navigating layoffs and economic uncertainty: the critical role of HR leaders

In the current environment of layoffs and economic uncertainty, the role of HR leaders is more critical than ever. The pandemic showed that HR plays a critical role that had previously often gone without credit: ensuring the organization can continue to function effectively, whatever the challenge. Ever since, HR leaders are playing an ever-more instrumental role in developing strategy to navigate market challenges, shape culture and improve employee experience. And, when difficult decisions have to be made about resourcing the organization’s needs, the C-suite turns to HR.   

HR’s growing responsibilities in the face of layoffs

One of the main responsibilities of HR leaders in uncertain times is to weigh all the possible avenues for reducing headcount cost and increasing agility and efficiency. While layoffs are often viewed as a tried and tested means to achieving savings — and stock prices often bump up on their announcement — these gains are frequently undermined by their impact. 

Morale and productivity among surviving employees has been shown to decline by 20-41%, for example. Another study found that downsizing a workforce by just 1% can lead to a 31% increase in voluntary turnover the next year. Plus, there’s the negative impact on brand, especially when layoffs receive poor publicity. HR leaders have a responsibility to illuminate these reasons not to jump to layoffs when other members of the C-suite are pushing for action to reduce costs.

At a time when markets can bounce back just as quickly as they can decline, you should do everything you can to retain, redeploy and motivate employees through tough times. When you consider what you invested to attract and develop that talent to your organization, when the rebound does come, you’ll be glad to have taken steps to retain as many people as possible. 

Only once all other options have been exhausted, should layoffs be implemented. And when that has to happen, make sure any layoffs or reductions in force (RIF) are carried out fairly and equitably. This includes developing clear selection criteria for layoffs, communicating the reasons for the layoffs, and providing support and resources to those being let go. And, of course, HR leaders are accountable for ensuring their organizations comply with any legal requirements or regulations related to layoffs in their geography.

A critical component of managing layoffs and RIFs is getting the communication right. Virtual communication has become a necessity with the rise of hybrid working arrangements and remote teams spanning multiple time zones. However, as evidenced by the proliferation of leaks in the media, this shift also increases the risk of sensitive information being shared outside of intended audiences.

Layoffs tend to be a pragmatic financial decision undertaken for the long-term good of the business. But HR teams are essential to ensuring the business conducts layoffs with empathy — not only because it’s the right thing to do, but to protect the company’s reputation and avoid going viral for all the wrong reasons.

maintaining morale in tough times

Another key responsibility of HR leaders during such times is to maintain morale of the remaining employees, who are likely to be under increased stress or feel uncertain about their futures. A recent study found 74% of employees who kept their job amidst a corporate layoff said their own productivity had declined since the layoff, and 69% said the quality of their company's product or service has declined in this time too.

For those who remain, it can be incredibly hard to stay motivated for fear of another round of layoffs, losing a workplace friend or taking on an increased workload due to the cutbacks. HR leaders should advocate for open and honest communication, as well as support services and resources. They should avoid virtue signaling and do their best to create a genuinely positive work environment. 

Such actions have a real impact on employee experience during times of change. The cost-saving benefits of downsizing can only be fully realized if you take steps to mitigate the impact it can have on productivity and voluntary turnover among survivors. That’s why it’s important to work closely with communication teams and leadership, and to serve as a conduit between talent and leaders to assess sentiment.

In addition, HR is being asked to navigate the operational challenges of economic uncertainty. HR increasingly needs to work closely with leadership to develop strategies for managing costs, resourcing new revenue streams being identified and promoting organizational resilience. One of the positive legacies of the pandemic is that HR is brought in earlier, or more often, to take an active role in how the organization responds to changes in the business environment, such as shifting customer demand or regulations.

In uncertain times, leaders and managers are still pressed to think about the long-term. Our 2023 Talent Trends research finds that 82% of HR leaders believe that their role has been significantly elevated and/or expanded. The function is now expected to think about mobility, development, career pathways and skilling to make sure that the organization is ready for whatever the future holds.

building resilient careers and future-proofing your business

One of the most effective antidotes to volatility and uncertainty is building resilience and adaptability in your workforce. The skills and capabilities the organization will need to deploy in the coming years are highly likely to be different to the skills and capabilities it is drawing on now.  

