How to Prepare Your Company For a Recession

Claire Hastwell

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Recessions impact all companies, but they don’t impact all companies equally. Companies that emphasize workplace diversity and inclusion (D&I) not only survive recessions, but even thrive throughout them. Our data shows that companies who value diversity and inclusion outperform other companies by as much as 400%.

All businesses understand that recessions are a normal part of the business cycle — most of us don’t welcome them.

The idea that a recession might be on the horizon can cause business leaders to scale back their ambitions and plans in favor of reducing expenses and preserving cash to weather the coming storm.

Of course, the exact timing of a recession is nearly impossible to predict accurately. However, many news outlets and business magazines are warning that signs of an impending recession have emerged, and businesses are starting to discuss how to survive it when it finally comes.

What if you could do more than simply “surviving” a recession?

New research from Great Place to Work® shows that it’s possible for businesses to not only survive a recession, but to thrive during one.

The key to doing so might surprise you, because it doesn’t involve launching a new marketing campaign, rebranding your business or extending your product line.

Our data suggests that turning your attention to your company’s diversity and inclusion (D&I) efforts can strengthen your business’ performance, even in a recession.

What the Great Recession tells us about diversity and inclusion?

Until now, diversity in the workplace and recession were likely never uttered in the same breath. What possible tie could D&I have to an economic decline?

We discovered this link between D&I and success during a downturn in a study of the Great Recession.  Our data set comprised nearly 4 million employees across a multitude of demographics.

What we found might surprise you: diversity and inclusion efforts represent a potent source of strength for organizations as they weather tough times.

In particular, the experience of certain groups of employees — including historically disadvantaged groups — predicts whether organizations flatline, survive or thrive during a recession. (“Thrive” describes publicly-held companies in our data set that achieve returns of 14% or greater between 2007 and 2009.)

Often-marginalized employees turn out to be predictors of when the business climate will turn bad. Studying their workplace experiences can yield insights about opportunities to change your company culture and practices to better recession-proof your business.

Key groups of employees to ensure are having a good experience at work:

  •    Women
  •    People of color
  •    Front-line workers
  •    Hourly male workers
  •    Long-tenured employees.

Why do these groups act as bellwethers for an organization?

Just as recessions don’t impact all companies equally, they don’t impact all employees in a given company equally.

Historically marginalized groups are often the first people to feel the effects of a business running into trouble, such as wage cuts or rounds of layoffs.

These critical populations play vital roles in both good times and bad. They often serve customers directly and are plugged into the reality of how the business is doing. They’re also a source of good ideas that many companies overlook, like ideas for cutting costs or new ways to generate revenue.

How much of a difference can D&I make during a recession?

The S&P 500 suffered a 35.5 percent decline in stock performance from 2007-2009.

That’s a lot of companies losing a lot of value — but they didn’t all share evenly in the pain.

Companies whose key employee groups had very positive experiences posted a remarkable 14.4 percent gain.

Take a moment to let that sink in: in a recession, these companies grew.

For that group of “Thriving” companies, the good news wasn’t limited to the recession. Their gains started before the downturn and continued well past it as competitors lagged.

From January 3, 2006 to February 1, 2014, the Thriving group saw their stock performance increase 35%, while the S&P 500 had just a 9% gain. These companies didn’t merely outperform the typical business; they blew it out of the water, yielding a relative gain of 400% compared to the S&P 500.

Here are two strategies to help your organization thrive in recessions:

1. Revisit your hiring and firing practices

During downturns, most companies follow the last-in, first-out approach. They lay off recent hires, which usually erases progress made towards a more diverse employee population.

What’s more, organizations often overlook how front-line workers and historically disadvantaged groups are faring. Leadership fails to solicit ideas from them. In paying too little attention to these key employees, companies miss out on opportunities to thrive.

As the next recession approaches, smart companies seek out ways to prepare themselves. By making diversity and inclusion a key component of your recession plan, you can position your company to grow, even as your rivals are shrinking.

2. Double down on listening

What listening tools do you have in place now to measure employee experience? Identify existing but underused feedback channels. Examples might include:

  • employee surveys
  • town hall meetings
  • company intranet
  • chat tools
  • feedback forms

Get more ideas in our blog on effective employee communication.

The fastest way to get more input and engagement is to take visible action on ideas and issues that have already been shared. Consider appointing an organizational owner of feedback to help ensure great ideas aren’t lost in the daily grind.

To recession-proof your business, review all input and survey feedback from your key groups: hourly male workers, women, front-line workers, people of color, and long-tenured employees. Where experience isn’t the same across groups, leadership needs to take action to try to address those gaps immediately.

Claire Hastwell

Author

Great Place To Work identifies Best Workplaces™ in Asia by surveying over 1 million employees in Asia and the Middle East about the key factors that create great workplaces for all and analyzing company workplace programs impacting over 4.7 million employees in the region.

To be considered, companies must first be identified as outstanding in their local region by appearing on one or more of our Best Workplaces lists in Greater China (including China, Hong Kong and Taiwan), India, Indonesia, Japan, Kuwait, Philippines, Qatar, Saudi Arabia, Singapore, South Korea, Sri Lanka, UAE, Vietnam during 2021 or early 2022.

Companies rank in three size categories: Small and Medium (10-499 employees); Large (500+); and Multinational. Multinational organizations are also assessed on their efforts to create great workplaces across multiple countries in the region. They must appear on at least two national lists in Asia and the Middle East and have at least 1,000 employees worldwide with at least 40% (or 5,000) of those employees located outside the headquarters country.

