Get ready for a hard landing – HR management in economic downturn

Tiếng Việt

Get ready for a hard landing – HR management in economic downturn

Organisations should prepare to deal with major changes in their workforce as the risk of a global recession looms, experts from Great Place to Work and RMIT University said.

As the world saw the threat from COVID-19 slowly diminish, the outlook for the post-pandemic era was initially optimistic – a dramatic recovery boosting economies and quality of life around the globe. Nonetheless, global inflation pressure triggered by global supply chain issues (the Russia-Ukraine war and zero-COVID policy in China) heightened interest rates across countries, leading to concerns over a major recession in the near future.

The decisions of tech giants such as Meta (Facebook) and Twitter to lay off tens of thousands of employees signal that the economic downturn is around the corner. As economies and businesses are getting ready for the recessionary cycle, Vietnam is already feeling the heat as evident in the 600,000+ jobs being negatively affected by declining export orders over the past few weeks.

Ms Evelyn Kwek - Managing Director of Great Place to Work ASEAN/ANZ, believes since Vietnam has been industrialised and relying on the export sector more in recent years, the global recessionary signals are concerns for Vietnamese businesses. "The rise in interest rates could impact global investment appetites alongside inflationary pressures creeping into the economy", she added.

As the fear of layoff grows in organisations, it is a big challenge for human resource (HR) practitioners to juggle their business’s survival and employee morale during a downturn.

(From left to right) Ms Evelyn Kwek, Managing Director of Great Place to Work ASEAN/ANZ and Ms Ha Minh Chau, Senior Consultant at Great Place to Work.

RMIT Vietnam Associate Lecturer Pham Thanh Hang pointed out that previous studies suggest even if employees withstood the layoff season, they might suffer from anxiety, depression, and loss of trust in the organisation, which would significantly lower their productivity. “As a common practice, organisations focus on cost-cutting and bear with the negative impact on employee wellbeing and engagement,” she said.

However, it doesn't have to be that way. Ms Kwek revealed that Great Place to Work research (based on US data) posits that when companies focus on their people and company culture during a downturn, their organisations will not just survive but also thrive by creating more value on their stocks and people. "Do not undo all the good work and trust you gained with your workforce in good times, where a lot of investments and efforts have been put in to attract, retain and sustain talent," underscored Ms Kwek.

So, how can HR still thrive during an economic downturn and add more value to people and organisations?

"Trust and wellbeing must be the outcomes," Great Place to Work Senior Consultant Ha Minh Chau stressed. She added that trust comes from different dimensions in the organisation, including colleagues, work, and management, while wellbeing is built on emotional support, financial health, and meaningful connections.

Ms Chau said when the layoff communication was right and appropriate under ethical consideration, laid-off employees still supported the decision, which would shape a positive organisational culture among the remaining employees during the layoff season.

(From left to right) RMIT University lecturers in Human Resource Management and Entrepreneurship Ms Pham Thanh Hang, Dr Jung Woo Han and Dr Gavin Nicholson.

Dr Jung Woo Han, Interim Senior Program Manager for Human Resource Management & Entrepreneurship at RMIT Vietnam, cited the layoffs of 900 employees through a Zoom meeting at Better.com and 3,700 via overnight emails at Twitter as examples of how HR decisions might tarnish trust within organisations and teams.

He said the follow-up allegation of Twitter turning their meeting rooms into bedrooms so that employees can spend longer hours at work “is another example of how HR management can be accused of damaging employees' mental and physical health”.

“Hence, it would be worth considering a temporary pullback in the financial performance to maintain employee wellbeing, as this can be a seed for future blossoms,” Dr Han said.

RMIT University Lecturer Dr Gavin Nicholson flagged that senior HR officers should plan early on possible scenarios based on available resources to minimise potential risks, increasing the likelihood of successful transition and transformation during the economic downturn.

Not surprisingly, a study from Oxford University suggests a happy employee performs better by 13%, suggesting investing in trust and wellbeing would pay off during the coming downturn.

Dr Nicholson said: “In every crisis lie opportunities. It's time to rethink the coming recession as an opportunity for people to flourish within organisations.”

Media Release

Business and management

19 December 2022