What HR leaders can expect during economic downturn
The risk of global recession just went up following the widespread tariffs imposed by US President Donald Trump – and HR leaders will need to navigate the coming months of economic uncertainty.
JPMorgan has raised its forecast for global recession in the wake of Trump tariffs, which have been met with retaliations and threats of similar actions from other countries.
"There will be blood," read the warning issued by Bruce Kasman, JPMorgan's chief global economist, in a note to clients.
"The risk of recession in the global economy this year is raised to 60%, up from 40% earlier."
The note was uploaded online by Robin Wigglesworth, editor of FT Alphaville, the financial blog of the Financial Times.
The warning from Kasman comes as organisations across the world prepare for looming economic uncertainty, which led them to implement cost-cutting measures, such as hiring freezes and retrenchments.
Last year, business consulting and services firm HR Recruit said economic downturns have "far-reaching effects" on HR departments.
"For HR leaders, a tough economy can mean increased difficulty in attracting and retaining top talent," HR Recruit said on LinkedIn.
Citing a 2023 report from Deloitte, the consulting firm noted that 63% of HR leaders have said talent acquisition and retention are major challenges during economic uncertainty.
"This is compounded by budget constraints that limit the ability to invest in competitive salaries, benefits, and recruitment tools," HR Recruit added.
Budget constraints are one of the "most immediate and visible impacts of a tough economy," according to the consulting firm.
"For HR leaders, this often translates to a reduced ability to invest in recruitment tools, training programmes, and employee benefits," it said.
According to HR Recruit, there are various measures that HR leaders can take to navigate economic downturns.
"HR leaders should focus on cost-effective recruitment strategies," it said. "Leveraging social media and online job boards can reduce advertising expenses."
It also suggested optimising hiring processes to ensure they are getting value from their talent acquisition efforts.
"This includes refining job descriptions, improving interview processes, and utilising data analytics to better understand hiring needs and candidate performance," HR Recruit suggested.
It further recommended investing in employee referral programmes, which can be a cost-efficient approach to find high-quality talent.
HR Recruit offered the suggestions as it warned the cost of bad hires, which can be substantial for organisations.
"For HR leaders, the financial implications extend beyond the immediate expenses associated with recruiting and onboarding," it said. "A poor hiring decision often leads to increased turnover, which incurs additional costs for replacement hiring, training, and lost productivity."
Additionally, HR Recruit suggested exploring cloud-based HR platforms that "offer scalability and reduce the need for on-premises infrastructure."
"These platforms often come with lower upfront costs and can be more flexible in adapting to changing needs," it added.
Meanwhile, Alp Consulting Ltd. also advised HR leaders to be open and clear with their workforce when times are difficult.
"You need to be honest with your teams and your customers. Be specific about the value you provide for both employees and customers and highlight this constantly and consistently," Alp Consulting said on LinkedIn last year.
"They deserve the truth, whatever it may be because the truth is worth more than a million white lies."
Alp Consulting further suggested embracing technology, which can automate operational processes and improve efficiency.
"HR can help by putting safeguards in place for the technology by consulting with the technology teams and taking their suggestions, establishing a point of contact for any queries regarding how to use it, and creating training programmes for the new technology," it said.
"HR is also involved, most importantly, in understanding if the technology is translating into greater productivity and benefiting the organisation."
Various organisations across the world have implemented layoffs as a cost-cutting measure as they refocus their businesses to departments that are more revenue-generating.
Jatin Tyagi, founder of Recrudo Labs, said on LinkedIn that layoffs are difficult for both departing and remaining employees.
"When layoffs occur, it's not just the employees who are let go that suffer. Remaining employees often experience stress, uncertainty, and a dip in morale, wondering if they will be the next ones to go," he said on the website. "This environment of fear and insecurity can significantly impact job satisfaction and employee loyalty."
Instead of carrying out "short-term solutions of layoffs," Tyagi urged organisations to focus more on workforce optimisation instead. Some key strategies for this include:
"By focusing on internal talent and workforce optimisation, HR can navigate economic uncertainty without the need for drastic layoffs, creating a loyal and flexible workforce ready to adapt to change," Tyagi said.
