“Those who do not remember the past are condemned to repeat it.”
- George Santayana
Businesses which have been operational for more than a decade will be all too familiar with the term ‘recession.’ From 2007-2009, the world economy took a significant downturn in what came to be known as ‘The Great Recession,’ and thousands of business owners suffered as a result.
To avoid the same struggles business owners faced more than ten years ago, you must be proactive and brace your business for the upcoming recession - and yes, chances are, it’s likely to happen in 2023.
With a 64% probability of economic recession in the US this year, it’s time to batten down the hatches in the face of the approaching storm.
In this guide, we’ll explore the best strategies for recession-proofing your business, and avoiding the mistakes that caused many businesses to go under in the last major recession.
The Lay of the Land
The signs are clear: an economic recession is on its way, and to ignore it would be to put your business at risk.
Here’s what we know as we enter Q1 2023:
- Only 15% of economists put the chances of an economic downturn at less than 50%.
- Data and predictions put the chance of a recession between 47.31% and 64%.
- Unemployment is predicted to be 4.7% a year from now.
While the data is damning, and all indications are that the US will enter a recession in 2023, many believe it will be more of a ‘slowcession’, a newly-coined term from Moody’s Analytics suggesting there’ll be zero economic growth, but we’ll fall short of a full economic downturn.
Regardless, there are many ways a recession can negatively impact your business, so let’s take a look at some of the ways you can buffer against the effects.
Cut your Costs
One of the most severe consequences of stagnation in economic growth is the obvious: a reduction in turnover.
As consumers tackle rising inflation and interest rates, there’ll be a trend towards less spending, which will ultimately affect the bottom line of your business. To keep your business afloat as your profits start to decline, you need to evaluate where you can trim fat from your business.
Start by considering what your money is currently being spent on, including:
- Bonus programs
- Overhead expenses
- Software services
By carrying out a complete audit of your business’s finances, you can keep your profit margin healthy even when there’s less money coming in.
One of the most effective ways to figure out where to cut costs is to use employee monitoring software. With time tracking for remote employees solution Insightful, you can monitor employee internet activity and app usage, which can help you reach a decision on which software solutions are worth holding onto and which aren’t used very often.
You can also use the time data to solve the question of how to analyze employee performance by identifying a benchmark for performance. From there, you can see who is performing to company standards and who is falling short of expectations. That way, you can make informed retention decisions or share the data to boost individual accountability and attempt to boost overall productivity levels.
Rather than relying on third-party workforce optimization companies to help you get the most out of your employees, you can take control of performance yourself with time data.
Operational efficiency is a cornerstone of a recession-proof business, so if you can get more from your workforce with less or the same input, then you can avoid making rash layoff decisions that could harm the trust you have with your workforce.
On the theme of employer-employee trust, transparency is best when making significant decisions regarding talent during a recession.
As we’ve seen with recent big tech layoffs that has left over 150,000 people out of work, there are right and wrong ways to let staff go. Google’s parent company, Alphabet, has come into heavy criticism in the early stages of 2023 for letting go of thousands of employees via email.
Taking employees by surprise and letting them go on short notice via email is a surefire way to tarnish your company’s public reputation and diminish trust levels with your workforce. It can make it more challenging to retain talent in the short term, and to hire in the long term.
That’s why it’s important to be transparent - even when you have incredibly tough decisions to make regarding personnel. Nobody wants to be treated as just another number, especially when they might have given years of dedication to the company.
Plus, if word gets around that layoffs are on the horizon and you haven’t said as much, employees will still have suspicions. These suspicions can cloud their ability to focus on work and create a toxic work environment that can lead to quiet quitting as employees feel that their roles are under intense scrutiny.
By being honest and upfront about the upcoming situation, you may even be able to avoid layoffs altogether. While it may seem unlikely, some employees would rather take a pay cut than take their chances in a lottery of layoffs.
Create a Culture of Resiliency
Your best defense against the negative impacts of an economic recession is a culture of company-wide resilience.
What do we mean by a culture of resiliency?
A resilient company is one which values long-term performance metrics and prioritizes agility over rigid doctrine and tradition.
With a culture of resiliency, you can stabilize the ship as you navigate choppy waters since you set yourself up to be adaptable. Many companies set themselves up for failure by ignoring the potential for disaster and change.
Here are some ways you can brace your business for a recession through a commitment to resiliency:
- Enable cross-functional collaboration: A simple pivot to focusing on cross-functional collaboration in your company can help create tighter links between departments and teams. Forge closer internal bonds and your company will be better able to bounce back when disaster strikes.
- Use and maintain digital processes: Remote work is forcing most companies to adopt digital processes and redefine workflows. Prepare for an always-online future by creating your own virtual work environment, and use work from home software such as computer activity recording software tools to start monitoring computer usage and evaluating performance.
- Anticipate the worst: There’s always a new challenge waiting around the corner for business owners, so embrace the changing winds. Commit to being an agile company that rolls with the punches and, through a dynamic structure, is able to bend without breaking in the face of adversity.
Often your best defense is proactivity, so by turning to top employee tracking software solutions such as Insightful, you can safeguard against the threat posed by the uncertainty of a recession.
Defeat any element of the unknown with employee web tracking software that allows you to visualize all employee time data in one place.