 3 per cent of CHROs stating that they are confident in their team’s ability to respond to a recession.
“The HR function could very well be the function that helps an organisation survive through a recession and recover faster than competitors, although the development of the HR function and team is often low on the executive agenda,” said Fitzgerald.
While most senior executives rank the CEO, business unit leaders and finance as the most important functions in managing an economic downturn, CHROs believe that the HR function is critical in helping organisations survive a recession.
“The HR function could very well be the function that helps an organisation survive through a recession and recover faster than competitors”
Organisational resilience through talent management
If an organisation waits for a recession to hit before discovering that it has the wrong leadership in place, Fitzgerald observed that it will ultimately find itself on the defensive.
“CHROs have a critical role to play in helping organisations recognise that the leadership required in the future may be radically different to that of today,” she said.
“They play an important role in building a strong culture and talent strategy, thus ensuring the sustainability of the organisation.
“Attracting the right talent, retaining the right talent and developing the right talent – these are key focus areas for a CHRO, whether facing a downturn or not.”
HR can therefore play an important role in helping the entire organisation to prepare for a potential recession by asking the right questions in relation to talent strategy, she said.
Fitzgerald explained that there are five steps CHROs can take to help executives and their organisations weather an economic downturn:
- Have courageous conversations with senior leadership
- Identify gaps, especially around agility and having experience of a slowing market
- Address the gaps with effective talent strategies, culture and leadership
- Stress-test team capabilities to respond and execute contingency plans
- Do it now. “Whatever you do, it is important to never wait,” said Fitzgerald. “Waiting for a recession to hit before realising that the organisation does not have the right team in place may cause a recession to have significant negative impact on company performance.”
“Identifying leaders who can adjust their behaviour to changing business conditions will ensure continued effectiveness during challenging times”
Resilience through diversity & inclusion
Tina Shah Paikeday, global leader of the diversity & inclusion practice at Russell Reynolds, added that the threat of an economic downturn is not the only issue that characterises the landscape of Australia’s current business landscape.
“Our research shows that inclusive leaders can significantly affect their employee’s experience at work, thus improving outcomes including job satisfaction, loyalty and sense of belonging,” she said.
“Inclusion helps employees be authentic in the workplace, and in this sense of belonging creates higher levels of resilience.”
Shah Paikeday explained that CHROs should look to align diversity and inclusion with business imperatives, particularly in an environment where investing in diversity for the long term will ensure sustainability under projected downturns.
Ultimately, Fitzgerald explained that CHROs can play a key role in readying the executive team to weather a recession.
“Identifying leaders who can adjust their behaviour to changing business conditions will ensure continued effectiveness during challenging times,” she said.
“We can never predict when a recession is going to hit, and whether the furore surrounding a potential recession will in fact become a reality.
“While we can hope for the best, CHROs can ensure their executive peers are equipped for the worst.”