Chatter about a potential recession is all over the news right now, along with headlines about big, successful companies cutting headcount—Meta, Amazon, and Twitter, just to name a few.
And that’s got quite a few senior leaders and HR teams feeling a little worried.
But if the economy does head into a recession, it’s clear that this one won’t look like the last few. With an unemployment rate still sitting at a near-record low of 3.7%, businesses are struggling to find new employees and hold onto the ones they already have.
Making sure your employees are engaged and enthusiastic about their work isn’t easy during a recession, but it’s critical—since hiring their replacements will continue to be very challenging. Your current employees are the key players holding your company together through tough economic times, keeping your company surviving and even thriving—but only if you can keep them around.
To boost employee retention and plan for a successful year:
Why retention during a recession matters
Employees are well aware of the shortage of workers right now and it’s giving them plenty of well-earned confidence. In fact, confidence is so high that one in three U.S. workers say they wouldn’t sacrifice anything to keep their job during an economic downturn. That’s definitely not what we saw in the 2008 recession when workers were happy to go far beyond their duties just to keep their jobs.
There are still almost two jobs for every job seeker, which means that employee confidence is coming from a very real place. Employees know they still have other job options if they’re unhappy with their current role, so many of them aren’t willing to sacrifice their personal lives or the benefits they’ve earned. They’ll simply hunt for, and likely find, a job that suits them better.
According to Axios:
Employers have a huge appetite for more workers and aren't letting go of the employees they do have. The still-elevated level of quits mean workers are confident enough about better job prospects — and, likely, higher pay — to leave their current jobs.
There’s still plenty of uncertainty about exactly how severe a potential recession will be, or if we’ll even experience one. But all of these numbers add up to one certainty: the extremely tight labor market isn’t going anywhere, so focusing on retaining your employees (especially your top performers) is more essential than ever.
How to retain top performers in a recession
A recession offers plenty of retention challenges for employers, but it offers opportunities as well. If you can show employees that you truly care about them and value them even during tough times, you can earn their loyalty for years to come.
And best of all, most of these solutions are low-to-no-cost so you can prioritize retention even when growth is slow and budgets are tight.
1. Prioritize recognition
One very simple and completely free way to reduce turnover is regularly appreciating and acknowledging the hard work your employees do every day. Saying thank you is free! And it feels great for both the giver and the receiver. Plus, a failure to recognize employees is 2.9 times more important than compensation in predicting turnover.
Recognition can come in many forms: from one peer to another, from a manager to a direct report, from senior leadership to their team, and in pretty much any other direction you can imagine.
But recognition doesn’t happen on its own. You need to proactively build a culture of employee appreciation and recognition so that individual contributors, managers, and leaders all feel comfortable giving and receiving recognition frequently.
Creating a culture of recognition begins with your senior leadership team. They should set the example themselves by increasing how much recognition they give to their reports and employees in their departments (a super short thank-you email from a higher-up can make an employee’s week!).
Then, make sure you’re making it easy for employees to recognize their colleagues and managers to recognize their direct reports for a job well done. This can look like adding agenda space to a weekly meeting for appreciation, applauding accomplishments in the department Slack channel, or using a platform like Bonusly to enable recognition for anyone on the team with just a few clicks.
2. Practice empathy
Recessions are mentally and emotionally challenging for employees, even if their jobs are secure. They may worry about family members and friends who are struggling, feel anxious about the future outside of work, or have stressful memories of previous recessions (*waves as a millennial who graduated into the Great Recession*).
Understanding the stresses employees might be feeling can help HR teams and company leaders prioritize ways to help them through tough times as much as possible. You can try out creative new wellness programs, proactively communicate about existing benefits that can help employees, and train managers to have better one-on-one conversations with employees to see what’s going on in their lives.
Empathy doesn’t need to mean avoiding difficult conversations or necessary layoffs. But it does mean keeping employee feelings and morale top of mind when making important decisions. When your people don’t feel understood by their HR teams or senior leaders, they’re at a higher turnover risk—and just might go find a company that prioritizes their well-being more.
3. Don’t forget about career development
Promoting your top workers is a proven way to keep retention high. After all, highly skilled and productive people aren’t likely to stick around if there’s no room for them to grow. But a common mistake leaders and HR teams make is thinking of career growth only in terms of promotions.
In a recession, it might be difficult to promote employees because of budget concerns. In that case, you should prioritize other options for career growth for your employees so they know they’re still progressing toward the future they’ve imagined for themselves.
Creative career growth options could look like creating a strong framework for lateral moves, which is a huge retention boost.
Gartner research found:
Employee intent to stay is 33% higher in companies with strong internal hiring markets.
Mentorship programs can also be a cost-effective way to help employees grow their careers right now without focusing on promotions. And providing additional training is another great way to encourage employees to stay during a recession as they develop skills that will serve them in the future.
(And you might want to run the numbers on how much it would cost to replace a top performer given the true cost of turnover if they leave for a promotion somewhere else. But that’s another story altogether. 😬)
4. Keep meaningful benefits in place
Your company's perks and benefits aren’t only there to reward employees in roaring economic times. They’re just as vital in the tough times too. Great benefits and perks can be critical differentiators in a tight hiring market and often provide motivation for employees to stick with your company.
The urge to immediately cut benefits when a recession hits is strong in many industries. And of course, you don’t need to keep absolutely all of them at the risk of your company’s financial health. But indiscriminately cutting perks, or slashing the ones with the highest cost, might actually make your company less set up for success in the future.
Let’s say your leadership team decides that the company doesn’t need to provide free coffee anymore as part of cost-reduction efforts. They might reason that your well-paid employees can simply buy coffee from one of the many coffee places surrounding your office.
But employees consider the coffee you provide as an act of care, plus they like to gather and chat while they pour their morning cup. The money your company will save on coffee may pale in comparison to the goodwill and collegial connections you’ll lose.
Wondering which benefits your employees value the most? Don’t assume you know—ask them directly! Gathering their feedback will help you make the case to retain the benefits that matter most to your employees, instead of cutting the ones they value and risking a rise in resignations.
5. Enhance internal communication
Communication and transparency are surprisingly strong contributing factors to employee retention. Employees who believe their leaders are transparent report more than six times higher satisfaction with their work environment, and four times higher sense of belonging at work.
Prioritizing regular, clear internal communication is even more critical during a recession than during good times. Employees want to hear from their leaders when things feel uncertain, so developing an internal communications strategy and cadence should be top of mind for your team.
Transparency doesn’t mean you need to tell employees everything—they know you can’t do that, and they don’t expect it. But the more you can proactively communicate priorities, decisions, and the company vision, the more employees will trust that your company has their interests at heart—and the less likely they are to look for another job out of frustration or fear.
Employee retention resources
Our guide to retaining your top talent offers plenty of data-backed actionable strategies you can use to increase retention so your company is set up for success, no matter what the future of the economy holds.
To plan and accomplish a successful 2023 with retention in mind, download our free checklist made just for HR pros.
Inside, you'll find:
✅ An interactive PDF that yes, lets you literally check off boxes!
💭 Reflection and planning prompts to align your people goals with overall business objectives.
💚 Actionable tips to improve culture and engagement, recruitment and hiring, growth and development, performance and feedback, wellness, and recognition.
⚒️ Over 10 new tools and resources you can use for free today!