An economic recession is a natural stage of an (economic) life cycle, whether in personal or business life.

To understand how to manage a business in a recession can present unique challenges for business owners as well as for their employees.

Our economy is very complex, and its growth is measured by a number called gross domestic product (GDP).

When all is going well, the overall economy expands, which means businesses are making money, growing larger and hiring people.

This means that the people earn increasingly higher incomes (hopefully) and purchase more products, which further drives economic expansion.

Sometimes, like a rubber band stretched to its limit, those underlying economic factors begin to slow, reach a peak, and then reverse.

When they decline for more than a few months consecutively, the economy goes into a recession.

It’s impossible to predict when a recession will happen or what will cause it.

But there are some common symptoms of a recessed economy that impact businesses.

Once you understand what they are, you can better prepare your business and your workforce for a period of recession.

So here at YBP, we would like to share how you can help to recession-proof your business -

In the months leading up to a recession, consumer spending and available capital can both decline, which can cause a business to feel a pinch in their budgets.

This means some difficult decisions may have to be made regarding product pricing, marketing initiatives, hiring, benefits and even new launches.

While each business will experience a recession in unique ways, the most common challenges faced by companies of all sizes include:

• Temptation to cut product size, quality and benefits – or raise prices. When lagging sales no longer pay for the cost of doing business (you don’t breakeven), businesses may look to products to find wiggle room in the operating budget.
• Not enough capital to pay employees. Companies may feel they can no longer pursue plans to expand operations, pay bonuses or even keep the workers they have.
• Lower employee morale and productivity. Frequent layoffs and employees asked to do more with less can lead to a culture of apprehension. Productivity can suffer when employees feel uncertain and unmotivated by bad news.

Data is the best way to meet these challenges head on. It’s vital to understand what the metrics say about your day-to-day operations, even when they show that your company may be suffering.

Data on the marketplace …

Data on the numbers; your bottom line; your breakeven; your cashflow; your profit/loss …

Data on your status in the current technological; electronic; AI age …

Data on your customer experience; customer care …

Have you kept your data, or used a traffic light target system? These are suggestions we share with our clients.

Try to answer these questions:

• Are there inefficiencies regarding your product or service offerings?
• How much talent can we afford right now? How far can we really stretch people?
• What resources do you need to maintain or exceed current output?

During any analysis that we conduct, we identify the trouble areas of your business.

As a result, we suggest it’s time to make changes that will make your business more resilient in this (and every) economic climate.

What could this include –

• Realigning your staff or restructuring your organisational chart
• Evaluating products and services to ensure the market demands continue to be met for your clients
• Readjusting benchmarks and projected growth targets.

Not every problem can be solved at once.

Prioritise issues with the highest potential and least likely to damage your customer base, business culture and bottom line.

So here are some suggested actions to take:

• Personnel:
  • Can you consolidate redundancies?
  • Can the job of two workers be performed by one?
  • Is job-sharing an appropriate solution?
  • Could the non-essential employee be moved to an area where talent is scarce?
  • While layoffs are never ideal, struggling companies can’t afford to pay for repetitive processes.  

• Products and services:
  • Consider reducing or eliminating products that don’t generate profits or with low profit margins.
  • Look at the labour required for each product.
  • If most of your employees’ time is spent on low-margin products, then perhaps their time can be better spent on your profit centres.

These changes may not come easy to your staff.

This will require having difficult conversations with employees; which is always difficult.

Approach the conversations around downsizing and other sensitive matters carefully.

Some suggestions we feel worth considering:

• Tackle the issues head-on:
  • Keeping the news private about layoffs or other changes can do more harm than good.
  • What you fail to tell your workers can end up becoming a PR nightmare.
  • Get ahead of rumours by having an honest dialogue with your staff.
  • Be transparent by being honest about hard truths, and your employees will respect you for it.
• Don’t let work fall by the wayside:
  • Be conscious of the fact that changes to your workforce may make the business vulnerable to inefficiencies.
  • The impact of the recession should be mitigated so that the customer doesn’t feel your internal strife.

When the recession puts a squeeze on your resources, including your human capital, consider how you can maximize the teams you already have in place.

This could include:

• Providing encouragement and reassurances to your existing leaders and staff
• Identifying undiscovered leaders in your organization and calling on them to step up

Actions to take:

• Mentorship and training:
  • One of the hidden gems in any business is having a strong mentorship and training programme. If this is not currently in place, this would be a really good time to introduce one and make better use off the staff and time through difficult situations.
• Rally the troops:
  • Explain that while these may be tough times, the tide will change.
  • If everyone bands together, the company will persevere.
  • Remind them that their hard work is valued and does not go unnoticed or unappreciated.
• Identify leaders:
  • Ask your staff to help identify unrecognized natural leaders.
  • Is there someone that everyone relies on during stressful times?
  • Who is the ‘goto’ person who answers questions, provides guidance and acts as a peer mentor without being asked?
  • Once identified, encourage these high producers to take on more responsibility and fill in gaps.  
• Track everything:
  • Use metrics to track and recognize core competencies.
  • Understand who is on the bench and whether they can assume extra responsibility.
  • That way you can begin to cross train team members.  
• Always listen:
  • Regularly solicit feedback from your leaders, heavy hitters and regular employees.
  • Their intimate knowledge of the company could inspire innovative solutions to problems both small and systemic.
  • Having this type of buy-in can keep morale high and productivity consistent.

A recession is hard on everyone, and while it can have a damaging impact on morale, you need your employees to be more efficient and productive than ever.

You achieve this by understanding your employee’s personal needs and producing an excellent processes and procedures handbook.

Listen to your employees. If you experience recession-induced stress in the workplace, it’s likely that employees are suffering through financial, emotional or interpersonal strains at home, as well.

This is more important than ever during a recession, especially with employees taking on extra responsibility.

Actions to consider:

• Offer intangible perks:
  • Knowing how to motivate employees outside of monetary compensation is essential.
  • Flexible scheduling — allowing employees to take time off or work remotely — is one popular intangible perk.
  • WFH – this has now become a big option for employees.
  • As you implement these changes, closely monitor productivity.
  • Don’t let relaxed oversight lead to decreased employee output.  
• Make every manager an advocate for mental and emotional health:
  • Educate employees on how mental health issues can affect the workplace.
  • Ensure that managers are prepared to offer help, follow wise protocol and avoid developing stigmatizing prejudices.
• Use your employee assistance program:
  • These programs can be a great asset for employees struggling through various issues.

Business owners who understand that recessions are normal and should be expected can prepare for them.

Those who plan for all possible outcomes are best poised to survive.

Actions to take:

• Think long-term:
  • Planning can take much of the unknown out of the equation.
  • Give leaders tools for training, productivity, communication and mitigation long before they need it.
• Conduct regular checkups:
  • Instead of entering crisis mode once a recession hits, use every opportunity to gauge the health of your business.
  • Use data to guide how you build efficient teams, foster new leadership and support your employees’ well-being.
  • Those that are proactive, rather than reactive, may get better results.