Should we Invest in People in Times of Recession?

There is a 47.5% probability even for the world’s strongest economies to face a recession within the next year. The highest inflation rate in decades makes this process look imminent. At the same time, unemployment, a traditional crisis result, doesn’t seem to be an issue. On the contrary, the labor market demonstrates unprecedentedly high ratios of new vacancies for potential applicants.

During the Great Recession of 2008, even industry leaders failed to come up with retention plans for their employees and experienced a significant lack of qualified specialists. For business leaders who don’t want to repeat the same mistake, employee development would be the best investment strategy for 2023.

Labor market in a post-pandemic world

The Covid-19 pandemic has drastically changed economics as we knew it. Social media, streaming platforms, online banking, and delivery increased the workforce to cover the growing demand. The e-commerce market grew two to five times faster, and the industry leaders such as Amazon and Shopify doubled their staff. Today, the immense growth of these industries is slowing down. But the hiring process doesn’t. The anticipation of a new recession makes business owners not just cut costs thoughtlessly, but to be reasonable with human resources.

Total uncertainty divided tech companies into two groups. Industry giants like Meta, Twitter, or Uber slow their hiring down and announce lay-offs. Smaller companies are hiring as usual, and the number of openings majorly exceeds the number of jobseekers. With this in mind, we can assume that most companies lack qualified specialists. But considering the upcoming recession, business owners, including industry leaders, want to get more done with fewer resources.

The best time to invest in people is now

During recessions, most business owners try to cut down costs, usually spent on employees. It is an instinctive decision, and, from a short-term perspective, it works. But what if I prove they are wrong?

Announcing layoffs and hiring new, cheaper employees may have been an option earlier. Today, job listing sites report that in the tech industry in the US, there are almost twiceas many job openings as jobseekers. This trend is hardly going to change in the near future. The best strategy I can offer to business owners — retaining talented specialists and investing in your team’s development.

Right now, 87% of business owners notice skill gaps or expect them to appear in the upcoming years. Due to a tight labor market, specialists with the required skill sets may not always be available. The most promising solution I see is building skills in existing employees. It is a long shot, but it pays off. In my company, we always prefer to educate and promote team members who have been with us for some time and showed themselves active and motivated.

By educating your team members, you not only get qualified specialists trained according to your needs, but also a free bonus — retention. Lack of career growth is the second most popular reason for people to quit their jobs. Investing in your employees by helping them maximize their own potential lets you keep talented professionals on your team.

Training and development programs may not seem the priority in unstable times. But as soon as you realize that people and their skills are the most valuable asset, you’ll probably include the team’s education to the list of your main focuses. Managing operational costs is still vital for any company, but investments in people provide you with sustainable growth for a long-term perspective.

Other ways of staff investments may not be as obvious, but still bring their benefits. Open communication, regular one-to-one or group calls, team building events, and charity initiatives team members can take part in — all of these are proving to be quite effective, as my entire team practices all of them regularly. This part of the work with your team is aimed at two results: retention (encouraging your team members to stay with you) and reputation (attracting new employees who share your spirit and values).

Business owners should be careful and not repeat the mistakes of the last economic crisis. Today’s market won’t forgive the attempts to cut costs on your team and their development. In fact, the sooner you start investing in your employees, the more profit you get. Professional growth and increased motivation maximize your team’s productivity, ensure retention, and help your business grow.