Aligning People Ops Strategy for the 5-Stage Business Cycle

While Human Resources Management has effectively evolved into People Ops (POPS), the business cycle has largely remained the same. Businesses expand, hit their peak, then face decline — sometimes at the same time as the general economy.

But whether we’re looking at your organization or the economy, the focus of POPS shifts along with the market. For example, when the business is expanding, you may be concentrated on hiring, but as the economy shrinks, retention becomes critical.

Evergreen concerns such as compliance and efficiency remain in every stage of the business cycle, but certain stages have specific pitfalls. Overhiring often occurs when a company is growing rapidly, while understaffing (thus increasing turnover) can become more prominent during a recession.

To better plan ahead for your POPS department, it helps to fully understand how the business cycles and strategies are connected to Human Resources.

The connection between People Ops and business strategy

In the past, the link between Human Resources and business operations was simple: Supply workers and keep them. But just as business models have changed over the years, the shift from Human Resources to People Operations has led to new ways of thinking about employees.

When we look at employees through the lens of HR, they are no longer simply a resource. They are an asset, a client, and a contributor. Employees are stakeholders in business success. And every decision — from hiring to termination — empowers employees to do more.

That said, People Ops managers have to juggle not just the employee lifecycle but the business lifecycle, too. Creating strategies based on tried-and-true models of how a business runs can help HR and POPS leaders to better plan ahead, maintain a positive workplace, and meet business objectives.

People Ops for every step of the business cycle

Each business cycle can happen at an individual level, organizational level, or economic level. But just because the economy is in a depression doesn’t mean your business is. Likewise, during periods of “growth,” certain industries or business models may struggle.

Knowing your industry can help you align your business progression with the overall economy. But all 5 stages of a regular business cycle still apply.

We’ve summarized each stage below and highlighted which tasks tend to be associated with each phase:

1. Expansion

At this stage, a business has just opened its doors, or it’s growing rapidly. Generally, the economy is good, debt is low or paid on time, and cash flow accumulates.

When we look at expansion in HR or People Ops, we’re looking at increased hiring, opening new locations, training new employees, frequent onboarding, and upgrading benefits packages.

When we look at expansion in HR or People Ops, we’re looking at increased hiring, opening new locations, training new employees, frequent onboarding, and upgrading benefits packages.

However, as a good warning, it’s important to control growth and not let expansion control your People Ops team. Looking at the massive tech layoffs in 2022, we see the results of overhiring.

Instead, it’s better to hire who you need and focus on improving retention. Hiring appropriately and better-using resources will help your team make it through the more difficult periods of the business cycle.

2. Peak or maturity

Eventually, your business will reach a limit. This occurs when the market is saturated. And as consumers restructure their budgets, businesses will quickly follow suit.

This is where you want to begin to limit new hires, ensure your teams are lean, and double down on core benefits. But, of course, the challenge is understanding that business growth is at its limit.

People Ops or HR managers that are recent hires may not realize right away that the market is situated or that the company is close to hitting a brick wall when it comes to growth. Even small business owners can struggle to diagnose where they are in the business cycle — until it’s too late.

For that reason, it’s always important to have an updated contingency plan in place. If you notice that the business is scaling faster and faster, it’s better to make time to reevaluate:

• Actual hiring needs rather than anticipated needs
• Whether contractors make more sense until the growth is proven to be sustainable
• Ensuring backup plans.

That said, hitting a peak doesn’t always translate into near-immediate decline or recession. In some cases, a business may simply hit a certain maturity level.

At this point, an organization may have tenured employees, have annual, stable growth at around 5%, and maintain several subsidiaries.

When it’s unlikely that a business will make significant growth spurts or is focusing on maintaining stable, even if low, growth, it’s you’ll want to align your People’s Ops on retention, reducing redundancies, and ensuring that everything is compliant.

3. Recession

A recession brings peak business back down to earth as prices fall and teams grow smaller.

For People Ops, it becomes more difficult to provide raises or bonuses. You may need to restructure benefits plans to give employees more money. Hiring freezes and potential layoffs can cause alarms and drop morale.

It’s essential to be transparent during this period, even if you must take painful steps and restructure the team.

Recessions can last anywhere from 1 to 3 years with effects lingering for another 2 to 5 years. In the initial stages, you’ll want to regain control of spending, reduce liabilities, and restructure.

In rare cases, a long recession can evolve into a full-out depression.

4. Depression

In some cases, a recession can turn into a depression, and the business will need to shrink further. For People Ops, this can mean more terminations and retention issues as employees leave for better paychecks.

In general, the role of HR and People Ops during these periods is to reduce spending, maintain morale, look for growth opportunities, and improve productivity. Like in a recession, benefits plans may need to be pared down further to accommodate for lack of raises or increased cost of living.

People Ops teams that invest in their people and operations during this time, always striving for new innovations both to reduce costs and maximize efficiency, can better retain workers.

Improved workflows can boost employee morale, reduce the need for an extended workforce, and decrease potential liabilities. For example, payroll automation may reduce filing errors and improve cost visibility.

During an economic downturn, small improvements add up to significant gains, especially when things start to improve.

5. Recovery

When a business begins to recover from depression, you will likely see increased cash flow and higher productivity.

It can be tempting to rush into hiring again. But beforehand, it’s best to ensure that all of your policies and materials are compliant, your onboarding process is updated, and that there is positive employee morale.

Your employees will be the first to know whether or not the business is in recovery. And as their optimism grows, you can leverage their experience and feedback for a successful hiring and improved retention strategy.

As the business continues to recover, it will re-enter the growth phase — thus starting the process all over again.

Gain insight from People Analytics

Understanding the connection and the regularity of the business cycle makes it easier to plan and execute your People Ops objectives at the right time. But it also helps you to boost employee retention and engagement, even during low periods.

In-depth People Analytics can do more than tap into the company culture — it can help you identify savings in hiring, costly mistakes, and workforce planning opportunities.

For the full story, check out our comprehensive guide on getting started with People Analytics.