Now is not the time ‘to hunker down and hope things pass’

Despite the headlines about company layoffs as the US tariffs gain steam, now is not the time for employers to take drastic measures for the short term — because of the long-term consequences, say two Canadian experts.

“It's possible to overreact to… what's going on in the market today — we're definitely into a period of volatility on all fronts,” says academic Catherine Connelly.

“But the response to that is not to increase your company's volatility by making sweeping changes.”

A lot of companies are in this moment of panic, she says, and wondering what to do.

“There's a feeling of maybe retrenchment, in terms of ‘Protect what we have try to save as much money as we can.’”

Making big, sweeping decisions can feel like you're taking action, but sometimes the best action is no action, says Connelly, professor and business research chair in organizational behaviour, in the Human Resources and Management department of the DeGroote School of Business at McMaster University.

“A lot of these decisions, they're very difficult to undo. So, once you lay off a few people, then everybody thinks they're going to get laid off, and then hiring people back becomes more difficult because they found something else, or people find your company less appealing because you're the company that lays people off sometimes.”

‘Decisions can’t be made in a vacuum’

Any major decisions by HR and employers can't be made in the vacuum, says James Chowhan, associate professor at the School of Human Resource Management at York University.

“We have to think of the longer-term consequences of any decision.”

Employers need to consider the impact on the strategic orientation of the organization if they're changing any HR practices, he says.

“If the organization has a strategic focus and you've put in place HR practices that you think support that focus, then I wouldn't drastically be changing anything unless it was for the survival of the organization. Things might need to be pared back or put on hold temporarily... suspended in some way, if it's a cash flow issue, but, ultimately, not removed or diminished to the point where the employee feels that the psychological contract is broken.

“Because, once you do that, then you're impacting morale. That potentially impacts commitment, trust; ultimately, that impacts job satisfaction, work engagement, then you get lower productivity, higher turnover.”

Planning amid uncertainty of US tariffs

Organizations should be thinking about where they're going to be, short-, medium- and long-term, and then how much knowledge, skills and abilities they're going to need over those phases of their planning, says Chowhan.

“Trying to implement things when you're thrown into a challenge, you're left with ad hoc scrambling. So, ideally, organizations [already] have some planning they're able to fall back on at this stage.”

Usually, employers will develop risk assessments and scenario planning by scanning the environment, on a regular basis, he says.

“We're talking about the economy and the political system and the legislative environment, regulatory environment… part of that scanning is identifying the risks, identifying the problem, generating some probabilities that might be associated with those risks, thinking about the impact of the events that might occur,” says Chowhan.

“In a world where managers have limited time and resources, these planning steps really do help managers identify what's the top of their list for their time and their attention.”

Do hiring freezes make sense?

As the impact of the US tariffs take effect, or loom on the horizon, some employers are implementing hiring freezes.

But the latter can be tricky, says Connelly.

“Frequently, there are top management teams who use them as a way of imposing some predictability on something that just feels a little bit uncertain. So, it can be a way to make yourself feel better: ‘OK, we've done something, we've had a hiring freeze.'

“But this could mean that you have a bit of a lost opportunity, because depending on what happens, you might want to make some strategic hires. And it's [about having] that adaptability and that flexibility. And with the unemployment rate creeping up a little bit recently, it means some really great people might be available to you suddenly.”

On the other hand, a slowdown in hiring might be more advisable, she adds.

Cutting training, salaries, benefits

Another area where employers often look to cut costs in the short-term is training budgets, along with compensation.

But, as much as possible, pay packages should at least keep pace with inflation, says Connelly.

“It's going to go up, just because of the tariff situation, so we're about to see more inflation. So it's not the moment for salary freezes either, not just at the entry level, where you can't, partly because minimum wages are still going to go up, but also with your more senior people. They still need to feel that their pay is reflecting their… qualifications.”

Employers might also consider cutting back some perks or expense benefits for the short term, says Chowhan.

But when it comes to some of the longer-term, more permanent benefits, such as pensions, health savings accounts or profit sharing, it’s not advisable to take those off the table.

“Those types of profit-sharing benefits or bonusing really can contribute to effectiveness, productivity, performance,” he says. “Those things tie employees to the organization. They make them committed.”

