The economic impact of inflation goes beyond the bottom line for a company. Here’s how corporate leadership can help mitigate the impacts of inflation for their team and organization.
It is becoming clear that the pandemic is going to have lasting effects on society beyond just the virus itself. With inflation on the rise, companies are raising prices and cost-of-living is increasing every day. Inflation (and a potential recession) is going to be the next hurdle that leadership is going to have to face.
Inflation means tough choices, an impact on the bottom line, and additional stressors on your employees. As businesses, while there are ways to mitigate the effects of inflation, there is no doubt that it is one of the most intense challenges that business leaders will face.
The State of Inflation in 2022
The state of inflation in 2022 is shifting every day. It seems that today’s statistics are out of date the next day, due to the rapidly shifting global pressures.
Here are some statistics regarding inflation:
- 61% of small businesses in the U.S. have raised prices for their goods and services (highest percentage since 1964)
- The consumer price index climbed to 7.5%, impacting price increases including energy, food, and housing costs
- Employee compensation costs in 2021 surged the most they have in 20 years
Tips for Leading your Team through Inflation
- Analyze for Easy or Obvious Cost-Savings
This is what many may call the “low-hanging fruit”. Consider cost-savings or cost-cutting methods that will have minimal impact or disruption to your employees’ day-to-day. Conduct analyses on existing contracted services and look for opportunities to price freeze, renegotiate, or terminate depending on how important that service is to your business.
Look for low impact cost savings to maintain company culture and morale. The less obvious you can make the instability or insecurity to your employees – the better it will be for employee retention and overall attitude.
- Honesty is the Best Policy (when possible)
Preparing a company for a recession or a sudden rise in inflation is one of the hardest tasks that leadership will face. Often, it calls for tough decisions to be made under extreme internal and external pressures. When possible, honesty is a great strategy to ensure your employees feel secure, heard, and informed.
Depending on the size and flexibility of your organization – the best thing for retention and morale is to be as transparent as possible with your staff. This balance between not “spooking” employees and making sure that they’re aware of the gravity of the situation is important.
- Reconsider Compensation for Retention Purposes
If your business is feeling the inflation squeeze, so are your employees. Prices and cost-of-living are skyrocketing across North America. It may be advantageous, for employee retention, to consider a cost-of-living wage increase that is in line with the current consumer price increase (CPI) numbers. If wage increases are out of the question, consider other cost-saving methods for your employees such as remote work to save the cost of commuting.
Be careful not to spend on things that your employees may see as unnecessary. For example, distributing grocery cards or a free lunch may seem like a nice gesture, but some employees may prefer to receive that same dollar amount in a simple wage increase or bonus cheque for other expenses. Instead of spending money on “perks” – use your budget to line the pockets of your employees.
- Automate and Optimize Processes
Inflation can be a great opportunity for innovation, automation, and optimization. Consider taking the time to fully understand how all pieces of the organization are working with one another. Where is there overlap? Is there room to maximize efficiencies? What would restructuring in various areas of your organization look like?
These are all ways to not only benefit your bottom line but also make your employees feel integral to the operation. Automation may seem scary or threatening, but it can be about freeing up time to increase profits or wealth for the organization in other ways.
- Avoid Passing on Increased Costs to your Employees
With so many companies hiring, there’s no doubt that this is an employee’s job market . Stories of the Great Resignation and employees leaving for “greener pastures” are becoming the norm.
It’s imperative to consider employee retention – especially given how difficult it is sourcing, hiring, and compensating talented employees during this unprecedented time. Be extremely conscious about passing on increased costs to your employees.
Make no mistake, your employees will take note of how you treat them moving through these challenging times. Those who feel the corporation is putting the onus on them to shore up costs will leave. Be mindful of how you’re treating employees and approaching the overall company culture.