- David Maxfield is a New York Times bestselling author, keynote speaker, and leading social scientist for business performance. He leads the research function at VitalSmarts, a corporate training and leadership development company.
- When it comes to recession preparedness, more than half of today’s workforce won’t be prepared with five key skills, according to a new VitalSmarts study.
- To weather a recession, leaders should “skill up” and train their workforces as soon as possible. And employees should proactively learn new skills and take on new work.
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When the next recession hits, as much as half of today’s workforce won’t be ready.
This alarming data from our recession-readiness study reminds us of an observation Warren Buffett first introduced in his book “Warren Buffet Speaks: Wit and Wisdom from the World’s Greatest Investor“: “When the tide goes out, you discover who has been swimming naked.”
According to the 89 leaders in our study, nearly half of their employees don’t have the necessary skills to weather a financial downturn. In other words, when the recession hits, they’ll be caught in the buff.
Our research team at VitalSmarts asked 1,080 employees and executives to rate their company on five skills we’ve found are vital to weathering a financial downturn. The skills – and their relevance to an organization being financially agile – include:
- Open dialogue: Leaders and employees need to quickly recognize changes that threaten the status quo. Sacred cows must be called out and discussed. When employees don’t feel safe enough to speak up about their concerns, the organization won’t be able to respond quickly and effectively.
- Change mastery: Disruptive change is one of the most common challenges of a recession. Reorganizations, workforce reductions, and budget cuts are common and difficult to absorb. An organization that can quickly move from outdated habits and practices to new, more effective ways of doing things will be far more successful.
- Productivity: Financial downturns require people to do more with less. As customers demand lower prices, staffing and resources are often cut. To compensate for the shortages, productivity must improve.
- Universal accountability: Our research has surfaced a common breakdown: Under financial pressure, leaders agree to difficult changes that will reduce expenses or improve productivity, but then fail to follow through on these commitments. The cultural norm becomes, “I won’t hold you accountable if you don’t hold me accountable.” When accountability fails, the organization is unable to respond to the changes wrought by the recession.
- Leadership: Organizations need to respond quickly and as a unit in order to stay ahead of the challenges a recession creates. If leaders can’t 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.
Although the 89 executives in the study rated all five skills as important to a company’s success during a recession, in their assessment, 47% of their employees are not sufficiently agile, persistent, or self-starting to handle a downturn. Similarly, 52% of executives also believed their employees lacked the skills to engage in the kind of open, productive dialogue required to survive. On the upside, executives had relatively less concern about their employees’ productivity during a recession.
- Courtesy of David Maxfield
And it turns out leaders weren’t the only ones fearful of how their skills stack up against a financial downturn. When employees were asked about their observance of these skills, 52% said their bosses did not have the skills needed to successfully navigate a recession. Only an average of 7.3% of employees were confident their senior leaders could plan, communicate, or lead the sustainable changes needed for success.
As we studied the recession of 2008, we found leaders whose teams were on the short side of these skills didn’t just struggle to weather the recession well – they struggled to weather it at all. The truth is, recession-proof companies have people – from front-line employees to executives – who can hold crucial conversations on how to stay relevant, profitable, and accountable. Before times get too tough, it’s important leaders and employees skill up their ability to be agile, persistent, self-starting, and productive.
What leaders can do
As we prepare for a possible downturn, it’s important for leaders to develop and practice recession-proofing scenarios. For example, we are working with an auto lender whose leaders are developing scenario plans about the actions they will take if new car loans were to decrease by a third due to a recession. They are practicing the tough conversations today – before they are tested in an actual recession.
More generally, leaders need to “skill up” the human side of their organizations. Often, when a recession hits, soft skills training is one of the first casualties. And yet, these important communication, leadership, and behavior change skills are the competencies that make the biggest difference when an organization and its people are under pressure. If leaders truly believe a recession is becoming more likely, then training their people now is vital – especially if it’s likely training budgets will be marginalized or cut when the recession begins.
What employees can do
Economic downturns can give heroic employees a chance to step up. 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 and likely rewarded in the future.
If the corporate training budget has been shortsightedly axed because of the recession, there may still be some discretionary professional development money available to individuals – especially if the skills can be clearly tied to what the business crucially needs. Advocate for more affordable online training and virtual training (with a real-time trainer) opportunities during a recession.
And remember, recessions don’t last – but new skills do. In the absence of professional development funds to build these skills, a forward-thinking employee will know their skills will outlast the recession. Employees who invest in their own training – even out of their own pockets – will be known as the ones who stood up when others stayed down after the smoke clears.
Organizations aiming to recession-proof their businesses must prepare for more than the issues they can see – like revenue, costs, budgets, and headcount. They must also consider the absolutely vital elements of survival that are below the surface – including open dialogue, change mastery, productivity, universal accountability, and leadership. These are the organizations that will not only weather the recession, but emerge stronger and more profitable.