News of a pending recession is everywhere, with economists and business leaders making different predictions about when (sometime in 2023 looks like the current consensus), how bad, and what businesses can do in response (cut costs, “do more with less,” reduce employees, etc.).
While every recession generally triggers corporate cost cutting and layoffs, moving away from hybrid work does NOT make sense as a potential recession response. Employees, especially your top talent, continue to view workplace flexibility as a primary need, so employers seeking to maintain employee productivity will need to maintain an effective, well-considered hybrid work set-up.
As a report from International Workplace Global explains the perennial nature of hybrid work:
With hybrid work, companies have benefited “from significant falls in their real estate costs, along with tangible productivity gains and an increased ability to attract the best talent no matter where they are located. Hybrid working is no longer a “nice to have”: more than 70% of [job] candidates are now insisting that companies have a flexible work policy.”
Rethinking Office Space
What will hybrid work look like in the context of a recession? The office will continue as a site for employee connection and collaboration, but it can’t be deployed as a collection of empty desks or designated offices that people use infrequently. The office itself must be configurable so it can flex to accommodate multiple use cases, including in-person meetings, close collaboration, private/quiet immersion, social programming, and much more.
Some companies might use recession as a reason for mandating people back into the office, as Tesla CEO Elon Musk recently did when he announced a “40 hours weekly RTO” mandate right before laying off 10% of his workforce. But does a “mandated RTO” make good business sense?
Reduce Costs by Adjusting Your CRE Footprint
In times of cost-cutting, attention should be given to reducing an organization’s CRE (commercial real estate) footprint while maintaining spaces that can accommodate office use cases, as described above. According to Brian Kropp, VP of research at Gartner, companies that allow employees to come in whenever they want see fewer than 50% of employees coming into their physical location. “That means you can actually decrease your real-estate footprint by close to 50% and still have enough space for everybody,” Kropp told HR Brew.
So reducing and reconfiguring your CRE/office space “is not just what employees want, but also where companies are able to achieve cost savings when it comes to preparing for a potential recession,” says Kropp. According to Global Workplace Analytics, a typical employer can save about $11,000 every year for every employee who works remotely for half of the week.
Don’t Battle Your Employees: Everybody Loses
Forcing employees back into the office, using a potential recession as the justification, will not only increase your CRE costs, but also the turnover of your top employees. Just because things start to tighten up during times of economic uncertainty doesn't mean there is any less need for top talent. In fact, you'll need these star players more than ever.
Dan Kaplan, senior client partner at Korn Ferry’s CHRO practice, told HR Brew that in every recession employers “wish they had less real-estate space.” Fighting to get employees back into your office full-time makes no sense for cost control or retaining top talent.
Wrong Leverage, Wrong Time
Just because a recession may be looming, with its typical pressures to “do more with less,” doesn’t mean you should seek a “rebalance of power” when it comes to your talent returning to the office. Muscle flexing is understandable in some places (maybe the beach or the gym), but it can also get you into needless fights that you’re going to lose. Top talent can’t be pushed around, as these stats indicate:
- There are two job openings for every unemployed person in the current labor market, so employees should be able to hold their own better than during past recessions. Put simply, you need your most talented, productive employees to generate revenues.
- Hybrid has become, and will remain, the norm for the majority of employees, according to SHRM data. “By the end of 2024, we believe that the number of fully remote workers will go to about 20%. But that still means 80% will be working in the office in some way,” SHRM president Johnny C. Taylor Jr. told HR Brew.
4 Tips for Recession-Proofing Your Organization
1. Recognize that not all industries and jobs are impacted by recessions in the same way, so carefully consider how a recession might impact your particular industry, customers and people, including implications for sales, production, distribution and hiring.
2. Continue to retain and hire for the critical skills that are key to revenue generation. In a recession, your talent strategy remains mission-critical, so try not to over-correct in an environment where talent shortages will remain.
3. Employers expect health care costs to continue to increase due to inflationary conditions, as well as delayed and canceled care during the pandemic. Rising health care costs affect different employee segments differently. When planning for a potential recession, carefully review factors impacting your health care costs and programs.
4. Last but far from least, prioritize people over places – because your office space doesn’t ultimately drive your business, your people do. Picking the wrong fights over RTO mandates will make you less attractive to top talent and will likely diminish the employee experience and productivity of your existing employees, not to mention potentially increasing your CRE costs. Why go there?