Cross-training, upskilling amid US tariffs

Usually, Canadian employers can expect attrition rates ranging from 7% to 11% with people relocating, retiring or quitting. For some organizations, that might be sufficient to “weather the storm,” says Chowhan, while others might ask for volunteers willing to retire or quit of their own accord.

“There are steps organizations can take beyond hiring freezes that are less dramatic and that are voluntary. In other words, they can ask people to step up.”

However, there’s the risk you might lose your best people, he says.

“[Employers] would really strongly want to consider the degree to which they want to engage in certain practices and what the impact of them will be.”

If an employer does have to downsize, then it’s important to make sure that organizational capital is retained, through programs such as cross-training or job rotation focusing on core competencies, says Chowhan.

“This is important because you're making sure a breadth of employees within your organization have the core skills that the organization requires to continue, and so you're essentially creating an insurance policy.”

Engaging, retaining top talent in downturn

Despite an expected or actual downturn, employers do not want to lose top talent. So if they are restrained when it comes to spending – such as cutting back on planned promotions or raises – there are other ways to engage and hopefully retain star employees.

Clear communication, for one, can let key employees know that there's a plan for them, says Chowhan.

“Obviously, you don't want to promise timelines to people, but what you do as a senior manager is you sit down with your upcoming talent, and you lay out a career path for them… and maybe lay out a training plan… so that the employee can start to move towards their goals.

“They at least see some movement, they at least see that the organization is committing to them and buying in to their progression.”

Top talent can always leave, so cutbacks are risky, says Connelly.

“Companies will panic because of the uncertainty and hunker down and think, ‘We're going to cut everything and we're not going to spend any money on anything — even our employees who make it all possible,’” she says.

“But communication goes a very long way in terms of people feeling that they are contributing to something important, and that they have say in decisions that affect them, and that they can chart a reasonable career path within the company. So, I think keeping those lines of communication open even when there is uncertainty is really important.”

Communicating to alleviate anxiety

During strained times or times of uncertainty, managers can help in alleviating employee anxiety or stress by providing clear communications, letting the employees know where the organization is at, says Chowhan.

“Obviously, they don't have a crystal ball so [they] don't want to get into things where it's speculative or supposition, but you want to let the employees know the reality of the situation, without creating panic, and let the employees know what as an organization you're doing to address the critical challenges.”

That can give staff the confidence that management is leading the ship, so to speak, and hopefully taking it in the right direction, he says.

“It’s part of a broader talent management retention strategy. When you're being upfront, honest and clear with your employees with good communication, they have more confidence, they're more trusting, they can be more committed, and they don't get into the worries of job insecurity, the anxiety [and] eventually, emotional exhaustion that accompanies all those types of feelings.”

Supporting front-line managers

Not that front-line managers should be left to their own devices – they need support too.

“Top management sets the tone, but they are not talking to frontline employees every day. So, I think it's really important that there's consistency in the messaging, [and] that's only going to work if the top management is consistent with what they're saying, if their walk matches their talk,” says Connelly.

And the direct supervisors need to be aware of what's happening.

“The last thing you want is for them to find out on the news or on social media what's going on in their company, or that there's been a disconnect between what top management has been saying and then what's happening internally,” she says.

It’s a good idea for employers to strike a committee to develop an overall communication plan addressing the key messages to be conveyed to employees, says Chowhan.

“Draft up language that can be provided in short training sessions to the employer, to the managers, frontline managers in particular, so they’re able to convey these messages in a consistent way, in a regular way that alleviates anxiety that employees are going to be feeling.

“Really clear messaging is going to be critical for managers — and it shouldn't be left to HR.”

Winners and losers amid US tariffs

Despite the challenging situation brought about with the imposition of US tariffs, some employers are benefiting from the ‘Buy Canada’ movement, he says.

“There are some organizations out there that might be better off now if a recession hits. Obviously, there's going to be risks there, but there's some organizations that… are doing a lot better and struggling to keep up with the new demand.”

Some Canadian employers have seen their orders go through the roof, says Connelly, and are ramping up production to carve out market share, which means different kinds of challenges for HR.

“Maybe you're just going to rely on overtime for that, or maybe some short-term hires,” she says. “But this might also be an opportunity to hire, when you find good people, and make them permanent and then just grow.”

As we’ve seen before, there will be both winners and losers in a trade war, says Chowhan.

“We just have to support the losers and encourage the winners… And as we transition, managers and HR will need to think about how they're able to best do that.”