How can employers keep their staff engaged in a prolonged recession?

As a lengthy period of stagflation becomes a genuine possibility in the UK, causing employees concern about fundamentals such as job security, firms’ engagement efforts are facing a true test
A group of engaged employees stand around a table working together on a project

It must have seemed like a good idea at the time. In October, Barts Health, London’s biggest NHS trust, posted a TikTok video showing staff at its corporate HQ in Canary Wharf enjoying the modern facilities of their well-appointed office. It included wellbeing rooms, high-end coffee machines and comfortable-looking pods for working (“or snoozing”). 

The footage didn’t go down well with many of the trust’s 16,000 other employees, including clinicians, who wasted no time in uploading videos and stills of their more austere working conditions on the front line of healthcare provision. 

This case illustrates how workplace initiatives intended to improve engagement can misfire in a tense atmosphere as employees brace themselves for a widely expected economic downturn. The Bank of England has warned that the UK is set for a recession that could last two years. 

Although the past 15 years could hardly be described as an era of great prosperity, the UK’s most recent deep and enduring recession – lasting five quarters – occurred back in 2008-09 as a result of the global financial crisis. Since then, the concept of employee engagement has become well established in the workplace. As they compete to recruit and retain scarce talent and valued skills, employers have gone to great lengths over the ensuing period to make their people feel more empowered. 

Flexibility and fringe benefits 

Business leaders are telling their staff that their views really matter. Employers have become more flexible about people’s working hours and locations, while fringe benefits have become central to the workplace proposition, from cycling allowances and subsidised gym memberships to profit-sharing schemes and sabbaticals. 

Employee engagement doesn’t make up for poor business decisions or low levels of investment and it isn’t an alternative to paying people fairly

But such advances must be set against a real-terms decline in the more fundamental rewards of employment, such as pay and and pensions. Inflation-adjusted average weekly earnings in Great Britain were lower in December 2021 than they had been in February 2008, according to the Office for National Statistics. Inflation has been unleashed more recently, having been kept under control for the best part of three decades, so average earnings are likely to have fallen significantly in real terms this year.

It’s a delicate equilibrium. The question is whether it can endure at a time when the cost-of-living crisis is forcing people to think more about basic concerns such as their take-home pay and even their job security. Engaging employees is a tough task when they are struggling to keep up with their bills.

During the 2008-09 recession, researchers at Gallup reported a significant deterioration of employee engagement and morale in organisations, although they had little quantitative data to go on. Recent developments such as the rise of remote working make era comparisons difficult, while the principles of engagement have been more widely adopted than they were back then, but employers are braced for a further decline if the widely expected recession comes to pass. 

Putting engagement to the test 

Ed Mayo is CEO of Pilotlight, a charity that partners with businesses and harnesses the skills of their employees as voluntary workers on projects to benefit the community. He believes that the likely economic downturn will inevitably put a strain on employee engagement. 

“It has been easy for corporate employers to project feigned solidarity with their people,” he argues. “But inequalities of power and pay make for a shallow culture. During a recession, these inequalities come to the fore, which heightens tensions. Employee engagement will need to reinvent itself for this reality.” 

Pilotlight believes that volunteering programmes offer one way forward. These provide much-needed skills for worthy causes while giving participating employees a chance to contribute to society, bolster their CVs and feel good about themselves. 

“Our research shows that there is very strong support among employees to contribute to community organisations and make a difference,” Mayo says.

Agility in a recession is vital for survival. Inspiring a passion for innovation among your employees could help to set you apart from the crowd

Jo Moffatt is MD of advertising agency Woodreed and a board member of Engage for Success, a not-for-profit organisation promoting the benefits of employee engagement. She believes that some employers have focused on engagement activities in recent years as a sticking plaster to cover fundamental problems. 

“It doesn’t make up for poor business decisions or low levels of investment and it isn’t an alternative to paying people fairly,” Moffatt stresses, but she adds that firms with a “commitment to genuine engagement will be in a better position to navigate difficult times ahead because they’ve established an enduring partnership with their employees”.

AdviserPlus, an HR consultancy with clients including United Utilities and Virgin Atlantic, believes that a deep and prolonged economic downturn would have a significant impact on engagement levels. The cost-of-living crisis is already having a detrimental effect on employees’ wellbeing, particularly those who are starting to fear for their jobs as their firms consider cost-cutting measures for surviving a deep recession, notes Emily Charlesworth, HR technical consultant at AdviserPlus.

“For many business leaders, preparing for the impact comes down to reducing costs, stalling new initiatives and battening down the hatches to weather the oncoming storm,” she says. “What may not be top of their agendas is the part that employee morale, motivation and engagement play in helping firms to withstand a recession. A decline in morale, for instance, will have a direct impact on performance, which creates an even greater business risk during an economic crisis.”

The need to keep innovating

Charlesworth believes that “prioritising employee experience in your recession planning will help to position your company to move forward while your competitors retreat. But getting that right requires business-wide engagement and commitment.”

To this end, she would encourage any leadership team to focus on encouraging innovation, especially as the economic environment gets tougher. Although seeking new ideas from all parts of the organisation is typically among “the first things to stall when cash flow starts being tightly controlled, agility in a recession is vital for survival. Inspiring a passion for innovation among your employees could help to set you apart from the crowd.”

Moffatt would advise any business leader to remain highly visible to their workforce during difficult times and keep lines of internal communication open. All messaging about any problems the organisation is facing must be clear and honest. 

“Employees are always the first to know how business is going in any case,” she says. “They are supplying the products and services and they have a feel for what their customers are experiencing. It makes sense to work with them to address the challenges.”