the role of HR in building a business during tougher times.

Lowered market demand, reduced industrial activity, and increased unemployment rates are just some indicators that a recession may be on the horizon. A slump in economic activity that lasts for two quarters or more is often labeled a recession.

If you're an HR leader and are waiting for a financial analyst to make an official designation before acting, you're already too late. To effectively manage your workforce, you must anticipate events, economic and otherwise, factoring them into your recruitment and leadership development activities.

The response of many businesses during a recession is to reduce employee expenses. While budget cutbacks may be necessary, losing or restricting the driving force behind your business — your employees — is often self-defeating. Preparing for a recession involves proactive workforce management, not wholesale downsizing. The HR department must cooperate with top management in how to plan for a recession, helping your business survive and emerge poised for growth.

human resources must support growth — now and in the future

Throughout history, countries have experienced economic fluctuations — recessions and expansions. Japan and the United Kingdom entered into recession at the end of 2023. The United States has experienced 14 recessions since the 1930s for different lengths, with the average being about 14 months. After a recession, there is usually a period of recovery followed by growth or expansion.

While the goal of a business is to remain solvent during a recession, it's equally vital that they're prepared for recovery and expansion. And that means ensuring continued access to a reliable, talented workforce. 

recession planning for the HR leader

The HR department has the difficult task of trying to cut costs while retaining the same valuable employees who have made your business successful. Fortunately, while challenging, effective workforce management during a recession is possible.

Now is the time to analyze your talent pool, find, train and groom potential leaders and, if necessary, remove underperformers. Leveraging technology can help you trim costs and reduce work hours. Finally, consider using an expert HR solutions company for guidance on long-term planning and short-term efficiency.

redefine recruitment strategies

Recession planning requires adjustments to meet budget constraints, especially concerning recruitment efforts. And while you want a steady pool of reliable, skilled employees, you also don't want a surplus of workers. The key is having the right number of employees to keep up with market demand, along with the ability to scale up as needed quickly.

Consider the following strategies to ensure you continue to attract and secure top talent while keeping costs in line.

adjust recruitment processes

As everyone knows, the most expensive option isn't always the most practical. Analyze your recruitment processes to see where you could be wasting money and where you could invest more wisely. According to Randstad's Workmonitor 2024, today's employees are looking for more than a high salary. They value flexibility, an equitable work-life balance and career fulfillment. You can attract top talent by prioritizing and promoting these desires, which also helps grow your employer brand.

With declining market demand, you may not be rushed to fill a position, meaning you have the luxury of searching out the best person for the job. You may discover high-demand talent that was impossible to get before due to cutbacks among competitors.

leverage technology

Regardless of economic variability, technology remains a critical tool in business operations, including HR management. However, you must carefully determine which application helps further company goals the most — now and in the future. You'll receive the best return on your technology investment by empowering your people during a recession, not replacing them.

From streamlining your recruitment and onboarding processes to improving worker engagement and social connections, AI-powered software tools can help reduce indirect HR expenses. Training and development on current technology and processes can facilitate future productivity, ensuring your employees are ready to move forward once the market eases.

explore alternative talent pools and partnerships

Preparing for a recession takes experience, especially regarding the effective use of human resources. Utilizing the services of a trained professional can remove some of the burden from you and your team while enabling cost-effective strategies.

For example, an HR partner has access to large talent pools of pre-vetted employees, letting you scale your business rapidly to meet market demand. You'll be ready to move forward as soon as the economy eases, giving you the edge over your competition.

Besides having a selection of contingent and temporary workers, a talent company knows what employees are looking for, including in-demand talent. If you've been considering hiring for a top management position or technology role, a recession may be the perfect time to find these skilled individuals. An HR services specialist can help you locate and attract these high performers and advise you on competitive benefit packages.

succession planning and leadership development

Surviving a recession and thriving afterward requires strategic thinking among company leadership. But what if you're lacking management talent and abilities? A tight economy may not be the best time to hire an expensive senior staff member. Instead, look at the potential within your organization.

identify and groom internal talent for leadership roles

Managerial roles are some of the most difficult positions to fill for the HR team. In addition to the requisite hard skills and knowledge, a manager needs a full array of soft skills, such as time management, conflict resolution, decision-making and communication.

You'll need input from coworkers, other managers and HR team members to identify candidates for leadership roles. You'll also need to review employee data, from productivity metrics to absenteeism rates. Once you have a short list of possibilities, you can begin mentoring these potential managers.

create a robust succession planning strategy

Sometimes, you have plenty of notice before a manager leaves their role, such as a promotion. In that case, you may already have a replacement in mind. But what about sudden changes? Perhaps your company has instituted an early retirement strategy to help manage an economic downturn.

Without an effective succession strategy, you may be forced to choose from less-than-ideal candidates, pay more than necessary for an external applicant or leave employees without guidance until a suitable replacement appears. Consider talking with an HR solutions partner if you need immediate help finding temporary and permanent leadership personnel.

A succession plan helps ensure continued productivity by aligning potential candidates with critical positions in the company. These roles are ongoing and necessary to support the business in the future. The key to effective succession is knowledge and skill transfer.

Capturing current managers' knowledge, skills and expertise requires more than an exit interview and information dump. Instead, you need a sustainable system that adequately equips future leaders.

invest in leadership development programs for long-term success

Training and development programs are essential to shaping effective managers. Toxic managers can lead to high turnover, low productivity and unengaged employees. These outcomes can damage a company's profitability and threaten survival, especially during a recession.

On the other hand, a great manager can spur a department onto high levels of efficiency and increased morale. During economic instability, it can help to have a fresh perspective on business operations. New faces can bring new strategies, and when those faces are already familiar with business operations, it's a win-win combination. Leadership development is an investment in your company's continued success.

Providing potential leaders access to a training program can help ensure a successful transition, as you can ensure they have adequate managerial soft skills before assuming responsibility. A fully stocked pool of talented individuals within your current employee roster can help ensure business continuity.

protect human resources during economic shifts

Whether it's officially called a recession or just an economic downturn, periods of market decline can affect your bottom line. The temptation to cut back on expenses is understandable and, in most cases, a wise option. However, permanently losing valuable resources, such as your employees, can place you in a difficult position when markets rebound.

Instead, consider this practical advice. Highly skilled employees who may be relatively scarce during periods of economic expansion may be interested in changing jobs when companies start to tighten down. If you're missing critical skills or need in-demand talent, take a look around. Now may be the perfect time to land your dream employee.