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Offering high salaries to attract top talent? If a recession occurs, that may backfire

April 20, 2022, 10:34 AM UTC

Good morning,

There’s been increased talk on Wall Street about a potential recession resulting from interest rate hikes by the Federal Reserve. Within the next two years, there’s a 35% chance of a recession in the U.S., according to Mark Zandi, Moody’s chief economist. That coincides with Goldman Sachs’ recent estimate.

Employers and employees have already been dealing with the effects of the COVID pandemic, geopolitical tensions, and inflation. C-suite executives named the war for talent as a top risk this year, according to a recent PwC survey. A recession during a war for talent, which some experts say might last until 2031, could make things exponentially more complicated. I spoke with two experts to find out the dos and don’ts for talent management in case of a recession.  

The don’ts

“Don’t overpromise and don’t underdeliver,” says Yuvay Meyers Ferguson, Ph.D., assistant dean of impact and engagement in the School of Business at Howard University. “As people are changing jobs for higher-paying opportunities and better culture fits, a recession can make a mess of the two attributes that keep and attracts employees.” 

At the onset of the labor shortage, companies began offering high salaries to attract top talent. When asked about raising salaries amidst a recession, Bhushan Sethi, joint global leader of people and organization at PwC, says that may not be the best practice, not only in terms of costs, but the effect it may have on the morale of existing employees.

“If you are bringing in a number of people and the job roles are paying 20% more, then you’re going to have some inequity issues in the organization [when it comes to employees in comparable roles],” Sethi, an adjunct instructor at NYU Stern, explains. 

In certain states, like New York, there is going to be potential legislation around more pay transparency, he says. If a company decides to continue offering higher pay to candidates with cybersecurity or data skills, for example, that will be a challenge, he explains. “As soon as you bring in people at higher salaries, everyone else in the organization is going to look,” Sethi says. 

“Lack of job security is a major morale buster,” Ferguson says. “This is where the CFO and [chief human resources officer] CHRO need to be in alignment. If there is a way to be fiscally responsible and keep your workforce secure, that should be a priority.”

Another thing companies shouldn’t do at the onset of a recession is cut spending in programs to reskill employees. “Maybe it’s learning about ESG or maybe it’s just leadership skills,” Sethi explains. “If the skills are going to improve their future employability, whether it’s with your company or not, it’s not the right business decision [to cut training or programs]. 

What you should do

Many employees weren’t yet in the workforce during economic recessions, like in 2008, Sethi says. “The most important thing you can do is actually get out there and over-communicate,” he says.  

For example, telling employees, “‘We cannot predict the future, but here’s how we’re going to make decisions,’” he says. “If like we saw at the beginning of the pandemic, people have to be furloughed, or the business model needs to be changed, at least give people some guidance.” 

How do we model for cost, labor, and commodity increase? And how does that factor into our pricing, revenue and profitability? These are questions that will come into play for companies, he says. Answering them will require workforce and HR data, with CHROs working alongside CFOs to “model out some of the scenarios,” he says. 

Company culture should also be top of mind, Ferguson says. “Beyond higher salaries, which is straightforward, employees are seeking a culture fit,” she says. “Investing time and energy into that area of your work environment will provide exponential returns in the form of protection from the potentially impending recession.” 

Compliance and ethics should be a priority as well, Sethi says. “I spend a lot of time working with financial institutions, and a lot of the large banks,” he explains. “The other thing that you cannot do is turn a blind eye to all of the risk, ethics, and compliance issues.” Why? “In times of anxiety or fear, people may not be acting in the best way,” such as demonstrating less inclusive behavior, he says.  

See you tomorrow.

Sheryl Estrada

Big deal

Global advisory Willis Towers Watson's (Nasdaq: WTW) survey of more than 9,600 U.S. employees highlights the importance of health and retirement benefits to attract and keep workers. About 60% of respondents cited their employers’ retirement benefits as an important reason they remain with their current employer, compared with 41% in 2010. The survey found 44% of employees want their employers' support when it comes to retirement benefits, compared to 39% who said flexible work. 

Going deeper

How the COVID-19 Pandemic Changed Recruiting, a new report by Indeed, examines how employers are expanding their talent pool beyond the traditional constraints of industry experience, education, and location. About 67% of companies with 1,000 or more employees would consider ending the undergraduate degree requirement, compared to 53% of businesses with 10 employees or fewer. The survey also found that 76% of employers are now considering more applicants who come from different types of positions and or sectors. In addition, 57% of employers find remote work options that enable them to attract more applicants and reach a more diverse talent pool (56%). The findings are based on a survey of 502 employers across the U.S.


Natasha Fernandes was promoted to CFO at IMAX Corporation (NYSE: IMAX), effective May 1. Fernandes succeeds Joseph Sparacio, who served as the company's CFO from 2007 to 2016, and rejoined IMAX last year as the interim CFO. Fernandes' promotion to CFO is the culmination of a 15-year career with the company. Prior to the role of deputy financial officer in 2021, she served as corporate treasurer since 2018. Most recently, Fernandes led the company's $200 million convertible debt offering in 2021 and new credit agreement earlier this year. Earlier, she held positions including assistant controller and director of financial reporting. Prior to joining IMAX, Fernandes was an audit manager of manufacturing and service industries at Deloitte.

Kelly Gold was promoted to CFO at CAMP4 Therapeutics, a biotechnology company. Gold currently serves as CAMP4’s chief business officer and SVP of finance. She joined CAMP4 in 2017 and has held roles of increasing responsibility leading the business development and finance functions. Gold previously held various roles in corporate finance and business planning at Biogen. Prior to Biogen, she worked in both the healthcare and Latin American investment banking groups at Deutsche Bank. Gold began her career as a mechanical engineer for Biosafety Level 4 research facilities.


"What forward-looking companies are discovering is that hybrid and even fully remote work arrangements don’t automatically lead to losing social capital. However, you do lose social capital if you try to shoehorn traditional, office-centric methods of collaboration into hybrid and remote work."

—Gleb Tsipursky, a behavioral scientist and CEO of the consultancy Disaster Avoidance Experts, writes in a Fortune opinion piece

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