While many business investors (including PE firms) have been citing concerns of a likely recession since 2022, a recent article “EX1 Freeze” by Fast Company’s Jared Lindzon (and published in the Hartford Courant on Sunday, November 26, 2023), is concerning, certainly not shocking. Key excerpts included:
- “All the signs point toward economic turbulence for next year which could loosen the labor market,” says J.P. Gownder, VP Future of Work, Forrester. He added, “an EX Winter will see disinvestment in employee experience functions, which will cause further declines in employee engagement and company culture… and that:
- employee satisfaction surveys will drop from 41% in 2022 to 34% next year;
- proportions of staff citing strong company culture will decline from 63% in 2024 to 55% in 2024; and
- proportions of companies funding DEI investments is expected to fall from 33% in 2022 to 20% in 2024.”
- Benjamin Granger, Chief Workplace Psychologist, Qualtrics added “Employees’ expectations have shot up very highly, and that doesn’t always jive with a tight economic environment… I fully expect what you’re going to see is a lot of organizations actually ramping up their [EX] investment because they realize that it’s critical to maintain their talent, and this is a time when they can really differentiate themselves.”
What We See
We, at The Human Resource Consortium, see realities on both sides of the coin with many on our team possessing backgrounds in both operations and HR. Our clients span most industry sectors, life cycles, and size. Historically, we’ve all observed painful and costly tailspins when organizations or communities have chosen paths marked by significant, adverse change.
The truth of the matter is that organizational culture and EX matters a lot! Nurturing and protecting your organizational culture assures your organization’s internal and external brand and supports its sustainability. Most CEOs agree wholeheartedly with Peter Drucker’s famous quote “culture eats strategy for breakfast.”
Organizational culture remains the hardest and most time consuming (5-10 years) undertaking to replicate by a competitor… creating a powerful and sustained competitive advantage. We also know from globally renowned experts’ studies that high employee engagement, fueled by employee experience, delivers 2-4X multipliers in performance and value to an organization. Add to that, another 233% in customer loyalty (retention, expansion, and referral).
- Trust in leaders and managers nurtures employee engagement and EX. A decline in investment or effort in EX will most assuredly signal prior inauthentic commitment by leaders, ultimately resulting in employee exodus… especially in a tight labor market, albeit a slight loosening.
- Increasingly, talent (especially top performers in a tight labor market who can choose where they work) gravitates to organizations that emulate their values… over those who may cite higher pay for challenging work environments (often referred to as ‘battle wages’).
The HRC Team’s Recommendations for Cost-Sensitive Culture Management
- Strategically Strengthen Competitive Advantage: If other organizations are decreasing their EX, ‘ante up’ your effort to enhance your employees’ experience to create a stronger competitive advantage while others’ wane;
- Maintain or Build Effective, Connecting Communications and Listening Behaviors.
- Reinforce Your DEIB/IDEA2 Investments by continuing to focus on Inclusion as well as Interaction Safety, leveraging your DEIB Committee, and building an Inclusive Common Language (Yvonne Alverio, our DEIB Practice Leader, recommends “Say the Right Thing” by Kenji Yoshino and David Glasgow).
- Engage in Proactive Talent Warfare: Competitiveness for the top 20% of talent is as real as ever. In a tight labor market, pulling back on EX is very risky. Trust that recruiting calls to your top performers will ramp up. Specific to facing a potential economic decline:
- With your leadership team, assess ‘flight risks,’ develop retention strategies, revisit employee expectations, and consider ‘stay put’ bonuses for key contributors,
- Ensure that all employees, and especially top performers and those in hard to fill positions, feel engaged, heard, and competitively rewarded;
- Elevate your external talent branding to ensure a robust talent pipeline.
- Invest in Behavioral Training and Mentorships to elevate organizational ‘magnetism,’ trust, and performance. If you have to decrease EX investments, you will need to ensure that behaviors you’ve worked hard to create do not recede to behaviors which have challenged employee engagement. Referring to prior satisfaction or engagement survey results may provide historical context. Unfavorable shifts in leader and/or manager behaviors will belie prior values-based statements and actions that effected employee trust and engagement in your organization which may be followed by a sense of betrayal and exodus of valued talent and organizational knowledge.
- Measure and Manage Culture Diligently and Regularly: Rather than lengthy engagement surveys, conduct monthly or quarterly pulse checks (5-10 questions, 3-5 minutes max). They can be structured into themes based on what your leaders feel is important, an issue that appears to be bubbling up which they are willing to explore for expanse and intensity, or in advance of strategizing and tackling a focused need.
Organizations have crucial choices to make in the next year or two while navigating through the potentiality or actuality of a recession. Ultimately, will your culture choices enable or destroy your strategy?
1“EX” is a commonly used acronym for employee experience.
2 DEIB is the commonly used acronym for Diversity, Equity, Inclusion, and Belonging. IDEA is a newer acronym for Inclusion, Diversity, Equity, and Accessibility.