Credit: shironosov, https://www.istockphoto.com/search/2/image?artist=shironosov&family=creative
More than 90 percent of responding U.S. CEOs believe a recession is on the way in the next 12 months, according to a survey of 1,325 CEOs from July 12 and Aug. 24 by professional services firm KPMG.
CEOs who responded to the KPMG poll said they’re preparing for the recession by making cuts in three main areas: staff, sustainability efforts and diversity budgets.
Cuts to staff and to environmental, social and governance issues such as diversity budgets could backfire in the long run, said Paul Knopp, U.S. chairman and CEO at KPMG, according to CNBC.
A study by the Society of Human Resources Management (SHRM) showed that budgets for diversity and inclusion at Fortune 1000 companies range from $30,000 to $5.1 million, and average around $1.5 million per year, according to Diversio.
“CEOs recognize they have to walk the talk” around improvements to their social agenda around diversity, equity and inclusion, Knopp said. “Customers are making buying decisions around those commitments” and employees “want to see us be more diverse and inclusive.”
Executives should be very cautious about how they approach layoffs, Knopp said. Today’s imbalanced hiring market was exacerbated by how they responded during the early pandemic downturn.
By early 2021, “the economy bounced back incredibly fast, and those leaders that cut jobs probably regret it to some degree,” he said. As hiring became more competitive, employers had to raise wages, add benefits and improve job conditions to get people in the door.
Other conditions led to employee shortages such as limiting immigration policies, people dropping out of the workforce due to covid, child-care needs and other things.
“It’s all about measured reduction in the short-term but commitments for the long-term,” Knopp said.
Businesses started caring a lot more about diversity and inclusion after high-profile lawsuits rocked the financial industry in the late 1990s and early 2000s. Bank of America Merrill Lynch settled a race discrimination lawsuit in 2013 for $160 million.
But diversity programs aren’t increasing diversity. Equality isn’t improving, according to Harvard Business Review. Among all U.S. companies with 100 or more employees, the proportion of Black men in management increased from 3-to-3.3 percent between 1985 and 2014.
Knopp said CEOs should be strategic in making job cuts and be prepared for another quick rebound by mid-2023. According to the survey, more than half of CEOs who responded said they are considering downsizing their workforce over the next six months but 92 percent expect their company headcount to increase in the next three years.
He expects leaders will continue feeling pressure to offer good pay, benefits and working conditions — 73 percent of CEOs say they’re concerned about their ability to retain talent due to rising inflation and cost of living factors.
Atlanta Federal Reserve Bank President Bostic said he expects job losses but there’s a good chance to get inflation down without killing the economy.
Job losses could be “smaller than what we’ve seen in other situations,” Bostic said on Sept. 25 while being interviewed on CBS “Face The Nation.” Thanks to strong employment, he said he believes in the “ability for the economy to absorb” rate hikes.
