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Should You Cut Your Learning Budget in a Downturn?

At some point, every organization will face an economic downturn. It could be a global recession or a serious slump in one of the industries you serve. Regardless, too many organizations jump to the wrong conclusions too quickly. They slash investment in employee development to save on variable expenses. But cutting a learning budget in haste can lead to much more severe business damage over time.

That’s why smart leaders embrace a long-term growth mindset before, during, and after a downturn. It’s why they double down on developing their people, even when times are tough. And as a result, these organizations don’t just survive. They thrive.

Learning: Strength in a Downturn

Wondering how some businesses actually flourish during difficult economic times? Take a look at the research. During the recessions of 1980, 1990, and 2000, a small minority of companies (9%) showed strong performance. In fact, they outperformed competitors by at least 10% in sales and profit growth.

What was their secret? In part, they invested in helping employees make better-informed decisions, improve their responsiveness, and adapt more quickly. What was the common denominator beneath these improvements? Learning. People needed the right knowledge and skills to pursue new roles, embrace new tasks, work more resourcefully, and make more effective decisions.

That’s why organizational learning is critical during a downturn. Yet ironically, L&D is often among the first departments that suffer when budgets are cut. It’s time for learning leaders to challenge this practice. Because employee development is not just a nice-to-have option when times are good. It is actually a powerful way to increase productivity, retention, and competitiveness — especially during uncertain economic times.

Flip Your Perspective

A downturn often brings uncertainty and fear. But seeing it instead as an opportunity for growth and differentiation can help your organization position itself as a market leader when recovery eventually comes. Preserving your learning investment can help your people do exactly that. If you cut back your learning budget now, you will hinder your future success.

I might be preaching to the L&D choir. But this is a vital message to spread far and wide across your senior stakeholders. Why? Chances are, the learning budget has already been slashed in each of your competitors’ organizations. If so, you can plant seeds now that can eventually grow into a competitive advantage.

Build the Case for a Sustained Learning Budget

To communicate effectively with executive stakeholders and colleagues, focus on understanding their unique priorities, fears, and challenges. For example, issues that matter to your CFO won’t necessarily be what keeps your CHRO up at night.

Department heads can be a goldmine of insight into high-priority projects, as well as the skills needed for successful outcomes. Partnering with these leaders increases buy-in. And with more voices supporting you, the less likely your learning budget will be cut.

Internal partners can also help you define learning programs that will have a deeper impact on your business. For example, when Capital One implemented a new cloud-based digital transformation, senior learning leadership worked closely with the CIO to define and develop required skills, assignments, and content.

Align Learning With Business Success Metrics

During a downturn, leaders are laser-focused on return on investment (ROI). To avoid seeing your budget hit the cutting room floor, L&D should focus on business metrics that show how learning contributes to the top and bottom line. When you show evidence that learning boosts performance, productivity, and operational efficiency, your C-Suite will think twice about trimming your funding.

Again, partnering with other departments can help uncover relevant data that may not be available in your learning system. For instance, you could link learning behavior with business data such as sales leads, onboarding time, or customer satisfaction scores.

The more directly you tie learning content and consumption patterns with business readiness and productivity metrics, the better. It’s even better if you can prove your learning strategy delivers a tangible business impact at a lower cost than a legacy learning system or process.

Make Every Dollar Count

Ericsson is a good example of this strategy in action. When investing in a new online learning system, the L&D team found that course completions rose by 62%, while the cost of operating the learning technology ecosystem fell by half.

At the same time, business units saw a 41% increase in ethical practices, with 97% of employees completing new anti-corruption training within two months of launch. This was a month faster than previous campaigns with higher completion rates.

In addition, the L&D team discovered that the number of workers who learned Ericsson’s five company-critical skills (5G, artificial intelligence and machine learning, collaboration, sales, and automation) increased by 14%.

Address Employee Uncertainty

A final point you can make to your C-Suite involves the human aspect of thriving in a recession. Make no mistake, your people are feeling very vulnerable right now. If they think their jobs and livelihoods are at risk, they cannot do their best work.

People may need to expand their workload in the wake of hiring freezes or layoffs. They may need to switch to another role, team, or project to keep your business operating smoothly. Or, they may have extra capacity when a project is canceled or delayed.

All of these situations affect employee wellbeing and performance, especially if people don’t feel equipped to perform well. In fact, nearly 60% of workers say a lack of confidence in their skills makes their job more stressful, and nearly 40% believe their mental health suffers as a result.

Offering a tailored learning plan with clear career growth opportunities that extend beyond the immediate downturn can have a huge influence on an employee’s perception of job security.

