My Take: Macroeconomic uncertainty makes a return thanks to the coronavirus

August 15th, 2022

It has been awhile since the economy has faced any serious adversity.

We do not know how sustained the impact will be from the coronavirus threat. But, it’s clear that there will be an impact on our economy. As consumers retreat from malls and airports, as conferences and other events are canceled, businesses are feeling it. As companies see their revenue coming in below forecast levels, we are likely to see the first widespread layoffs in many years.

The early reaction to the coronavirus bears a mild resemblance to the retrenchment after 9/11. In 2001, the recession was already in its sixth month when the attack occurred. As fears of a worsening recession grew, it was the auto industry kicking its marketing programs into high gear. GM introduced for the first time the no-interest loan in its “Keep America Rolling” plan, leveraging the Fed’s sharp rate cuts. Others car makers followed. The consumer reaction to the promotion was well beyond anyone’s expectations and the domestic car industry posted all-time record sales in the month of October. The recession was over by November, at least technically.

But, the public response to the coronavirus is different than it was to the terror attack. In the wake of 9/11, there was patriotic call from authorities to go on with normal life, fly, attend sporting events, etc. As it relates to the coronavirus, the authorities have a different message – protect yourself and protect others by limiting interactions with others. The implications for the economy are significant!

Which sector can pick up the mantle borne by the carmakers nearly 20 years ago and keep consumers and businesses spending as the virus runs its course remains to be seen. Could it be the public sector? Sure, but the federal government ran a trillion dollar deficit last year, in what was supposed to be the best of times. The combination of a virus-triggered slowdown and a big fiscal stimulus package or tax holiday meant to combat it could drive the federal deficit back to Great Recession levels. That’s not exactly a recipe for renewed confidence.

For HR, it is a battle on two fronts: employee safety and keeping the business moving forward. Twitter made headlines for telling its employees to work for home. But, this is far easier to do as an internet company than it will be for most companies. For factories, restaurants, theaters, etc., the list of challenges is quite a bit longer. Record low attendance at the Knicks game the other day was not just because my beloved Knicks are terrible.

Hopefully, the expected retrenchment proves mild and short-lived. But, it is probably still a good time for HR to revisit its offboarding practices and its outplacement vendor relationships. So much has changed since the last recession. Glassdoor’s anonymous review site was first launching in 2008 and didn’t have the influence on employer reputations it has today.

A few things to consider if your company is considering layoffs:

It’s critical to get it right. One of the most delicate, difficult, and potentially dangerous jobs an HR pro, business owner, or manager does is terminating an employee. The way a company handles offboarding impacts how the employee reacts to the news of his or her job loss, the transition success, morale of remaining co-workers, and the company’s bottom line. It can even affect the company’s brand and reputation. If the company bungles the offboarding process and a small army of former employees write savage reviews on Glassdoor, it can be brand-crushing.

Make sure you’re in compliance with the law. Mistakes in offboarding can also put your company in the legal hot seat. Every day, it seems, there’s a story in the news about an ex-employee suing for wrongful termination, whether it’s because of discrimination (real or perceived), violations of federal labor laws, or any number of legal snares. One example: Intel is facing a class-action lawsuit after a round of layoffs when people started noticing that the terminated employees were older than the remaining employees by an average of seven years. So it looked like the company was laying off older workers, which is age discrimination, which is against the law. Review local, state, and federal employment laws and regulations.

Communicate honestly. Transparency is key here. Tell employees why you’re doing the layoff. Also let them know you’re not happy about it, and express genuine gratitude to departing and remaining employees.

Put together a good severance package. Go over your company’s policy on severance packages, especially if you haven’t terminated an employee in a while. Be generous where you can. Typical items to include:

  • Severance pay, typically two to four weeks of pay for every year worked
  • Vacation pay
  • COBRA premiums

Provide outplacement services. It’s not just the right thing to do for your departing employees. It’s the right thing to do for your bottom line. Giving people something to focus on, a way forward after the loss of a job, is crucial to your departing employees and your remaining employees. It shows you care, and that creates loyalty.

For more information on best practices around offboarding, please download the Definitive Guide to Offboarding.

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