A Recession Is Not a Retention Strategy: How to Keep Your Best People
The Great Resignation of 2021 raised the stakes of the talent war for employers. Now, the landscape is changing yet again. Nearly two-thirds of employers and three-quarters of employees believe a recession is coming, and 45 percent of workers say they fear the difficulty of finding work during an economic downturn.
But no two recessions are alike. Unlike the housing collapse of 2008–2011, when employees tended to stay with their employers even if they were unhappy, the job market in 2022 is still very strong. With an average of two job openings per unemployed person, it’s still very much an employee-driven market—and fear of a recession likely won’t be enough to make your employees stay. In fact, they seem to be doing the opposite—in the same study, eight in ten workers actually reported looking for a new job in anticipation of an upcoming market shift.
With this in mind, what should HR be doing to ensure robust retention today and in the near future?
Start with Caring Why They Stay
Creating a workplace where employees choose to remain starts with caring about why they stay. In dark times, a steady paycheck may be enough—but when the sun comes back out, a job that merely pays the bills won’t keep people on board. They’ll be looking for work that provides not only stability but a rewarding experience that matches their personal growth with increased opportunity.
Helping employees feel heard, providing professional development, optimizing compensation and benefits, and caring for mental health all contribute to creating an environment that will keep employees loyal in good times and bad. To prevent turnover, HR should make employees feel secure in spite of the changing world around them, and optimistic about what lies ahead.
Bring Your Employees Along for Big Business Decisions
A recession can lead to fear and uncertainty among employees—fear for their jobs, fear of lost income, fear of struggling to find work to support their families. But don’t assume this will make them stay. If they feel their current employer is unprepared for a recession, they’ll look for a more reliable job in advance of possible layoffs. And if they feel unheard and unsupported, they’re going to start looking at employers who demonstrate a culture of communication. Fear and uncertainty can be alienating, but steady, consistent feedback can help reduce apprehension and make employees feel more secure.
By prioritizing transparency and honest communication, you can ensure you’re developing a culture of retention and employee engagement at your company. But feedback only improves engagement if there’s clarity on both sides of the employer-employee agreement— employees know you hear them and everyone knows how the company’s decisions lead to accomplishing your shared goals.
1. Listen and Act on Feedback
Creating this culture of transparency requires listening to employees and giving them a voice. Start by surveying employees and getting feedback on what they like about their job and what they think could be improved. Uncovering the potential problems that may drive employees to start looking for other jobs is the first step toward addressing them.
2. Share the Big Picture “Why”
Of course, it’s not as simple as approving every change request. Adjusting your policies to solve every complaint would likely involve too many tradeoffs in progress toward your overall goals, especially when complaints oppose each other. The key when you can’t solve an issue is to help your team see the big picture “why,” clearly tying your current and long-term plans back to business initiatives and showing how they align with company goals.
3. Communicate Your Follow-up Plans
Employee surveys are a great start. But it’s essential to avoid the perception of ignoring employee feedback from the surveys. Your company needs to ensure employees see that their feedback is heard and has a clear response: yes, no, or not now—and why. This way, employees feel like the company cares enough to not only listen, but to take their problems seriously as well, which will help them want to stay.
4. Create a Culture of Feedback
Convincing employees that your company can support them in the long term isn’t a one-time event—it takes creating a culture of feedback that builds momentum. This includes structured feedback in regularly scheduled employee meetings like performance reviews, check-ins, or 1:1 meetings. Train managers on how to provide unstructured feedback in real time outside of a review cycle so the lines of communication always feel open.
Regular feedback keeps employees involved and continually improving. Employees who enjoy a strong culture of feedback are 2.7 times more likely to be engaged in their jobs. And those engaged employees are more likely to want to stay and put in their best work.
Leadership Training and Career Development Remain Critical
With an uncertain market on the horizon, employers will be looking at ways to reduce expenses. Some line items that generally fall under HR’s purview, like leadership and career development, are often the first to take a hit.
But this can be a huge problem for retaining employees during a recession. Many employees cite that the number one reason they left their role was because of poor leadership. Navigating a recession only adds stress to the situation and increases the need for good leadership, so you need to ensure your leaders are equipped to help employees feel valued while also being able to have hard conversations about the business.
In fact, many HR leaders say companies need to increase their budgets for leadership training, learning, and development during a recession. Having empathetic, well-trained leaders is critical in helping employees feel valued and engaged with your company and can make or break your culture-building efforts.
Plus, in the event that layoffs do need to happen, or if new roles can’t be immediately filled because of economic uncertainty, employees will need to be re-skilled and cross-trained to help support your organization through a recession. Beginning the process now helps future-proof your workforce while accounting for natural turnover and a fluctuating job market.
Compensation Is More Than Salary
Along with efforts to build a healthy workplace culture, compensation also plays a prominent role in employees’ decision to stay. Here are some of the top reasons employees report leaving a company:
- Better compensation
- Needing a change
- Better work-life balance
- Better benefits
Understanding and addressing these needs can help ensure that you can retain talent in an employee-driven market.
Compensation has been a top driver for employees in the Great Resignation. Employees are seeing as much as a 30 percent pay bump when they go to a new job. But while employees would love it if you increased wages by 30 percent across the board, it may not be feasible (or in your power) to do so. So what can you do to retain employees who want more money?
The good news is that HR leaders can get creative. Compensation doesn’t have to be all about salary, and putting a transparent plan in place for employees to understand their compensation and what to expect for the future will go a long way in helping employees decide to stay.
Creative Ways to Approach Compensation
If employees feel they’re not compensated in line with market rates, the likelihood of them leaving is much higher. But not every company is equipped to race to the peak of employee compensation rates. Likewise, you also want to ensure equitable compensation across your organization, not just for those filling new roles. So savvy companies are looking at other ways they can compensate their employees without having unsustainable salaries at the forefront.
So, outside of salary, how else can you retain talent at your organization? The good news: employees are motivated by more than the numbers on their paychecks. While 25 percent of respondents in one survey said they’d leave a role for better compensation, 21 percent also reported that better benefits are important. This powerful motivation gives you a chance to show how your benefits address the bigger picture of employee needs.
A creative compensation strategy includes items that won’t have to be permanently baked into budgets, helping you provide rewards to help retain top talent without putting your compensation on unstable footing when the market bounces back. These financial compensation elements outside of salary include:
- Performance bonuses
- Flexible work schedules
- Mental health benefits
- Extra vacation days
- More PTO
Building for Any Future
The employment landscape is always changing, but no matter where it goes, being the best option is always better than being the only option. A recession might keep employees from leaving, but relying on the economy isn’t a retention strategy. Whether your company is weathering a recession or dealing with a tight job market (or both at the same time), creating an environment where employees want to stay—versus having to stay—will be the best investment you can make in your future. With a proactive and employee-centric plan, you can create the kind of loyalty that will survive any economic storm.
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