The biggest challenges facing managers during the financial crisis: what HR need to know

With the UK economy floundering and a recession looming, businesses are bracing themselves for tough times over the coming months.

This is especially true for senior leaders and line managers. On the one hand, they’ll be tasked with keeping employees productive and motivated during times of economic uncertainty. But, on the other, the ever-deepening cost-of-living crisis is hitting everyone’s finances hard – and many employees will be feeling the strain.

So, with the financial crisis worsening and 2023 shaping up to be an incredibly challenging year for everyone, we wanted to discover what the biggest challenges facing managers and senior leaders in the UK and Ireland, their biggest concerns, and find the answers that will help HR teams to plan ahead.

1. Nearly 90% of senior business leaders believe their businesses are or will be negatively impacted by the financial crisis

With the economy already shrinking, it didn’t come as a surprise to learn that nearly 90% of the managers and senior leaders we surveyed said their business has already (56.6%) or will be (31.6%) negatively impacted over the coming months. Only 12% said they didn’t believe they’d be negatively affected by a recession.

2. Companies are planning freezes or reductions in recruitment, overtime and pay rises

Of the managers and senior leaders who said their businesses have or would be negatively affected, over 57% of them said the biggest effect was that recruitment will have to be cut back or halted altogether. Freezes or reductions in overtime came second, whilst a reduction or freeze in pay rises was third.

3. Over a third of business leaders believe no department is safe from cost cutting

Of the managers and senior leaders who said their businesses have been or would be negatively affected by the worsening economy, 35% of them said all departments would be impacted by cost cutting measures. However, sales teams (33%), customer service / facing roles (28%) and Human Resources (26%) were identified as the departments also most likely to be impacted.

4. Nearly three-quarters of managers say their employees are worried about the effects of a recession on their jobs

Our survey found that employee wellbeing is being directly affected by the financial downturn: with over 73% of managers saying their employees have expressed concerns over how a recession would affect their jobs.

5. Employees are worried about being made redundant

Of those 73% of managers who confirmed employees have expressed concern about a recession on their jobs, an overwhelming 57% of them said their employees were mainly worried about redundancies. Their salaries being frozen (12%) and an increased pressure on performance or efficiency (11%) were the other main concerns.

6. Preventing excess staff turnover, improving health and wellbeing programmes and upskilling the workforce are HR’s priorities during a recession.

When we asked line managers and senior leaders what HR’s top 3 priorities should be during a recession, 54% of respondents said preventing excess staff turnover, with 18% giving it as their top answer. Improving health and wellbeing programmes came second, and upskilling the existing workforce came third.

7. … Whilst over half of HR managers believe HR should be prioritising combatting excess staff turnover.

However, when we asked the same question just to HR managers, 55% of them said that reducing excess staff turnover should be the top priority for HR: with improving health and wellbeing programmes coming second, and upskilling the workforce third.

8. 77% of business leaders say a line manager’s main priority should be supporting employee morale during a recession

A whopping 77% of senior leaders and managers who took part in our survey believed that line managers should prioritise supporting employee morale during a recession. Maintaining levels of staff performance came second, and retaining good employees was third.

9. Over two-thirds of managers and senior leaders are concerned a recession will lead to excessive rates of staff turnover

Our survey discovered that an overwhelming number of managers and senior leaders are worried about losing staff during a recession: with 80% saying that a recession will drive rates of excessive staff turnover.

10. Job insecurity is the biggest causes of excessive staff turnover during a recession, say managers and senior leaders

When we asked what managers and senior leaders thought would lead staff to leave their role during a recession, 31% said job insecurity was the main driver. To secure an improved salary came second (28%), and job-related stress was third (12%).

11. Over a third of managers believe redundancies will drive away good employees

Lastly, we asked managers and senior leaders what their biggest worry would be if they had to make redundancies. 34% of respondents said it would cause the business to lose good employees, whilst 28% said employee morale and productivity would also suffer, and 20% said they’d lose hard to replace skills or experience.

The key takeaways for HR

Whilst this survey has revealed the main challenges facing managers, it’s also an opportunity for HR teams to refine their strategies and implement some ‘quick wins’ to support their organisations through the economic storm. Some key actions for HR include:

• Review and refine your organisation’s health and wellbeing strategies
  Effective health and wellbeing initiatives have always formed a big part of healthy company cultures. With everyone feeling the financial strain, employee wellbeing is a subject that HR teams (and senior leaders) truly cannot afford to ignore.
• Review your retention strategies
  Although not every business may be planning redundancies, other cost-saving actions – such as freezing wages, reducing overtime or cancelling bonus schemes – may lead to an exodus of good people from your business. If your business has to take these measures, think about how your staff can be supported in other ways in order to keep them engaged and not immediately heading for the exit.
• Evaluate your employee data
  Your employee data will be vital should departmental cost savings need to made. Think about how you can thoroughly analyse the performance of your employees, the productivity of certain departments, or where employees may need extra help and support.

Survey conducted in November 2022, consisting of 500 line managers, HR managers and senior leaders from a broad mix of private industries across the UK and Ireland.