The Marketplace Values Skilled People

Companies that treat their people well during a downturn are building lasting loyalty and a strong employer brand that can pay off over time. For L&D, actions you take now to preserve your learning budget can directly influence your organization’s ability to attract and retain talent in the future.

This is also a strong confidence signal to those outside of your company. It shows prospective customers, analysts, influencers, and investors that you understand this is just a moment in your business lifecycle, and that you’re preparing your workforce for the inevitable upturn.

After all, if your people aren’t prepared with the right skills when the opportunity arises, your business won’t be able to seize the day. In fact, if you wait to upskill your people when a recovery begins, you’ll be too late. Others who invested in learning during the downturn will lead.

Grow Now, Lead Later

Historically, some of the most innovative and inspiring businesses continued to grow during downturns because their leaders understood that opportunities don’t necessarily come during good times. Tough times present challenges that can force you to rethink processes, reskill your people, and develop a competitive edge while other companies may pause.

Learning is crucial in all economic climates, but especially in uncertainty. Skills are the building blocks for your future. You don’t want to cut back on them and find yourself without a springboard to success when the going gets better. For the kind of business impact that will stand the test of time, resist the temptation to cut your learning budget. Instead, double down — the sooner the better.

Hiring In a Recession: 3 Strategies for Business Resilience

The global economic climate is in a precarious state, with experts now predicting a 70% likelihood that the U.S. will enter a recession this year. No doubt, this news is unsettling for business owners. But it’s important to remember that recessions are a natural part of ongoing economic cycles. They can even present opportunities for organizational growth and resilience if you know how to capitalize on them.

So, how can leaders navigate today’s challenges and emerge even stronger on the other side? By strategically hiring in a recession. If you want to build bench depth on your team during tough times, here are three strategies to consider:

3 Strategies for Hiring in a Recession

1. Go Global With Remote Hiring

We’re in a much different position now than during The Great Recession of 2008. So is the global workforce. Thanks to technological advances and the prevalence of remote work models, it’s much easier now for hiring managers to tap into the vast global talent pool.

Compared with local hiring strategies, seeking out top talent internationally offers multiple advantages. Not only can you gain access to a much larger source of candidates, but you can also achieve significant overhead cost savings if you hire people in locations where labor costs are lower.

In addition, sourcing job candidates from around the world can help you develop a much more diverse team. If you are careful to hire skilled professionals, an international approach can inject your work culture and business deliverables with fresh perspectives. This can help your business operate more effectively and efficiently while supporting long-term growth.

That said, hiring globally isn’t without its challenges. To succeed, hiring managers need to be aware of hiring laws and regulations in their chosen countries, as well as cultural differences. It’s also important to ensure that hiring practices are fair and equitable, regardless of where potential employees may be located.

The importance of remote work leadership also needs to be taken into consideration here. Your organization should be prepared to develop and support management skills and practices that will help remote teams stay connected, engaged and motivated.

2. In an Era of Mercenaries, Focus on Your Missionaries

The last few years have been like a game of musical chairs for the labor market. The Great Resignation resulted in 44% of workers hopping from job to job, searching for higher pay, better benefits, and more flexible work options.

This led to a new trend known as “mercenary hiring,” where employers use inflated compensation packages to recruit highly skilled candidates without regard for the company’s mission or culture. However, this recruiting practice can be very risky. While it may be an effective way to attract top talent in a tight labor market, it can also lead to increased workforce churn and damage company culture.

Fortunately, there’s an antidote to mercenary hiring. Hire “missionaries” instead. Focus on people who share a passion for your company’s mission, purpose, vision, and values. These job seekers are more likely to invest in long-term success with your organization, so they’ll also be more invested in your company’s growth.

Of course, it’s one thing for employers to identify, attract and hire these “missionaries.” But it’s even more important to focus on creating an environment that nurtures them and encourages them to thrive. For example, this can include competitive salaries, consistent recognition, and generous professional development opportunities, as well as incentives like flexible scheduling and remote work options.

3. Find Opportunity in Adversity

The hiring landscape may have changed, but one thing remains the same: Hiring during a recession is an opportunity to tap into highly qualified talent you might not find as easily during better economic times.

During the last recession, the U.S. lost 2.6 million jobs. And in 2022, we began seeing some very prominent companies announcing major layoffs. While this news can be disturbing, hiring managers should see it as an opportunity to find the best and brightest talent amidst the chaos.

History has shown us some iconic instances of hiring when the job market was at low ebb. For example, in the 1940s, Hewlett-Packard famously capitalized on the closure of military labs to beef up its workforce. And during one of the nation’s worst 16-month economic cycles, Microsoft took the initiative to hire some of its most influential engineers. Both cases offer powerful business lessons.

