CHROs and Their Teams Lag in Recession Preparedness

July 19, 2019 – At a time in which many believe recession to be inevitable, chief human resources officers and their teams are ill-prepared for an economic downturn, according to a new report by Russell Reynolds Associates.

The executive recruitment firm’s survey of 534 senior leaders at companies across the globe — including 148 CHROs — found that just eight percent would describe themselves as well prepared to manage through an economic downturn. Similarly, just nine percent of CHROs described themselves as well prepared.

CHROs are even less confident in the level of preparedness of their teams, said the Russell Reynolds Associates Downturn Survey. Just three percent of CHROs said their team is well prepared to respond, in comparison to seven percent of general counsels and five percent of chief operating officers.

The survey sought to gauge just how worried senior executives are and whether that concern is translating into action. Just five percent of CHROs said they believe that an economic downturn is highly unlikely in the next 18 months, said the search firm.

Feeling Unprepared

“If a recession is deemed so inevitable, the key question is whether the fear of one is instigating a response among senior executives,” said Russell Reynolds Associates. “Are advisors to the CEO putting into place contingency plans to ensure they are well prepared to manage in the event of the market turning?”

CHROs gave several reasons for feeling underprepared, most frequently citing the greatest weaknesses of their team to be a lack of agility and experience, said the study. Some CHROs said they believe their biggest weakness sits outside of the HR function. “I would be concerned about the lack of leadership competency in the broader organization to address a significant economic downturn,” said one. Another simply pointed to “line management” as their biggest weakness.

“That’s unsurprising, really, given HR’s concern for having the right talent in place — a concern which naturally extends beyond the HR function,” said the report.

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When senior executives were asked to rank the three most important functions in managing through a downturn, there was agreement among peers of the CHRO that the CEO, business unit leaders and the finance function took first, second and third places, respectively. A mismatch, however, was seen between CHROs and their peers, with CHROs ranking the HR function as the third most important area of management, replacing finance.

An Important Role

Attracting the right talent, retaining the right talent and developing the right talent are key focus areas for a CHRO, whether facing a downturn or not. “HR can therefore play an important role in helping the entire organization to prepare for a potential downturn by asking the right questions in relation to talent strategy,” said Russell Reynolds Associates. “Does the HR team have the right talent/leadership in place to respond effectively to an economic downturn? But perhaps even more important, does the organization have the right management team in place at the business-unit and CEO levels, as well as in the finance function, to successfully navigate through a recession?”

When CHROs were asked to consider the aspects of HR that would be most important in the event of a recession, leadership and coaching came out on top, accounting for 27 percent of responses. “If an organization waits for a recession to hit before discovering that they have the wrong leadership in place, they will find themselves on the defensive,” said the search firm. “Through a focus on leadership and coaching now, HR can help the organization to equip existing leaders with the tools they’ll need to manage through a recession. Not only that, HR can identify gaps in leadership which might require new hires to be made ahead of a potential recession hitting.”

The take-home message is all around preparedness. “These are interesting times, and who is to say whether the furor surrounding a potential recession will in fact become a reality? While we can hope for the best, it certainly never did anyone any harm to prepare for the worst — something CHROs and their C-suite peers should keep top of mind during these calmer times,” said the report.

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Research on successful executives is increasingly showing that leaders who thrive at the senior-most levels of organizations are able to manage competing sets of competencies – pairs of psychological traits that, on their face, seem to contradict each other, said another report by Russell Reynolds Associates.

Leadership Span

“They can be both pragmatic and disruptive, reluctant and risk-taking, vulnerable and heroic, and connecting and galvanizing,” said the study. “We call these four pairs of traits Leadership Span.”

Leaders who can “span” are able to be high-level, long-term performers, more so than their peers, said the executive search firm. They are able to flex and adjust for changing circumstances, inside and outside their organizations. They can change and grow as their companies, markets, competitors, and customers shift.

Several of these characteristics will be critical for CHROs in the future: “As companies position themselves for innovation, CHROs will need to be more risk taking and disruptive,” said Russell Reynolds Associates. “This isn’t to say that they take their eyes off the risk management aspects of their job, or make foolish and ill-advised moves, but that they think about how HR can enable disruption, and how the company can support new hires who are perhaps significantly different than the typical employee. Being risk taking and disruptive builds on their natural proclivity to push back against group think.”

As organizations enter into more alliances, and transform themselves from single monoliths into networks of organizations who share common goals, CHROs will need to help the organization become more connecting. “Existing efforts to build networks within the company will need to shift to focus on building networks across organizations,” said Russell Reynolds Associates. “HR professionals will need to rethink their approach to helping employees come together on common goals, even if they don’t share common employers. Being connecting builds on their tendency to be good listeners and to make the workforce feel heard and represented in the corner office.”

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; Stephen Sawicki, Managing Editor; and Andrew W. Mitchell, Managing Editor – Hunt Scanlon Media