Cost cutting in a recession usually includes strategic HR and leadership development initiatives and expenses. Recessions often also lead to negative perceptions of HR since they are made responsible for cutting people and programs in line with company directives. The CEO and board are usually so preoccupied with company survival and the need to significantly cut expenses that they often have no sympathy or time left for strategic leadership development initiatives.
However, unconscious financial behaviors of many CEOs and senior management result in more than just costs being cut. Margins are often unwittingly chopped in the race for aesthetically-pleasing expense line items. Falls in margins are usually the consequence of reducing value-adding expense items, which reduces the medium and long-term competitive edge of the company. Executives need to be aware of these behavioral biases so that they can reduce costs without threatening the long term sustainability of the company.
This White Paper shows that a recession is actually an opportunity for HR and leadership development to increase its credibility by promoting programs to modify financial behaviors that directly support the CEO and board’s agenda to cut expenses while increasing margins. By adopting such approaches, HR can put in place programs and behaviors that not only rapidly improve short-term financial outcomes, but also put in place a framework for longer-term increases in profit quality and financial performance.