Key Takeaways

So, what’s the moral of this story? Here are the three key takeaways to keep in mind about hiring in a recession:

1. Top Talent is Only a Zoom Call Away

With the rise of remote work and virtual hiring tools, it’s easier than ever to find top talent in all corners of the world. Don’t limit your search to local candidates. Consider expanding your talent acquisition reach to a global scale. This can open you to a broader pool of qualified, motivated candidates while giving you access to diverse skills and experiences.

2. Resilience in Hiring is More Than Just Hiring More People

In a recession, it’s important to be strategic about who you recruit. Look for individuals who share your goals and understand your company’s mission. People who sincerely want to advance your agenda are much more likely to stay with your company during difficult times. Focus on building a team of dedicated employees who are willing to be flexible during uncertain times. This will help you weather the storm and emerge stronger on the other side.

3. When Others Freeze Hiring, Be Bold

During a recession, it can be tempting to react with a hiring freeze. Although that approach may save costs in the near term, it is also likely to be a mistake. Investing in talent during tough economic times can set you apart from competitors and position you for success in the long term. Don’t be afraid to be brave and continue investing in your team, even when times are tough. This can help retain your best existing employees, while also helping you attract strong new talent. That combination can build the foundation your company will need to drive future growth.

Final Note

Overall, the key to successful hiring in a recession depends on three factors – your ability to be adaptable, strategic, and focus on building a team that is willing and able to weather the storm with you. By keeping these principles in mind, you can navigate even the toughest hiring climate and make your organization more resilient in the face of any economic downturn.

Are You Ready to Lead Through Uncertainty?

Sponsored by HiBob

As 2023 begins, the world of work is bracing for a rough ride. For more than a year, inflation has gripped the economy. Previously unstoppable tech companies are reeling from recent layoffs. And other industries are tightening their belts, as a recession now seems unavoidable. What will it take to lead through uncertainty?

Strategies that helped organizations thrive under different circumstances are no longer relevant. But during lean times, how can you preserve what’s valuable and unique about your organization? This question is top-of-mind for leaders everywhere. So let’s get advice from someone who understands the factors driving today’s business climate:

Meet Our Guest:  Ronni Zehavi

Today, I’m thrilled to welcome Ronni Zehavi, Co-Founder and CEO of modern HR platform provider, HiBob. After more than 25 years of experience in launching and leading successful technology companies, Ronni knows first-hand how to guide organizations through volatile, uncertain circumstances. Now he’s sharing his unique perspective and expertise to help others lead through uncertainty.

Managing Multiple Unknowns

Welcome, Ronni. Let’s dive right in. How can organizations navigate through uncertain times?

It’s a bit like driving a car. In 2021, driving fast may have been easier because the road was clear. But today it’s bumpy and cloudy. No one knows when it will end, so you need to slow down.

2023 is going to be challenging. First, read the map and then adjust your plan. How long is your runway? Do you have enough cash? Do you have enough funds to weather the coming storm?

Then look realistically at the environment. A slowdown will have an impact on your customers as well as your organization. Will you be able to generate the revenues you expect?

The Long Game

The economy will eventually bounce back. How can we prepare for that now?

It starts with your people. Invest in them. Make sure you can retain all of them. Or, if not all of them, focus on your most important people. Because you’ll want them to be with you when the tailwind comes.

And more than anything else, think positive. What goes down comes back up. So optimism is critical.

How to lead through uncertainty

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What About Layoffs?

Is there a right way to reduce headcount? How can leaders avoid damaging their company culture?

Layoffs are only one option in a CEO’s toolbox when adjusting to a difficult environment. First, you may decide to slow down hiring. If a slow down isn’t enough, then you may need to freeze hiring or freeze salary increases, or both. And if needed, the next option could be salary cuts or layoffs. One or both.

But it is important to think about the people who stay as well as those who are laid off. Retention can be affected when those who remain are expected to do the job of two people or even more.

Communication and transparency are critical to preserve your culture.

Can Flexible Work Help?

Do you think economic changes will influence where we work? 

I don’t think so. I think hybrid work is here to stay. Flexibility was a nice-to-have perk a few years ago. But the pandemic proved that organizations can deal with it.

The ultimate combination is two or three days at the office or two or three days remote. It offers flexibility, but it keeps engagement and collaboration among people.

How to Support Hybrid Work

I like the idea of finding a balance between onsite and remote work. But how can leaders accomplish this? 

It’s a journey. It will take time until we get there as a standard. But flexibility is all about what we call internally, The Three T’s:  Trust. Transparency. Teamwork.

If your organization follows these values, it will help you create a flexible work culture.

