Here’s a tale of two companies navigating economic uncertainty, each choosing a very different approach—and experiencing starkly contrasting outcomes.

Company A saw the looming economic challenges and reacted by immediately scaling back its investment in learning and development. In an effort to be conservative, they cut what they perceived as "extra" layers of management, believing these roles were dispensable. Unfortunately, their cost-cutting measures inadvertently undermined their long-term growth potential.

On the other hand, Company B took a strategic perspective, choosing to prioritize the development of their strongest talent, especially managers. Understanding that effective management is crucial during periods of uncertainty, they deferred capital investments and made difficult staffing adjustments, redirecting resources to manager training and employee development.

Research strongly supports Company B’s strategy:

• According to Gallup (2023), companies that invest in manager development achieve up to 21% higher profitability due to increased employee engagement and productivity.
• McKinsey & Company (2022) highlights that organizations focusing on managerial effectiveness during downturns experience accelerated recovery, improved retention rates, and higher employee morale compared to companies that aggressively cut managerial roles.
• Harvard Business Review explains how employers should not overplay their hands in a tight labor market.  Instead, firms that prioritize employee growth and manager training during economic downturns experience significantly lower turnover rates. This retention of institutional knowledge translates directly into sustained performance post-crisis.

In the short term, Company A's approach triggered an immediate crisis of institutional knowledge loss. Employees, noticing reduced growth opportunities and increased workload without adequate support, quickly became dissatisfied. Their best talent started looking elsewhere, resulting in significant voluntary turnover.

When the economic climate stabilized, Company A was left facing a considerable talent deficit, diminished team performance, and costly rehiring and retraining efforts. Conversely, Company B emerged from uncertainty stronger, with capable managers who deftly navigated their teams through the challenges.

The marketplace today continues to demonstrate these patterns—underscoring a lesson businesses have repeatedly learned.  Investing in your managers during economic uncertainty is not merely prudent, it’s essential for long-term organizational success.

We’re building a movement to change how we work, and we believe managers are the key lever. To learn more about our work and get involved, connect with us at www.managereq.com.