As interest rates rise and consumer spending habits change, rumors of a recession have started to emerge as a strong possibility for the coming months.

Regardless of whether a recession happens, the mere rumors of a recession can have a massive impact on our employees and their feelings about work, and managers should be considering how to adapt their leadership style to handle any economic worries by their direct reports.

On a high level, below are a list of things that typically happen when there are concerns of a recession:

·        Companies go on hiring freezes or begin laying people off – Companies tend to hire based on what they believe they will need so when a recession strikes and their projections are incorrect, they are forced to change course and lay people off as they adjust their projections.

·        Employee confidence diminishes – Strong economies with low unemployment help employees feel confident asking for higher wages and greater perks.

·        Teams are consolidated – Companies create departments and teams based on projected growth, but when economies start to slow, teams tend to be merged, people are laid off and those remaining must pick up the additional workload. 

Some companies and industries and going to be more impacted than others. If you lead a team and feel that your direct reports show some concern about the economy, this article covers how to be a better leader in times of uncertainty.

As a professional, I am a firm believer that you are an entrepreneur of your own life. I am not writing that everyone should be an entrepreneur, but as a person, you have full agency to make the decisions that you believe are best for you. When it comes to work, especially if you lead a team, it is critical that you do your own research to identify if the company you work for will thrive for the foreseeable future.

For example, one of the executives in our mastermind group works for a company that does COVID tests. This business model boomed over the past few years, but as fewer people get COVID tests, our leader has recognized that something needs to change for his team to continue working for their company. 

As opposed to doing the same thing over and over again as business dwindles, he is being completely candid with his team. He has been identifying business opportunities that he and his company can pursue based on the infrastructure they have created over the past few years. Essentially, he is becoming an intrapreneur – or a person who is pursuing entrepreneurial opportunities within a company.

This openness, honesty, and candor has caused his team to feel excited about the work they are doing. They still complete the tasks that keep the lights on, but they are taking the additional time they have from diminished business and putting that towards identifying new opportunities they can leverage and deploy. 

Many of the ideas proposed won’t work out, but it is much better than doing nothing and hoping it works out. His team has greater clarity and understanding regarding the business’s health and prospects, and most employees are staying and trying to help find a new path for this business.

This team is still searching for the next business model that will reinvigorate their business, but this isn’t solely a task for the leadership team anymore. Now, the entire company can be a part of the solution.

Therefore, to recap, when your team feels uncertainty because of a potential recession:

1.      Lean into the concerns and share openly and candidly why the company’s current way of operating won’t be affected by a recession (e.g. if you work in healthcare or grocery, you can share multiple data points that show that those industries tend to be minimally affected by a recession) or what you are doing to pivot and stay agile even if a recession does come.

2.      Incorporate your team in the innovation process when it comes to identifying ways to cut costs and increase revenue (laying people off has a very negative impact on employee morale and confidence).

3.      Understand the risks and benefits because if your team is unsuccessful at effectively pivoting, your employees will understand why they are being laid off. The benefit of incorporating your team in the innovation process is that they will feel that they had a chance (an opportunity!) to help be a part of the solution that turned the company around as opposed to being left in the dark and then one day getting laid off.

The key when identifying the opportunities to innovate and pivot is to explicitly lay out the risk tolerance you have for ideas. You may not have a million dollars to test out every idea, but you might have $1,000 and that could be enough to garner some early data points of success or failure. Risk tolerance also applies to legal risk. Our executive in our mastermind group is in the healthcare space which has rules and regulations companies must follow. It is critical that your team understands those rules and regulations before trying different ideas.

·        Set up both team and 1:1 meetings to meet with your direct reports to ask them if they have concerns and if so, what concerns do they have. Don’t avoid the conversation because a solution is unknown.  

·        Once you have gathered all of the concerns shared, craft a response for each concern. A response could be why the current way the company operates won’t be affected by the concern proposed, a potential solution that is being implemented that should alleviate the concern, or incorporate them in the solution process to help alleviate the concern as a group.

