Despite the challenges facing the global economy – the war in Ukraine, supply chain issues, recruiting challenges, and high inflation – economists are still projecting growth this year, albeit at a slower pace
. With the bad news piling up, some economists are now warning that a recession is just around the corner, one that will impact how we live and work.
Though economists aren't predicting negative gross domestic product (GDP) in the near term, some analysts are beginning to lower their GDP forecasts for the year, in part because of the war in Ukraine and higher oil prices, as Forbes shared in an article
. Also, the Goldman Sachs economic team put the odds of a recession for the next 12 months at 15%, but then they increased the odds to 35% for the next 24 months, MarketWatch recently reported
Identifying What is Vital for the Future of Work
Of course, a recession isn’t a guaranteed, and its impact would most likely be unevenly distributed across different industries and their workplaces. However, the prospect of a recession means now would be the perfect time for workplace leaders — whether in IT, HR, or real estate/facilities — to ask the question: What would a recession mean for my ambitions of building the connected workplace of the future? Workplace leaders would be well-served to have a plan for how their workplace can move forward with their vision of the future of work, even in a slumping economy.
Financial website Investopedia shared a breakdown of things that might happen to a company during a recession in this article
. Providing the example of a Fortune 1,000 manufacturing company during a recission, Investopedia shared how the company would curtail both capital expenses and operational expenses: It might cut R&A, halt the rollout of new products, not purchase new equipment stop or cut back on hiring new employees, or worse, lay off workers. Productivity might increase, but employee morale might suffer, as they have to work longer hours for less compensation with the fear of layoffs looming over them.
So, if workplace budgets get slashed across the board due to a recession, that means less money for technology, workplace amenities, and investment in HR programs or new software. Gartner recently estimated
that worldwide IT spending will reach $4.5 trillion in 2022, a 5.5% increase from 2021, with IT spending fueled by the need to support hybrid and asynchronous ways of working. But if economic conditions worsen, we could see this trend stop or reverse itself as workplaces pivot to cutting operational expenses.
Remote vs. In-office Work Debate Takes on a Different Significance
A recession would also shake up the discussion about where employees should work. Currently, many employees feel confident that if their current employer doesn’t offer a remote or hybrid work option that they could find an employer whose policies suit their personal preferences. In fact, 42% of 400 employees interviewed in a weekly Morning Consult survey on April 10, 2022
, said they'd quit their job if their employer tried to get them back in the office before they thought it was safe to do so. But what happens when the hot job market cools? Would CEOs and executives then use that as leverage to bring even more people back into the office?
It's not unforeseeable for executive teams to use that bit of leverage to bring more employees back into the office, but they might not even need to use that added pressure. Fearing a potential lay-off, employees might venture back into the office more willingly, as they fear that they might “be next” on the chopping block. By going into the office – where many executive teams prefer working – an employee might be currying favor with leadership in the attempt of securing their jobs.
And any economic downtown would also mostly impact how workplaces approach their real estate strategy. While many workplaces are readjusting their real estate strategy, we didn’t see the wholesale abandonment of office real estate
as some predicted during the COVID-induced recession. Instead, large enterprises that might be in a good position to ride out a recession might maximize their real estate holdings but carefully weigh any major real estate investment. Currently, companies like Slack, Yelp, and Airbnb
have already downsized, and many others are reassessing their overal overall real estate strategy in light of the pandemic.
Though we don’t know what will happen for sure with the global economy — and there is a fair bit of conjecture to all of this — having a “recession-proof” workplace strategy that accounts for technological considerations and workforce policies in place might mitigate the worst of future economic shocks. The specific of that recession-proof workplace strategy will look different from organization to organization. However, by spending the time now to consider all the possibilities, workplace leaders are demonstrating that long-term thinking considers both best and worst-case outcomes.