Not Your Parents' Recession: Why This Time is Different and What to Do About It

by Ed Manfre and Dustin Seale

[780 words, ~3.5 minutes to read]

We already see it happening.

Around the world and across industries, the trusty old recession playbook is rapidly becoming a bestseller.

The greatest hits – cuts to travel, holiday parties, discretionary expenses, training and development, even recruiting – are on full display. In some cases, as recently announced in the technology industry, large reductions in force are underway.

We believe more will follow suit in the new year.

And why wouldn’t they? As the sayings go: What's past is prologue. History repeats itself. We've seen this movie before.

So we run the same reliable plays. Right?

Not this time. There’s one major distinction. 

This is Not Your Parents’ Recession

What makes it different? This time, we're entering rough economic waters while a nuclear war for talent rages all around us.

Historically, as the economy goes, so goes the labor market. But this round, the cycle is inverted. Labor has been tightening for some time (remember The Great Resignation?) and the result is a slowing economic playing field chock-full of A-list talent who have never had more options.

These are the people that leaders need most right now.

Bloomberg offers this interpretation:

"All of this means that despite weakening demand for their goods and services, many businesses are looking to retain or even add staff, rather than let them go - hoarding labor that they know they'll need once the economy starts accelerating again."

Navigating this period demands fresh thinking. And not all leaders around the world are running the same old plays. 

What the Best CEOs are Thinking Right Now

As opposed to slashing and burning all non-operating expenses, the strongest CEOs we engage with are guided by this principle:

 “Retain our best talent, develop them to get us through today and create competitive advantage for tomorrow.”

How they implement this guiding principle depends on industry context, exposure to recession drivers and established leadership structures.

For ease of explanation, we put companies in two categories: those operating with a more centralized, top-driven leadership structure and those requiring a more decentralized approach.

Approach One – Focus on the Top Leaders 

In these organizations, every employee is critical, but the biggest difference comes from the top leaders – typically five to ten percent of the total – steering the business to success.

Here, the leadership development approach must be targeted and surgical.

One client in this category launched their prime people priority: identifying the top 75 leaders and crafting a development journey that coincides with the ongoing economic challenges.  

This approach will not only ensure clarity of the group’s top strengths and gaps, so strengths can be enhanced and gaps closed, but will also provide this group with a community to invest in relationships and socialize best practices.

Our firm has spent the last two years assessing more than 3,000 executives around the world to help enable what we call “Future-Ready Leaders.” You can learn more about it here.

Approach Two – Shape a Performance Culture Across the Enterprise 

In this second group, leadership needs to be more distributed and leaders below the top 100 make a much bigger difference.

Here, shaping an inspiring, high-performance culture will increase the contribution and bandwidth of all your employees so they can navigate the company through choppy waters and prepare you to win on the other side.

This approach requires you to seek clarity on the winning mindsets and behaviors for your strategy, today and tomorrow, so you can engage and align your employees in a conversation about bringing them to life.

We found through our research that these CEOs and organizations can be classified as “Culture Accelerators” and they achieve more than double the revenue growth of their peers.

Among old-thinking CEOs, culture can be treated like an afterthought. But today, forward-looking leaders see culture as a competitive advantage, and do just the opposite: make it the centerpiece of performance.

Embrace Tomorrow by Throwing Out Yesterday’s Playbook

Every disruption creates winners and losers. A recession is simply a disruption. 

Who do you need to retain to navigate this period effectively and how do they need to develop? What psychology and capability do you need in them? Are you investing in them? Will your culture give you an advantage, or is it ill-fit for the challenges to come?

The most effective CEOs know they need to bring fresh thinking to this challenging environment. They know a “cut everything” approach may have worked in the past but is a losing formula now.

Instead, focus on ensuring your people and culture investments are surgically targeting what your business needs most – a future-ready class of leaders that create stability through today’s challenges and a performance culture that mobilizes and prepares your people for tomorrow.

Ed Manfre is a Partner in the Los Angeles office of Heidrick Consulting. Dustin Seale is Managing Partner of Heidrick Consulting in Europe.