·        Clearly lay out a plan for your team for what the next 3, 6, 9, and 12 months will look if a recession has little to no effect on the company, a moderate effect on the company, and a major effect on the company. The worst thing you can give your team is uncertainty so crafting this projection allows them to fully understand and prepare for the worst possible outcome (which is never as scary as the unknown negative possibilities they could come up with in their minds).

Regardless of whether or not you are right, people will follow those that are certain. Certainty can come in the form of processes, inclusion in the solution, metrics that show why things will be fine, or projections for the best, moderate, and worst-case scenarios. 

As a leader of people during times of uncertainty, you must give people certainty.

The AIM Insights People Leader Certification is the only management certification that both teaches and evaluates a leader's ability to impact their team over time. The AIM Insights People Leader Certification program is for managers who strive to become elite and grow to more senior roles in their careers.

Some of the core benefits of becoming AIM Insights People Leader Certified:

·        Highlight to your senior leadership why you should be promoted

·        Show prospective employers why you are a great leader of people

·        Compare your leadership score to other leaders

·        Evaluate how your leadership is impacting the quantitative output of your team paired with the qualitative sentiment of working for you as a leader

·        Distinguish yourself as an incredible people leader from others vying for similar opportunities as you

1.      Create an account and add your direct reports to your team

2.      AIM Insights prompts your direct reports to complete monthly assessments to better understand their sentiment about the work they are doing and the quantitative tasks they are focused on

3.      Managers receive executive coaching every month based on the results shared in the assessment

4.      After applying the advice given by the executive coach, managers can observe their team’s improvement in both sentiment and productivity over time

Yes. And unlock traditional certifications which certify people based on time and exam completion (typically based on rote memorization), the AIM Insights People Leader Certification levels are determined based on your team’s scores over time.

Timeline: First 6 cycles (typically 6 months) in AIM Insights - can be retried over the next 6 months if unsuccessful

Timeline: First 12 cycles (typically 12 months) in AIM Insights

·        60% of Goals were rated as SMART

·        60% of Goals were rated as relevant to team goals

·        60% of Goals were rated as medium or high impact

·        A minimum SMART Impact Score above 25 for each direct report

·        An average sentiment score of 75% or higher in all categories or at least 80% in 3 categories

·        75% of Goals were rated as SMART

·        75% of Goals were rated as relevant to team goals

·        75% of Goals were rated as medium or high impact

·        A minimum SMART Impact Score above 30 for each direct report

·        An average sentiment score of 85% or higher in all categories or at least 90% in 3 categories

Ø  Understand how your performance as a leader compares to other leaders

Ø  Leverage this data (and certification) as a basis for negotiating a bonus, raise, or promotion

Ø  Gain insight into why certain team members are performing better than others

Ø  Receive executive coaching guidance to help you gain certification

Ø  Showcase your certification to prospective employers and on LinkedIn

Ø  Distinguish yourself as an incredible people leader from others vying for similar opportunities as you

Receive monthly executive coaching based on your team’s scores so you can adjust your leadership style to best drive your team’s results.

Closing the perception gap between what you think of your direct reports and what they think of themselves is critical to helping you understand where you need to create clarity for your direct reports.

Giving you insight into what your direct reports think they need to be focused on can help you alter and adjust your direct reports' paths so your team doesn't waste time via miscommunication.

The goals report also helps you overcome subjectivity and recency bias when reviewing your direct reports because you will have a full understanding of everything your team has been working on over the time period being reviewed.

Providing you access to skip-level teams down through your organizational unit can help you pinpoint where challenges might be existing and on which specific teams.

Guiding you with your 1:1s with your direct reports is a core component of AIM Insights and one of the biggest benefits the certification process provides is guiding you on how to have an effective 1:1 and what questions to ask each direct report based on each direct report's circumstances.