Organizations can build greater flexibility, and reduce the need to fire in one part of the business and hire in another, by adopting a mindset of everboarding, rather than simply onboarding. Everboarding means organizations are continually providing learning and support to employees so they are always thinking about the skills they need to develop. This helps them remain valuable to the organization and enhance the sustainability of their own careers. While there’s always a risk that highly employable people with portable skills might leave, our Worklife Coaching Report showed that 93% of employees would stay longer with an organization if they feel the company is listening to them and investing in their future.

What creates this feeling of being listened to and invested in, isn’t just the big ticket items like the annual engagement survey or announcements from leadership; but the small, everyday interactions that create a fabric of moments that matter. These either reinforce a positive employee experience or start picking away at it.

One way to build more positive interactions is to listen for employee aspirations and invest in their careers. Offering greater career development and opportunities to move internally is a win-win. LinkedIn’s 2023 Workplace Learning Report revealed that the C-suite’s second top priority is “Giving employees opportunities to move into different roles within the business” (behind “keeping employees motivated and engaged”). Unfortunately, only 15% of employees say their organization encourages them to move to a new role. Clearly, there’s a disconnect here.

Helping your employees to navigate a career within your organization, instead of setting sail outside it, is clearly beneficial. Your employees feel more motivated and engaged, and your business benefits from reduced recruitment costs, retaining institutional knowledge and networks, and a more agile workforce.  Realizing these benefits and instilling this mindset can be achieved by:

  • using coaching as a development tool
    A coach can have more candid conversations with an employee than a manager can about career aspirations. The coach can help them process those moments that matter — especially if they relate to manager interactions. This can help maximize learning and identify what future development will enable them to thrive.
  • providing career development
    Offering learning opportunities in various forms — including formal programs, on-the-job training, mentoring, secondments, projects, conferences, workshops, online courses and other learning resources — can help employees acquire new skills to advance their careers with you.
  • offering flexible work arrangements
    Remote work, hybrid work, part-time work, and job-sharing allow employees to balance their work and personal responsibilities while enhancing their well-being and career development.

So if you’re in the midst of a transformation program and think you will have to lay off people who don’t fit the profile of what your organization needs going forward, think again. You may be able to avoid the negative consequences of layoffs, and the cumulative costs they are likely to incur, by reskilling, reconfiguring and redeploying your workforce to generate more resilience and agility. 

investing in your employees: the benefits of democratized career coaching

Whatever the size of an organization, it's now possible to develop coaching programs to benefit everyone — and at a price that isn't prohibitive.

Our research shows coaching can be particularly effective in helping employees develop new skills and advance their careers. However, until recently, only around 10% of an organization's employees would ever enjoy the benefits of being coached. That's largely because one-on-one coaching has long been reserved for senior leadership or those on high potential programs. 

Today, coaching can now be accessed by everyone in your company, in an affordable way. This movement is something we refer to as democratized coaching. It’s about equity of opportunity. If you want everyone to level up their ability to respond to uncertainty, you have to make the tools available to all.  

Providing a coach is one of the most effective ways to offer personalized  guidance, support and motivation in the moment, and help all employees make the greatest contribution they can to organizational success.  

maintaining organizational effectiveness in times of adversity

Especially during times of economic uncertainty, one of the most critical roles for HR leaders to play is to build and maintain engagement and trust between employees and management.  After all, employees may feel uncertain about the future and be more likely to question management's actions.

At the end of the day, it is the role of HR leaders to balance competing priorities, make difficult decisions, forecast challenges before they arrive and support the organization and its employees through difficult times. With effective communication, transparency and a commitment to the well-being of employees, HR leaders can help to minimize the negative impact of layoffs and economic uncertainty and promote organizational success.

You can learn more about our talent management and transition solutions here. Or, to speak with one of our experts about your priorities when managing talent through uncertainty, please contact us.

lindsay witcher.

svp of sales and customer success, incoming managing director

11 August 2023

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