The economic impact of inflation goes beyond the bottom line for a company. Here’s how corporate leadership can best mitigate the impacts of inflation for their team and organization.
It’s becoming clear that the pandemic is going to have lasting and deep 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 within organizations.
Inflation means tough choices, an impact on the bottom line, and additional stressors on your employees. As businesses, there are some ways to mitigate the effects of inflation but there’s no doubt that it’s 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. Moving into 2022, inflation was a major factor prediction by economists. It seems that today’s statistics are out of date tomorrow due to the rapidly shifting global pressures (Russian invasion of Ukraine, the pandemic, climate change).
Here are some stats around inflation today:
- 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% which has impacted price increases including energy, food, and housing costs.
- Employee compensation costs in 2021 surged the most they have in 20
5 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.
- Honesty is the Best Policy (if Possible)
Depending on the size and flexibility of your organization – it may be the best thing for retention and morale to be as transparent as possible with your staff. This balance between not “spooking” employees but making sure that they’re aware of the gravity of the existing situation is important. You may also be able to prepare for hiring or succession needs if you sense employees are seeking other opportunities.
- Reconsider Compensation for Retention Purposes
If your business is feeling the inflation squeeze on the bottom line, so are your employees. Prices and cost-of-living are skyrocketing across North America as a result of inflation pressures. Where possible, 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.
- 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 a restructuring in various areas of your organization look like?
- Avoid Passing on Increased Costs to your Employees
There’s no doubt that this is an employee’s job market with so many companies hiring. Stories of the Great Resignation and employees leaving for “greener pastures” are becoming the norm.
It’s imperative through this inflation squeeze 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 that your employees will take note of how you treat your team moving through these challenging times. Those who feel that the corporation is putting the onus on them to shore up costs will leave. There’s no doubt about it. Be mindful of how you’re treating employees and approaching the overall company culture.