Learn what drives you at work as well as your direct reports so you can better understand your unconscious bias as a leader and craft a leadership strategy based on what drives each of your direct reports.

Schedule an interview with our team to see if you qualify to become certified.

If you are accepted, you will be prompted to get started using the AIM Insights Tool with your team and begin the certification process.

AIM Insights will remind your direct reports every month to complete a survey on your behalf. As their scores come in every month, it will inform us if you are or are not on track to receive your certification - your assigned executive coach will walk you through how to improve your scores every month.

There are no limits to the number of direct reports using the tool.

AIM Insights provides unlimited email executive coaching guidance and monthly coaching videos customized for you from executive coaches

Yes, every 6 months after certification you will have your team re-assessed and every 3 years you will have to complete a new recertification to stay up to date - or you can keep using the tool on a monthly or quarterly basis.

Yes, you can re-certify as much as you would like to try and boost your scores.

Gallup has extensively researched the relationship between employee engagement and company profitability, and they showed that engaged employees are 22% more profitable than disengaged employees. 

The tides of the economy seem to be shifting, making this a time when it is even more critical to focus on culture and employee engagement. Many companies, especially private equity-backed firms, have responded by laying off employees rather than investing in them. I was curious to know, “Why are private equity-backed firms more prone to layoffs in a down economy compared to private or public companies?”

I reached out to my network to learn more. I interviewed multiple employees, leaders, and professionals working for private equity, and their consistent answer was that “They are seeking an exit – at any and all costs and that part of achieving an exit is showing numbers that your costs are down and revenues are up.”

Ryan, a former VP of Operations, was recently laid off from a private equity-backed firm. He proposed some ways for the company to consolidate its overlapping expenses. They loved the idea so much that after consolidating those expenses they consolidated him…and replaced him with a junior middle manager to take his role at a fraction of his salary. 

Don’t get me wrong, I am all for eradicating inefficiencies and driving profitability. 

But can the short-term focus of achieving an exit coexist with a thriving company’s long-term goals, especially when these goals require an engaged employee base with a great culture?

I would imagine that most private equity professionals land somewhere on this scale from unapologetic to compassionate. The unapologetic professionals don’t care about the people because revenue growth reigns supreme. On the opposite side, compassionate professionals care about building a sustainable business and invest accordingly. In between these two sides, many professionals will say all the right things but their actions will reveal whether their true focus is sales and reducing costs to show short-term metrics.

Another focus of my interviews was on the reputational cost. I was curious to know if there was any reputational risk for offloading a company that looks great on paper but is a dumpster fire internally. I'm envisioning a prospective investor checking something like a Carfax to find out if they are working with somebody that has a history of leaving others to hold the bag.

Unfortunately, I haven’t received any great responses so far. 

And until we have a way for companies to assess the reputational risk of how private equity firms treat their acquired companies' employees, there is nothing to stop these private equity firms from propagating bad cultures to dump onto somebody else’s plate.

The issue with all these scenarios is harm done to the people at these companies. Hundreds of thousands of professionals work for private equity-backed firms, not realizing how little security they have in their role or the value they have in the minds of the owners. 

Or worse, many professionals end up working for a company and feeling trapped because of economic worries or personal constraints. These workers end up miserable, and the whiplash effects from ownership changes only exacerbate these effects. Imagine starting with an executive team that cares about you (e.g. the founders), and suddenly you find out that the new private equity owners want 120% more revenue but for 30% less pay. These paradigm changes wipe away years of work building company culture and leave a hollowed-out company in their wake.

Research has shown how powerful investing in culture and engagement can be for profitability. But until we have a way to hold private equity firms accountable based on their reputation for either building great companies, inside and on paper, or mirage companies, great on paper but awful inside, it will be difficult for private equity and company culture goals to align.

The great resignation has impacted companies in many ways, and this has helped employees gain more leverage. Companies gave out inflated titles and higher salaries to lure workers, and organizations became less concerned about hiring people with frequent job changes in recent years. 

