18 Aug

Leaning into the Economic Headwinds

Three years ago, we were all talking about the ‘unprecedented’ times we faced during the pandemic.

In workplaces around the country, we’ve weathered lockdowns and belt-tightening, followed by the emergence bounce and “great resignation” phenomena, and the subsequent market correction.
So we’re back to normal, right? Well, no.

The global economy remains in a post-pandemic transitional state that’s been further complicated by the war in Ukraine. This has created some severe macro-economic drivers that have impacted inflation both globally and locally. In turn, that’s affecting business confidence and creating significant financial stress for many employees.

In this context, there are three employer-related trends we see emerging clearly across most sectors.

People are stressed and that’s affecting their productivity at work

The April 2023 Financial Stability Review by the Reserve Bank of Australia has recognised the current financial stress being experienced by certain sectors of the population due to higher interest rates and inflation. A late 2022 AMP report highlighted that financial stress has almost doubled over the past two years and is higher than ever before. Unsurprisingly, vulnerable groups like part-time workers (18%) and single parents (13%) reported being severely or moderately financially stressed. And it’s not just low income earners being affected, as 20% of employees earning more than $100,000 a year also reported they are suffering from financial stress.

Many of these workers are also worried about losing their jobs, particularly given news headlines about organisational downsizing in sectors like professional services, IT, banking and government.
Due to this financial stress, 21% of employees surveyed for the AMP report estimated that their productivity has fallen by 12 hours a week. In turn, AMP estimates this lost productivity costs $66 billion a year.

A return to rated performance systems

For the past five years, many organisations have moved away from formal, rated performance systems, arguing the process was a waste of time or not a priority pre-pandemic.

Now that the market is correcting, we are increasingly seeing organisations return to using these systems to identify productivity issues and manage lower performers.

Organisational structuring – a new narrative

While organisations try to empathise with the challenges faced by their people, they also need to make strategic decisions in line with their risk appetite and commercial objectives. Despite some strong financial results being posted, many organisations are taking a conservative stance to protect their future position through agile and regular restructuring.

For example, as reported in the AFR, Microsoft Australia undertook a fresh round of redundancies at the start of the new financial year despite a $1 billion surge in revenue. It is reported this brings the total local job losses at the IT giant to about 200 this calendar year.

Microsoft is not alone in trimming its workforce. Atlassian, CBA, Westpac, Telstra, Salesforce, KPMG and Canva – just to name a few – have all made the news for similar reasons. In May, The Australian reported up to 40% of Australian businesses are considering layoffs and 47% do not plan to offer significant pay rises.

Downsizing and salary freezes are not new tactics in challenging economic markets. What is new is the public positioning around these moves. By regularly tweaking staffing numbers across the organisation, rather than undertaking wholesale redundancies, organisations are changing the story from being one of performance inability to one of structural agility. For example, after confirming local job losses a Microsoft spokesperson told the AFR: “Organisational and workforce adjustments are a necessary and regular part of managing our business.”

Atlassian took a different approach. As reported in the AFR in June, Atlassian shed 480 low-tiered engineering management roles with the majority being “redirected to coding roles with no staff under them or bumped up to more senior management roles”.

With these smaller but more regular moves being positioned as business as usual activities, it will be interesting to see how much social licence organisations gain and how unions, where involved, respond.

JOST&Co has no magic bullet to fix the distress in the system. However, we can help organisations identify strategic initiatives, move to regular agile organisational design, and take action to survive and thrive in way that demonstrates compassion for people who are already suffering financial distress.

You can also join our free Masterclass this month where we will share an evidence-based approach to workplace wellbeing that promotes top-down and bottom-up strategies for lasting positive change.