Inflation and employee engagement: 5Ps for Leading in Difficult Times
Despite the strong job market, "Are you in better financial shape today than you were a year ago?" With inflation at its highest level since the 1970s, the answer is not difficult to imagine. The current economic uncertainty is a dark cloud influencing the nation's mood. The cost of living is increasing; rising gas prices, mortgage rates, record low consumer sentiment, and fears of a looming recession. To combat inflation, Fed Chair Jerome Powell admitted that the rate hikes would hurt the U.S. economy, saying, "We expect job losses to increase unemployment from 3.7% to 4.4% by the end of 2023."
Consider John and his family. They have outgrown their current home but cannot purchase a new one due to a lack of inventory, high prices, and mortgage rates. He's concerned and stressed. To cope, he has resorted to a self-preservation mindset by taking fewer risks to avoid getting fired.
Employees feel the cumulative effects of stress brought on by the pandemic, return to work mandates from employers, and now inflation, which is taking a toll on them. In the words of Nelson Mandela, "If you talk to a man in a language he understands, that goes to his head. If you talk to him in his own language, that goes to his heart." During these trying times, leaders must lead with empathy and speak their employees' language to touch their heads and hearts and move their hands to action. Otherwise, employees will disengage and communicate with their feet.
All is not lost. There is hope for organizations, even during these challenging times. Great Place to Work® studied several companies' data from 2006 to 2021, before, during, and after the 2007–2009 recession. They found that companies with exceptional workplace experiences had the fewest losses and recovered fastest after the recession. Below are tips to help you become the kind of leader your employees need you to be—someone who can inspire and lead them through the uncertainty and volatility of the current market landscape.
#1 Pay: Employees are worried about losing their jobs and feeling the pinch. Undoubtedly, they will be distracted and less innovative if they cannot meet their basic physiological needs of food, water, warmth, and shelter. Employees hope their employers will provide some padding to alleviate their discomfort. The giant accountant firm, PwC, helped employees keep up with rising costs by giving an unprecedented 5% mid-year increase to all employees (up to director) in January of 2022 and base salary increases effective July 1, 2022, as well as a fully funded bonus pool. The financial firm, Edward Jones, leveraged its reward programs to help employees navigate challenging times and provide flexibility.
Compensation and benefits are good starting points, but they are not enough. Furthermore, not all businesses have deep pockets they can access during a crisis. The key is to think outside the box about how your organization can best support its employees by creating workplaces where people can bring their whole selves, do their best work, and form meaningful connections.
#2 Purpose: Envision a ship's crew dealing with an existential crisis at sea. The crew is understandably overwhelmed by the situation. "Folks, it has been a pleasure to serve with you. Thank you for your hard work. Let us hope for the best while bracing for the worst," the captain says. A wise captain will increase the crew's chances of survival by reminding them of why they embarked on the voyage, the loved ones who await them, and the promise of a better future. The astute captain shows the crew they are fighting for something more meaningful and important than themselves.
Similarly, leaders must be visible and lead with purpose during difficult times. Like the wise captain, be intentional in sharing stories of your organization's purpose, the good it does in the world, and why all hands should be on deck to ensure its survival. What stories are you telling your employees? What are the core values that guide your organization? What difference does your company make in the world? Does it give your employees a sense of purpose and meaning?
#3 Project: The Great Resignation should remind leaders that millions of individuals quit searching for fulfilling work. When leaders don't have a clear vision, their organizations become bloated—they become everything to everyone and pursue consensus instead of prioritizing. As a result, they are slow to act, stuck in old ways of thinking, and unable to move forward.
Employees feel undervalued, insecure about their future, and seek opportunities elsewhere when they do not understand where the organization is going, why it is going there, or the value of their work to the organization and its customers. Managers and leaders should assist employees in aligning their work to the organization's priorities, bottom line, and passions to ensure employees stay engaged and energized.
#4 Place: Different strategies have been used post-pandemic to get people back to the office. It has ranged from "work from home forever" to "go back to the office." At a time of astronomical gas prices, commuting to the office is another tax employees have to pay. Also, as home prices and mortgage rates go up, employees may need to live further away from work to support their families. This economic environment is an opportunity for leaders to focus on their people and seek win-win outcomes.
#5 People: According to the Microsoft Work Trend Index report, the top reason employees quit in 2021 was personal wellbeing. According to a Gallup study of people in over 150 countries, wellbeing has five elements: career, social, financial, physical, and community. Unfortunately, only 7% of people thrive in all five.
If you want your employees to be responsive, it's crucial you pay attention to their needs. A quick check-in to see how your team is doing can go a long way. You might be hesitant for fear of unleashing a Pandora's box of problems, but no one receives a ticket for performing an act of kindness. Robert S. McNamara said, "Brains, like hearts, go where they are appreciated."
It is tempting to focus on customers, competitors, investors, and Wall Street during challenging times. After all, they are the ones keeping you in business. While true, your employees are the ones that create and develop innovative solutions and services that ensure that the company exists. With rising inflation, leaders must create environments, provide tools, and foster cultures that empower employees to prioritize their wellbeing. If your people are your greatest assets, then let your actions speak louder than your words. How are you investing in the five elements of wellbeing in your organization?
Closing:
Employees are taking notes. They are evaluating whether their leaders will practice what they preach or if the company's vision, purpose, and culture are just words on a page. Tough times don't last forever, but organizations and leaders that value their people's experiences will weather even the most challenging economic downturns.