More recently, however, rising inflation is causing fear of an imminent recession, and that volatility ends up diminishing the incentives for job-hopping. This may signal the beginning of a new post-great resignation era, but its consequences will continue to ripple out in the coming years. The companies that can successfully maneuver through this transition will be far better off than the companies that don’t.

The great resignation provided many companies with an opportunity for growth in the years to come, but this opportunity requires these companies to grapple with the effects of high managerial turnover. Many 1st or 2nd-year employees have had three or four different managers since starting work, and frequent manager turnover is a major drag on building an engaging and productive company culture. 

Some of these new managers are newly promoted novice managers from within the organization that must learn on the job. Others are highly experienced outside hires that must learn the company culture with a new team. And some new managers were outside-hires without any experience managing and had to learn how to manage a team while learning the company culture as well. These all can cause friction at the company, but even a perfect hire requires more than a few months to establish a resilient team culture that can handle turnover. 

Because of the transient nature of the great resignation, employees have become used to expecting to be working under a new manager every six months. This lack of consistent leadership has eroded the trust and sense of identity professionals have with their company and companies need to start addressing this now because this erosion will have lingering ramifications for years to come. 

Why?

Because professionals that identify with their organization are what make an organization profitable. I am a sports fan, so I will create a football analogy. Most general managers in the National Football League (NFL) prefer to build the core structure of their team through the NFL draft. Rookies have relatively cost-effective contracts and are locked into those contracts for 4-5 years. Once the rookie contract ends, NFL teams determine if players are worth the massive salaries that come with paying a veteran player. Considering that the NFL has a salary cap, there is a finite amount of money that can be spent on each player, so teams that win are the ones that can get the most ROI from their players and their contracts. 

Employees that identify with their company are like football players on their rookie contracts. They are creating a surplus for the team because they are providing more value than they are receiving. I am not suggesting that companies underpay their employees. But I am saying that employees that identify with the company in which they are working will go the extra mile to make sure their work is done right.

When those employees that identify with the company become leaders, this directly benefits the company. This increases their long-term value, and this effect is multiplied as their impact propagates across multiple direct reports. 

Granted, not all employees that identify with the company are great leaders – there is typically training that is necessary for these new managers to become effective leaders. 

But my argument is that leaders that don’t identify with their company will never go the extra mile to make sure that things are done right. They will follow core leadership tenets (if they are trained), clock in, and clock out. Going the extra mile just isn’t worth it for them because whether the company succeeds or fails isn’t a major factor to them. Under normal circumstances, this doesn’t usually matter. But sometimes a make-or-break moment arises, and team success, project success, or even company success will be determined by how one leader responds to a new situation.

How can you tell if your employees have formulated an identity within your company?

One early indicator is in the words people use to refer to the company, especially around people outside the company. If they refer to the company as “they” or “them” or “it” instead of “us” or “we”, that is typically an indicator that they don’t strongly identify with the company.

Another indicator comes from responding to bad news. If bad news comes out about the company or if the company is going through a particularly stressful time, how leadership responds will be a critical factor for employees. Are your leaders going to defend the company and work through it? Or are they going to deny responsibility and make excuses?

Employees that identify with their company will go far to defend their company and ensure its success. And when things are stressful, they will stay late, take on extra tasks, and do what is necessary to make the team succeed.

Why?

Because they identify the company’s success with their success. When the company succeeds, these employees feel a sense of pride in the company. When the company makes a mistake, they feel it and want to be better.

Therefore, companies that can build that sense of identity faster than others are the ones that will succeed.

Before spending any money on leadership training and developing managers into effective coaches, mentors, and leaders, companies first need to focus on making sure that all their managers identify with the company and know how to inspire that same mindset in their direct reports.

The best way to increase the number of employees that identify with the company is by increasing engagement.

