When asked to rank their top challenges, 44% of small businesses cited inflation, which is up from 33% in the last quarter. According to a recent study by MetLife and the U.S. Chamber of Commerce, no doubt we’re living in a rough economic climate, so you should consider taking steps today to help ease the negative impacts these events will have on your organization tomorrow. As you’ve come to hrmjunkies to become an expert in HR you’re uniquely positioned to lead these conversations.
So, in this article, we’ll discuss everything hr people need to know about inflation in the workplace. What it is? Why you should address it? And how you can approach conversations about inflation with leadership. By the end of this article, you’ll have a better understanding of how you can prepare to beat inflation in your organization. The points that we’re going to discuss are:
- What inflation is?
- Why it’s important for your organization to address inflation?
- How HR people should approach inflation conversation with leadership? &,
- The steps you can take to mitigate inflation in your organization.
Meaning of Inflation
Let’s dive in. What is inflation? Peter Cappelli, professor of management and director of the center of human resources at the Wharton School, defines inflation in a quite simple way. Simply put, inflation is defined as increases in the overall prices in the economy that make your money worth less, viz., a dollar buys fewer goods and services after price inflation than before.
Currently, our inflation rate sits at 7.11%, which is at a forty-year record high. And there aren’t any signs that it’s going to change course any time soon. So what does this mean for employers?
First and foremost, it tells us the cost of goods and services that you need to run your organization will cost 9.1% more than it did a year ago. That’s pretty steep – especially if you’re already operating on a tight budget.
No matter what, inflation is here to stay for a while so you won’t be able to ignore it. Let’s dive a little deeper.
Why Is It Important For Your Organization To Address Inflation?
Most HR people are involved at some level in the financials of the organization. For example, at bernieportal, the hr people are a part of their organizational success team which is also responsible for finance and operations. If you’re in a role that touches both finance and human resources, you’re uniquely positioned to start conversations around inflation at your organization if they aren’t already happening. But why? Well, you’ve seen the impact of inflation on your bottom line as well as the impact on your team because your role is strategic as you make it, as rightly said by hr experts.
Now that we have addressed why you, now let’s talk about the issues facing your organization at a high level.
This year 71% of small business owners reported at least a 20% increase in costs for supplies and services. No matter what industry you’re in, chances are this impacts hr people like you.
64% of SMBs reported an inability to acquire products or perform services and 56% can’t meet customer demand.
Finally, 80% of small business owners say their business’s financial health has suffered due to inflation over the past six months.
Of those 67% increased wages to retain employees and 61% increased wages to attract new employees. Meanwhile, 60% said they’ve offset their cost increases by passing it off to consumers by raising prices.
So now that we’ve addressed the issues at hand, how do you create a viable plan? Well, let’s begin by addressing leadership
How Should HR people approach inflation conversations with leadership?
Communication is key, and there should be ongoing conversations between hr people and leadership with regard to inflation and its impact on organizational policies, resources, and overall goals. At organizations, HRs can start conversations by having an initial meeting with senior leadership to gather general feedback and ideas on inflation.
From that meeting, specific areas that require more research to be done are identified. The additional research may cover topics from expense analysis to profit maximization exercises.
Depending on your organization, these activities may vary. But they should be generated with leadership to get both their ideas and buy-in.
If you have trouble getting started, ask yourself this. How are other organizations in your specific industry responding to inflation? Which solutions appear to fit best with your company’s culture and values? Once you’ve identified your organization’s opportunities and you’ve researched some solutions, schedule a follow-up meeting to discuss what you’ve learned. Keep in mind that most leaders will need your support during this process. For example, they may need expense reports invoice information, or other information they may not look at regularly. By knowing all these points, you’ll know the ways to help them.
From there, come up with a game plan for implementing the improvements with leadership. This isn’t going to happen overnight depending on existing contracts and other factors it may take many months so get started now.
What are some ways to cut overall costs in this current economic climate?
Let’s begin with organizational costs. Rent has skyrocketed. So if your organization rents space, perhaps you can take an inventory of that space to determine whether or not you could downsize. Physically moving from one location to another may actually incur more costs. So, it really depends on the size and scope of your organization.
However, if you employ a good number of remote workers it may be possible to reorganize the office space so that you could rent or lease what’s not being used. Thereby generating extra income for the business and offsetting some of those inflation costs.
Another area where your organization could reduce spending is with the goods and services you purchase from vendors. Now vendors are struggling in this economy too and they’re passing their increased costs onto their customers so it’s likely you may see a spike in vendor invoices. So take an inventory of those goods or services that you currently use and ask yourself, do you really need the goods or services? Chances are these are expenses you’re incurring on a monthly basis that you no longer need
Alright! Now let’s talk about those job vacancies you’ve been struggling to fill. You notice that other organizations are enticing potential candidates with higher pay and fancy benefits packages. But that’s not something your organization can do. What alternatives are there that would be budget-friendly?
For starters, conduct job analyses and take a look at the job rules and determine if there are any responsibilities that could be absorbed by other team members. You may be able to merge some job responsibilities that would reduce the need to hire a full-time employee.
One final thing you can do to save money is to focus on keeping the employees that you already have. It’s expensive and time-consuming to recruit and retain talent. You have amazing talent already working for you so what are some cost-effective ways that will show them much they’re valued and appreciated within your organization?
There are budget-friendly perks you can consider. For example, casual dress, summer Fridays, trivia nights, unlimited PTOs, or flexibility the possibilities are endless so you and your leadership teams will need to put on your creativity hats and generate a list of options that will complement your organization’s culture and values. But the important thing is to do something
Now you have some ideas that will jump-start your efforts to address inflation in your organization. Remember, that being proactive today will help ease the instability that lies ahead of you and your organization. So gather your leadership together and get the process started. As always remember that your role is as strategic as you make it.