Economics, Recessions, and the Weather
In his recent book, “Caesar’s Last Breath,” author Sam Keen examines the history of the atmosphere from the early days of Earth until today. The evolution has been incredible: from a planet incapable of sustaining life at its beginning to billions of living organisms able to survive because of the mix of different gases and pressure in the atmosphere. It is a remarkable story.
In one section, Keen discusses why it is so difficult to accurately predict the weather. The answer, according to Keen, is the sheer amount of chaotic and unpredictable events that have an impact on weather around the globe. The system is so complex and dispersed that weather predictions will never achieve the accuracy many assume will be possible with better computer models and technology.
The global economy is like the weather. Predicting what will happen in the coming quarter or year is more art or even divination than science. There are leading and lagging indicators. Charts and graphs show possible trajectories. There are hints of what will happen in the stories of different companies. But it is, so far, impossible to tell with certainty what will happen next.
A recession is generally defined as a fall in gross domestic product in two successive quarters. Is the U.S. heading for a recession? Is a global recession on the horizon? It’s one of the most speculated (and debated) trending topics today. Some say it is inevitable, though the market continues to improve.
Even the rumor of recession will change how businesses behave. Whether or not the economy is now or soon will be in a recession, company leaders are preparing. In 2023, there have been mass layoffs at Fortune 2,000 companies like Ford, Whole Foods, Tyson, 3M, Lyft, Deloitte, Walmart, and Meta, among others. The primary driver, according to the Wall Street Journal, is recession fears. Although the data does not currently indicate that recession is inevitable, business leaders are taking steps to protect their enterprises as uncertainty remains.
The Most-Likely Cuts in a Recession
Learning leaders should be attentive to economics because, as those who have been through them in the past already know, recessions can have a dramatic effect on corporate learning teams. Right-sizing and layoffs typically begin in two areas for large companies. The first is marketing because most companies can cut their budgets without losing brand recognition. It is like jettisoning items when a ship is taking on water. Begin with items that you can live without for a bit.
Unfortunately for many in the learning and development (L&D) profession, learning is often the second target for cuts, for the same reason as marketing. The assumption is that a lot of learning is already in place and will continue while the company rides out the recession. New learning initiatives are shelved for the time being. Staff cuts can relieve pressure on cash flow. Learning can be rebuilt later when the company and the economy are growing again and the storm has passed.
How Learning Leaders Can Prepare
Learning leaders are not without options, but preparing for a recession requires intentionality and planning. Here are a few tips to consider.
1. Stay Informed
Learning leaders need to stay current not just on current trends in learning but also on economic trends. A convenient way to track one metric, layoffs, is to follow sources like Brian Bushard at Forbes who tracks layoffs. Readers are able to see what other companies in their industry are doing with employee counts. For those interested in tracking other economic metrics, a good option is information compiled by the U.S. Census Bureau. The point is not to become economists but rather to understand how the economy is trending and the impact those trends will have on corporate training.
2. Get Lean
The best time to think about getting lean is before it becomes mandatory. Lean begins with examining every process in training creation and delivery to find inefficiencies. Technically speaking, it is finding and eliminating the waste of resources that could be better allocated to more productive work. Continuous improvement proposes that this process is ongoing and never complete, but most people struggle to be constantly vigilant. Now is the time to pay attention again to processes and how people work. Where can things be done more efficiently? What steps can be removed or combined in a way that will save time? Is it better to outsource portions of work that can be done less expensively than having internal full-time employees? Who are the least productive people and what do they need to improve their performance?
Whatever plan is created to get lean, needs to be communicated with people who make budgetary decisions. They need to know that learning leaders are being preemptive and intentional about getting the most out of the resources they have. This will go a long way toward building confidence.
3. Connect to Company-Wide Objectives
Learning leaders should be in tune with company-wide goals. More specific than mission and vision statements, company annual goals are more targeted and inform employees and investors about the highest priorities for the coming year. They also signal where company leaders are likely to spend their time and financial resources.
Every publicly traded company produces an annual report that summarizes the achievements of the previous year and sets the big goals for the current year. It is usually found at the beginning of the report as a management or CEO report. Listen in to the quarterly shareholder calls with investors and analysts. Gain as much information as possible.
Learning leaders should know these goals and connect their projects to them. If there is no natural connection to the annual goals, connect learning activities to the mission or vision statements. In other words, always be prepared to say how learning is achieving the mission, vision or annual objectives of the company.
4. Defend Your Budget
Connecting learning to overall company goals is essential to weather economic challenges but it is good practice even in periods of growth and expansion. Becoming competent in the latest information is one thing. Telling the story of the impact of learning is another. Learning leaders often find that defending their budget and clarifying how they are moving the company forward is one of their most difficult tasks.
Defending a budget well means connecting company objectives to learning activities and demonstrating how the second is helping to realize the first. It means moving beyond qualitative narratives into quantitative numbers that show more than courses completed and success rates. For instance, if a company’s goal is to get 5% more efficient in the next year, a wise learning leader would show how learning production got leaner and how learning increased organizational efficiency.
Formatting matters. If other divisions are demonstrating their gains in charts and graphs, learning leaders should follow suit. The value of learning initiatives should be visible and require minimal explanation.
No one can predict the weather or the economy with precision. The best that can be done is preparation for every contingency. No matter what happens economically, learning leaders get lean, become better informed about their companies, connect learning to company-wide objectives, and provide a strong defense for learning investment. Maybe a recession will come. Maybe it doesn’t. Either way, these efforts will only strengthen the learning team, their efforts, and their results.
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