Engagement is the combination of:

·        The amount of energy employees receive from doing the work

·        The connection employees feel to the mission of the company

·        The camaraderie employees have with fellow employees

·        How much the work complements their strengths

Your plan for increasing the amount of employees that identify with the business should start with increasing all four categories of engagement. 

Therefore, if you are a business owner or leader, the questions you should be asking yourself are:

·         What are we doing to ensure that employees are getting into flow when they do their work? Are we scheduling meetings at inconvenient times for them? Are we creating bottlenecks for them from doing the work that they get energy from doing? What are we doing to help our employees manage their time? How can we help them spend more time on tasks that give them energy and optimize the time for the work that detracts from it?

·         What are we doing to connect the mission of the company to their own personal mission and goals in life? Are we tactlessly shoving the corporate mission down their throats? Or is our mission an uninspired afterthought that’s rarely shared? Are we adequately meeting the mission on our end or is there a blind spot between leadership and the rest of the company?

·         Are we creating an environment in which employees can have a good time together on non-work tasks? – Most companies are pretty good at this but this is only ¼ of the equation for boosting engagement.

·         What are we doing to identify our employees’ strengths and how are we putting them in a position to succeed? Are we only promoting strong individual contributors to management roles, even though the skills set to be successful as a manager is different than the individual role they were performing?

Companies that can set a plan to boost engagement faster than other companies will become an ideal destination for prospective employees that want to work for a company in which their employees will work hard for them because they identify with the company. 

LinkedIn News recently published an article about Walmart’s $200k store manager problem. The article shines a light on the fact that simply paying higher salaries doesn’t necessarily create great leaders. 

Leaders at Walmart realized that they needed a multi-pronged approach to developing reliable, effective managers, so they started investing in manager training and coaching to help develop their managers.

Walmart is learning the same lesson as many businesses: great leadership requires investment and effort. I’m going to cover how we got into this position and what we, leaders in organizations, need to do to minimize the learning curve of a new manager becoming an effective leader.

The rapid increase in job transitions over the past few years (sometimes called The Great Resignation) has caused people to rethink their priorities for work. 

Some people qualified for leadership roles have learned that they just don’t like the responsibilities of being a leader.

Some new managers from outside the company fail to understand or adapt to the culture, and therefore struggle to get buy-in from the new teams they are inheriting.

Some new managers have never managed before. Their promotion to a management role is an opportunity for growth, but instead, they aren’t provided the guidance on how to effectively lead. 

These are just three examples of how manager development can go wrong. Without a strong system for training managers, replacement and resignation can rapidly spiral out of control and have long-term consequences on company culture and productivity. 

I recently wrote about how to maintain you’re a-game as a leader, where I described how many universities have downgraded degrees in management into co-majors or tag-along credits instead of being its own degree path. This happens because most recent graduates aren’t being hired to manage people so for universities to boost their placement rates and starting salary rates, it is more advantageous to train students in degrees that companies need from recent graduates right now. This shortsighted approach to management training is one of many contributing factors to the very issues facing companies today. 

The dearth of up-and-coming managers has led to greater turnover for both managers (e.g., they struggle with the transition) and the direct reports in their charge (they aren’t going to put up with a bad boss). This self-sustaining cycle of turnover can wash away company culture in months and take years to rebuild. 

1.       Equip managers with the tools and data to better understand their direct reports

There is no such thing as an effective one-size-fits-all management philosophy. That mode of thinking contributes to turnover.

Why?

Because people are driven by different motivations at different stages in their life.

One metric that we measure at Ambition In Motion (AIM) is Work Orientation. Our custom assessment measures what drives you at work and helps you understand how your work should fit into your life.

Some people are motivated by professional growth (Career Oriented), some people are motivated by work/life balance (Job Oriented), and some people are motivated by the value of their work for changing the world (Calling Oriented). Everyone has a mix of these motivations, but one type usually stands above the rest for an individual.

