Worse news: Your company is probably not prepared for it, according to recent research from leadership training company VitalSmarts.
In a survey of 1,080 employees and executives, leaders said roughly half of their employees didn’t have the skills necessary to survive a downturn, while 52 percent of employees said the same of their leaders.
The 5 Skills You Need to Survive a Recession
Precisely what skills did leaders and employees alike feel were lacking? According to VitalSmarts, these five competencies are key to recession-proofing any business:
- Open dialogue, defined as “the skills to engage in candid dialogue to reach alignment and agreement on important matters.”
- Change mastery, defined as “the skills to master behavior change by identifying the cues, routines, and rewards that influence behavior and result in habits that propel or impede success.”
- Productivity, defined as “the skills to manage the constant flow of tasks and interruptions people face at all levels of the organization.”
- Universal accountability, defined as “the skills to respectfully and effectively hold anyone accountable for their behavior regardless of power, position, or authority.”
- Leadership, defined as “the skills to drive high-leverage, sustainable behavior change across entire teams or organizations.”
“Financial downturns put the human side of an organization under a great deal of stress,” explains David Maxfield, vice president of research at VitalSmarts and coauthor of Crucial Accountability. “It requires a degree of alignment and responsiveness far greater than during good times. I’ll repeat Warren Buffett’s observation that ‘when the tide goes out, you discover who has been swimming naked.’”
Leaders weren’t terribly concerned about employee productivity in the event of a recession, which does suggest companies are at least confident in their employees’ abilities to get work done under difficult circumstances. As Maxfield says, “It’s a ‘duh!’ observation to say that financial turndowns require people to do more with less. Customers demand lower prices. In response, staffing is often cut, resources are reduced, and productivity needs to improve.”
But leaders did have misgivings about employee agility, persistence, and ability to self-start, with 47 percent reporting their employees were not sufficiently skilled in these areas. Moreover, 52 percent of leaders said their employees did not have the skills to engage in open dialogue — which could be bad news in the event of recession. Even if employees are capable of remaining productive, they won’t be productive in the ways they need to be without open dialogue.
“Leaders and employees need to be quick to recognize changes that threaten the status quo,” Maxfield says. “Sacred cows must be called out and discussed. If some of these conversations are undiscussable, the organization won’t be able to respond as quickly and effectively as the situation demands.”
For their part, only 7.3 percent of employees were “confident their senior leaders could plan, communicate, or lead the sustainable changes needed for success,” according to the VitalSmarts survey.
“As I’ve suggested, the organization needs to respond quickly and as a unit in order to stay in front of the challenges a recession creates,” Maxfield says. “If leaders are not able to keep people aligned and united as they move the organization in new directions, they won’t be able to make the changes the recession demands.”
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Skip the Blame Game — Here’s How to Prepare
While both employees and their leaders feel their companies are not ready for a recession, they at the very least aren’t trying to avoid responsibility. The survey didn’t reveal much in the way of finger-pointing, which means many companies are in a great place to mount a constructive approach to recession-proofing.
“While there was some ‘blame the other person’ for shortcomings, the overall picture from the data is agreement,” Maxfield says. “Both leaders and employees believe that even they themselves are not skill-ready for the next recession.”
But if neither party is to blame, why are companies so ill-prepared for a recession. In part, Maxfield says, it could have something to do with the nature of business itself.
“We selected the five general skills highlighted in the research because they are central to the human side of any organization,” he explains. “Many organizations focus so tightly on the nonhuman side — technology, systems, structures, etc. — that they overlook these human aspects.”
Another possible factor, according to Maxfield, is that many of us may have gotten a bit too accustomed to 10+ years of economic growth.
“I think many of us and our organizations have become a bit lax, and we know it,” he says. “If the tide goes out tomorrow, we know we will be swimming naked.”
Regardless of how we ended up here, Maxfield recommends organizations start taking steps to “skill up” the “human side of the organization.”
“Often, when a recession hits, training is one of the first casualties,” he says. “That makes sense for some types of training, but, if leaders truly believe a recession is becoming more likely, then training is more important now, even if it is likely to be cut once the recession begins.”
In addition to building these human-focused skills that are sorely lacking, organizations should be planning for the specific scenarios they’re likely to face if and when a recession hits.
“For example, we are working with an auto lender whose leaders are developing scenario plans about the options they will take if new car loans were to decrease by a third due to a recession,” Maxfield says. “They are practicing the tough conversations today, before they are tested in an actual recession.”
Meanwhile, employees don’t necessarily have to wait for their employers to take the charge — nor should they. While recessions are certainly unpleasant, they can offer opportunities to smart professionals who know how to seize the situation.
“Economic downturns can give heroic employees a chance to step up,” Maxfield says. “While others are covering their heads and riding things out, an employee who proactively learns a new skill and volunteers for new assignments will be noticed.”
Maxfield recommends employees look into any discretionary professional development money that may be available to them through their organizations. Make a case to use that money in order to develop skills that are “clearly tied to what the business crucially needs,” Maxfield says. If you need to find more affordable training options, consider going for online and live online trainings, rather than in-person events.
If you find the company purse strings are pulled too tightly, it may be worth it to shell out some of your own money for your development.
“Recessions don’t last, but new skills do,” Maxfield says. “If there is still no corporate money to build these skills, a forward-thinking employee will know their skills will outlast the recession. If they have to pay for a course or two out of their own pocket, after the smoke clears, they may be known as the one who stood up when the others stayed down.”