 


For more insights from Ronni about how to lead through uncertainty, listen to this full podcast episode. And be sure to subscribe to the #WorkTrends Podcast on Apple Podcasts or Stitcher.

In addition, we invite you to join our live Twitter chat about this topic on Wednesday, January 25th at 1:30pmET/10:30amPT. Follow @TalentCulture for questions and be sure to add the #WorkTrends hashtag to your tweets, so others in the community can easily find your comments and interact with you!

Also, to continue this conversation on social media anytime, follow our #WorkTrends hashtag on Twitter, LinkedIn, and Instagram.

Image by Biletskiy

Yes, The Shecession is Real (But the Horizon is Bright)

Even with vaccinations in sight, COVID-19 continues to ravage world health and drag economies downward. The resulting recession – the shecession – in the United States is having a sea-change impact on women.

For nearly a year, the pandemic pulled many women back into the home. Their new dual role: Serving as the primary caregiver and educator of their families while working remotely. Others have been forced out of the workforce altogether. The numbers are frightening. And yet, the likely long-term impacts offer both challenges and glimmers of hope, all at the same time.

The Shecession: Glimmers of Hope

On the hope side, the probable long-term impact of the large number of women working from home is promising. After all, perhaps for the first time, business leaders and decision-makers have had a front-row seat to the invisible work of parenthood. As a result, companies have sprung into action and added flex-time schedules, mental health, and childcare benefits. Some have taken the additional step of bolstering their paid family leave policies. Additionally, the pandemic has proven that flexible work schedules and remote work are viable. The widely touted concerns with declining productivity while working from home are unfounded, according to reports.

Going forward, companies will continue to capitalize on the remote work tools into which they have invested so much money and time. Many have already stated they will allow a large percentage of employees to continue working remotely post-pandemic.

It is not just women and parents that will benefit from this change. Other groups traditionally shut out of the workforce or marginalized to some degree due to an uncooperative infrastructure should continue to flourish. For example, people with disabilities should find more doors open to them they once found shut.

The long-term possibilities for many segments of the workforce are exciting – many are long overdue.

The Shecession: Our Current Realities

However, right now, the recession is having very harmful impacts with a disproportionate impact on women. It’s true: Overall unemployment numbers for women continue to improve since the early part of last year. But these numbers do not include women who are no longer seeking work. Data from the National Women’s Law Center (NWLC) is staggering:

In the month between August and September 2020, four times as many women dropped out of the workforce as did men.

“Over 1.1 million workers ages 20 and over dropped out of the labor force last month – meaning they are no longer working or looking for work,” NWLC wrote at the time. “Of the workers who left the labor force, 865,000 (80.0%) were women, including 324,000 Latinas and 58,000 Black women.”

Let us pause and let these numbers sink in.  It is no wonder so many people are referring to the current economic crisis not only as a recession, but also as the “shecession.”

The Pandemic Magnified Inequalities

Many employees struggle with serving as the primary caregiver of elderly relatives and children. Regardless of being driven by choice or necessity, this burden impacts women in more significant numbers than men. The pressures are particularly acute for women of color, who are often more likely to be breadwinners, care for multiple generations, and contract COVID-19.

For example, the unemployment rate for Black women and Latinas in September 2020 was more than twice as high as before the pandemic. These women were – and are –  disproportionately impacted due to high job loss rates in public-facing industries such as Leisure and Hospitality, Retail, Education, and Health Services. Many of these jobs cannot be accomplished remotely; as a result, companies eliminated these roles. What’s more, even when the pandemic is over, these industries are sure to be smaller and to look significantly different than they did leading up to the crisis. That means this critical cohort of people will not have as many of these jobs waiting for them when they return to the workforce.

There is no doubt: The pandemic has exacerbated existing inequalities in the labor market.

The Good News: Both Genders See the Possibilities

The good news is that men – who still are overwhelmingly the senior decision-makers in the business world – now recognize the opportunity to build more equitable workplaces. They see the need for more role model flexibility for all genders. HR leaders also see the issues that the recession has laid bare. More important, they see concrete actions taking place now that will positively impact the future.

The silver lining is that this crisis and these dismaying trends create an opportunity for leaders to pause and think. They can now ask themselves how their companies should adapt to survive and grow. They now must consider what they aspire to become as an organization and as an employer.

Yes, the shecession is real. But the companies that embrace more worker-centric, equitable, and inclusive workplace practices will reap the many benefits of these long-overdue changes. For them and their employees, the horizon is bright.

 

Editors’ Note: In addition to today being International Women’s Day, this is Women’s History Month. Each March, we commemorate and encourage the study, observance and celebration of the vital role of women in American history. To learn more, click here.