Since the last recession, you could argue there’s been a real shift toward thinking about people at work — their values, capabilities, talents and whole selves — not just draining their value, finding a cheaper version overseas, etc.
Fortune 500 companies have emphasized talent, diversity and inclusion, and we should also note other movements such as B Corps, which started certifications in 2007.
There’s also been societal change. To name just a few: the Supreme Court’s ruling on gay marriage, millennials becoming the biggest part of the workforce, #MeToo and other social movements, and the election and presidency of Donald Trump. Communication technology has amplified all of these factors, making 2007 as relevant as 1957 in terms of how we interact.
Through all this, corporate culture is ascendant and talent is king! And yet I advise caution because we have no idea how organizations will value talent and culture whenever the inevitable economic downturn occurs.
Culture and talent management have benefited from market conditions this decade. Corporate profits remain close to historical highs in terms of GDP. Companies are facing consumer and activist pressure to be socially conscious, so they’ve largely embraced policies that tell a story of how they care about people, not just profits. And, frankly, in such a tight labor market, companies have no choice but to step up their HR, talent and leadership functions.
All that said, and with the caveat that people have been predicting the next recession for years, here are two problems we’re not watching closely enough:
- Past recessions show that companies shrink away from talent. Recessions tend to weaken or sever ties between employers and employees — layoffs, furloughs and contracting all owe some debt to past recessions, as Harvard Business Review argued a decade ago.
- Everything’s easy when times are good, including values. In boon times, bragging about your culture is easy. Connecting the dots between “we did this cultural initiative” or “We define ourselves by X” and “We saw results from a culture-driven approach” is so much easier when your company was likely to succeed no matter what it did. How grounded are your values? Will they survive adversity?
Let’s look briefly at each.
Talent in a recession
What will the next recession do? (Hint: You’ll probably see more automation, fewer services and work shifted to consumers. Look at airlines, credit cards and self-checkout at stores) You’ll also see companies panic when they should stay calm, focused and strategic, as longtime SmartBrief contributor Steve McKee has written.
Those are high-level worries that might not directly affect your organization, and I haven’t discussed economic indicators, trade wars, Federal Reserve policy or the 2020 election. But that’s for someone else to fight about. For this article, I’m exploring this question: Is culture an inherent good or a line item?
HR has evolved in the past decade in its purview and its strategic importance, with SHRM’s 2019 conference continuing that by explicitly connecting culture to strategy and business outcomes. HR itself is changing its identity, referring to itself less as HR and more by a myriad of titles, each with a philosophy about what HR is supposed to be.
All of that, in my opinion, is predicated on growth and progress: “The world is changing.” “The future of work is …” “New generations and new expectations,” etc. These presume a growing economy and changing norms, where change is good.
In a downturn, I think HR, servant leaders and anyone else trying to build up people will find out quickly whether their organization cares about culture or considers it a profit-dependent resource.
For instance, how will HR balance “culture” when revenue is down 15% and the board wants to cut pay and benefits, automate some work and push other tasks to freelancers? Does this sound like how your organization will react in hard times?
“Training and development needs to deliver results. If we’re not making money building talent, why the hell are we building talent?”
Apply the same question to your organization’s efforts on compliance, diversity, inclusion, internships and apprenticeships, safety, non-standard benefits and anything not strictly mandated by law. This is a values question, of course, but also matters for budgets and strategic decision-making.
Data alone can’t defeat financial pressures
I wouldn’t bank on data alone to save your training, L&D and culture-focused budgets. Data is important, but broad-based data can easily be dismissed as “not relevant to us.” It can also be interpreted many ways. Here are three quick examples:
- There is preliminary data on strong-performing, women-represented teams. But does that data on the average women-represented team matter for Company X if it promotes women right before a downturn? A long-term approach would say, “Yes,” and any personnel decisions based on the particulars. But it’s all too easy for a company to take a short-term example of the “glass cliff” or working from home, etc., and say, “See! That doesn’t work here.”
- Maybe you have data showing that a particular form of onboarding leads to better retention. Or maybe it’s that apprenticeships work for your company. But that data might be ignored because the executive making the decision had a bad experience elsewhere. The executive’s personal experience is also a data point, and it’s valued more highly in his or her mind because it feels more real.
- Take that same company. Maybe you’re still not attracting candidates because your competitors are better or your industry has a bad reputation. What’s more likely: The company admitting it’s an unattractive employer or the company dismissing the data and blaming “people focused on culture instead of results”?
The situations you encounter will rarely be so clear-cut as the above examples. But before the next downturn, start thinking about these issues. I would ask, “Does your organization view talent as a foundation of financial success or something that competes with it?”
Answering that question will help you be ready for the impact on L&D budgets, leadership and career development, and retention policies.
Do your values have meaning?
I’ve written about recession preparation before, and while that was intended more for managers, it’s worth thinking about the corporate-level thinking. Specifically, what are your organization’s values?
Values and norms are tested by adversity. It’s easy to agree on abstract principles and difficult to stand by them when they’re tested.
Let’s look at an example. I’m not picking on this company, which seems to do OK by its values. I’m simply showing how values can be vague and even demoralizing when they not backed up by details, policies and accountability. These are the stated corporate values of a well-known international corporation:
- Customer Commitment: We develop relationships that make a positive difference in our customers’ lives.
- Quality: We provide outstanding products and unsurpassed service that, together, deliver premium value to our customers.
- Integrity: We uphold the highest standards of integrity in all of our actions.
- Teamwork: We work together, across boundaries, to meet the needs of our customers and to help our Company win.
- Respect for People: We value our people, encourage their development and reward their performance.
- Good Citizenship: We are good citizens in the communities in which we live and work.
- A Will to Win: We exhibit a strong will to win in the marketplace and in every aspect of our business.
- Personal Accountability: We are personally accountable for delivering on our commitments.
This looks like a good start? But what happens if business starts going poorly and these values aren’t being lived by executives, managers and employees. Let’s imagine how those values could be corrupted:
- Customer Commitment: Keep the customer happy no matter what we need to tell them.
- Quality: Hit the same quality but at a lower cost and faster.
- Integrity: Leadership did X, so it must be OK.
- Teamwork: Good teammates support the goals and don’t rock the boat.
- Respect for People: Disagreement is disrespectful,
- Good Citizenship: What we do is good, therefore we’re always being a good citizen.
- A Will to Win: We must win.
- Personal Accountability: Why aren’t you committed enough to winning?
SmartBrief contributor S. Chris Edmonds has made it his focus for years how to define, enact and measure workplace cultures. Having a system in place won’t prevent all trouble, scandal and bad behavior, but the stress of tough times will add to the temptation.
Defining and living out values matter, of course, for individuals and organizations, but managers have a critical role in shaping what happens in their corner of the world. Each of us has a part to play, even if it feels like our influence is small. Leading through difficult times isn’t an HR problem. It’s an opportunity for every leader to step up.