If you understand the Work Orientation of each of your direct reports *at that moment in time*, you can craft your leadership style for that person based on what drives them.

And that “at that moment in time” is important because Work Orientation is fluid. Unlike personality, which is generally consistent throughout life, Work Orientation is constantly in flux. Life events (starting a family?), professional events (getting a promotion?), epiphanies (deciding to start your own business?), influence from friends and colleagues (friend’s company has gone completely remote while yours hasn’t?), and more will mold your Work Orientation over time. Our job as managers is to be on top of these changes and adjust our leadership style and actions to manage your direct reports at that moment in time.

A good start for preparing to manage direct reports is reading about it. I’ve written about How to Manage Career Oriented Direct Reports, How to Manage Calling Oriented Direct Reports, and How to Manage Job Oriented Direct Reports in the hyperlinked articles.

The other big tool to equip managers with is a system for observing whether their perception of the workplace, productivity, and culture is shared by their direct reports. When leading a team, it’s difficult to get out of your head. This tool gives them the ability to observe and understand whether the team members agree (or disagree) with the manager’s assessment of individual productivity, team cohesion, and other metrics.    

This information is critical because perception gaps cause people to become disgruntled. People tend to judge themselves on their intentions and others on their perceptions. I was five minutes late because traffic was absurd today and nobody could predict it; you were late because you don’t care about being on time. Finding and understanding your perception gaps help you find real solutions.  

Managers need to understand where their people are coming from and empathize with their direct reports (and provide clarity) when there are gaps.

My team and I developed AIM Insights to identify the most important metrics for managers to understand their direct reports and cut through the noise. AIM Insights collects and measures everyone’s perception of their: task performance, team cohesion, team productivity, organizational citizenship, and manager performance.

If a direct report feels like they aren’t performing well, but a manager thinks they are performing great, this indicates that the direct report lacks clarity as to what success looks like in his role. Once the manager has this information, they can clarify expectations for that team member and help support long-term productivity and engagement.

And vice versa, if a direct report feels like they are performing great, but the manager disagrees, that indicates that the direct report lacks clarity as to what success looks like and that the manager must clarify expectations and help the team member improve their work.

2.                   Train managers how to act on that data and make their direct reports feel heard

The number 1 issue with any performance management tool in any HRIS platform is equipping managers with the training to interpret and act on the data to make tangible improvements. 

If a company surveys its employees but then doesn’t equip managers to do anything with that data, that company is wasting its employees’ time, creating frustration, and depleting engagement. 

Why? 

Because that data isn’t just for the executive team to review quarterly or annually. That data needs to be acted on!

If managers don’t identify productive actions from the data, there is no incentive for the direct reports to give an honest response, if they bother to respond at all. 

Therefore, it is critical that companies, if they ask for survey data from their employees, train their managers on how to interpret the data and have effective 1:1’s with their direct reports based on that data.

3.                   Actively coach managers throughout their tenure and support the need to adapt to the ever-changing nature of leadership

Leadership is an ever-evolving field. Economies are changing. Consumer demands are changing. Employee demands are changing.

Reviewing the employee salaries and benefits packages of companies even as recently as 5 years ago has drastically changed between now and then. What might have been thought of as outlandish and unnecessary is turning out to be required of job postings (my local Uhaul has a billboard that says “start today. Get paid today.” which was unheard of 5 years ago). 

Managers should be coached throughout their time as a leader with an organization, not just when they attend random offsite training. Leaders can’t just wait for the company to hire a speaker or host an event when they need to handle difficult circumstances. Life doesn’t consider the optimal timeline for you to get the training just in time. Sometimes stuff happens you need to be ready to handle it. 

Building rapport and offering consistent guidance helps managers handle the seemingly insignificant issues and builds the foundation for ensuring they won’t turn into massive issues.

Getting new managers to become effective leaders takes time. It isn’t easy and it isn’t obvious. Hopefully, these tips help your company excel and thrive in the future.