Great Place To Work identifies Best Workplaces in Asia™ by surveying 2.1 million employees in Asia and the Middle East about the key factors that create great workplaces for all and analyzing company workplace programs impacting 5.9 million employees in the region.

To be considered, companies must first be identified as outstanding in their local region by appearing on one or more of our Best Workplaces lists in Bahrain, Greater China (including China, Hong Kong and Taiwan), India, Indonesia, Japan, Kuwait, Oman, Philippines, Qatar, Saudi Arabia, Singapore, South Korea, Sri Lanka, UAE, Vietnam during 2022 or early 2023.

Companies rank in three size categories: Small and Medium (10-499 employees); Large (500+); and Multinational. Multinational organizations are also assessed on their efforts to create great workplaces across multiple countries in the region. They must appear on at least two national lists in Asia and the Middle East and have at least 1,000 employees worldwide with at least 40% (or 5,000+) of those employees located outside the headquarters country.

For All™ Methodology

Great Place To Work, the global authority on workplace culture, determined the Philippines Best Workplaces™ 2023 List by conducting annual workforce studies through our Trust Index Survey™ and Culture Management platform Emprising®, representing the voices of over 450,000 employees across the Philippines.

Employees responded to over 60 survey questions describing the extent to which their organization creates a great place to work For All™, meaning that the company empowers all individuals to reach their full human potential. Eighty-five percent of the evaluation is based on what employees report about their experiences of trust and reaching their full human potential as part of their organization, no matter who they are or what they do. We analyze these experiences relative to each organization’s size, workforce makeup, and what’s typical in their industry and region. The remainder of the evaluation is an assessment of all employees’ daily experiences of the company’s values, people’s ability to contribute new ideas, and the effectiveness of their leaders to ensure they’re consistently experienced.

To ensure surveys truly represent all employees, we require enough people in each organization to respond that results are accurate to a 95% confidence level and 5% margin of error or better. We review any anomalies in survey responses, news, and financial performance to ensure there aren’t any extraordinary reasons to believe we couldn’t trust a company’s survey results.

For All™ Methodology

Great Place to Work, the global authority on workplace culture, determined the Philippines Best Workplaces™ 2022 List by conducting annual workforce studies through our Trust Index Survey™ and Culture Management platform Emprising®, representing the voices of over 130,000 employees across the Philippines.

Employees responded to over 60 survey questions describing the extent to which their organization creates a great place to work For All™, meaning that the company empowers all individuals to reach their full human potential. Eighty-five percent of the evaluation is based on what employees report about their experiences of trust and reaching their full human potential as part of their organization, no matter who they are or what they do. We analyze these experiences relative to each organization’s size, workforce makeup, and what’s typical in their industry and region. The remainder of the evaluation is an assessment of all employees’ daily experiences of the company’s values, people’s ability to contribute new ideas, and the effectiveness of their leaders to ensure they’re consistently experienced.

To ensure surveys truly represent all employees, we require enough people in each organization to respond that results are accurate to a 95% confidence level and 5% margin of error or better. We review any anomalies in survey responses, news, and financial performance to ensure there aren’t any extraordinary reasons to believe we couldn’t trust a company’s survey results.

Categories:
These organizations’ assessment is based 100% on employee responses to the Trust Index survey.

  • Small 10-99 Employees

For larger organizations with more than 100 employees, we also use our Culture Audit™ tool, asking organizations to share with us their practices, policies, and programs to create a great workplace For All™ and evaluate the approach they take.

  • Medium 100-999 Employees
  • Large 1000+ Employees

Why do you say in one place your national list scoring is based on 85%/15% and in another place that it is 75%/25%?

We are explaining two different things:
1.  The criteria we evaluate

  •  85% concerned with Trust and Maximizing Human Potential and
  • 15% concerned with everything else

2.  Where the data comes from

  • 100% Trust Index for organizations with less than 100 employees
  • 75% based on the Trust Index survey analytics and 25% based on responses to the Culture Audit for organizations with more than 100 employees.
For All™ Methodology

Great Place To Work, the global authority on workplace culture, determined the Philippines Best Workplaces™ 2023 List by conducting annual workforce studies through our Trust Index Survey™ and Culture Management platform Emprising®, representing the voices of over 450,000 employees across the Philippines.

Employees responded to over 60 survey questions describing the extent to which their organization creates a great place to work For All™, meaning that the company empowers all individuals to reach their full human potential. Eighty-five percent of the evaluation is based on what employees report about their experiences of trust and reaching their full human potential as part of their organization, no matter who they are or what they do. We analyze these experiences relative to each organization’s size, workforce makeup, and what’s typical in their industry and region. The remainder of the evaluation is an assessment of all employees’ daily experiences of the company’s values, people’s ability to contribute new ideas, and the effectiveness of their leaders to ensure they’re consistently experienced.

To ensure surveys truly represent all employees, we require enough people in each organization to respond that results are accurate to a 95% confidence level and 5% margin of error or better. We review any anomalies in survey responses, news, and financial performance to ensure there aren’t any extraordinary reasons to believe we couldn’t trust a company’s survey results.

Categories:
These organizations’ assessment is based 100% on employee responses to the Trust Index survey.

  • Small 10-99 Employees

For larger organizations with more than 100 employees, we also use our Culture Audit™ tool, asking organizations to share with us their practices, policies, and programs to create a great workplace For All™ and evaluate the approach they take.

  • Medium 100-999 Employees
  • Large 1000+ Employees