Time to Pull Back?

It didn’t take much for worries about a recession to come roaring back—just a pessimistic US jobs report and one very ugly day in the world’s financial markets. It was only a matter of time, it seemed, before leaders would announce a wave of cost cutting and reorganizations in anticipation of a big economic downturn. “We’ve gone from soft landing to sky falling,” says Andrés Tapia, Korn Ferry’s global diversity, equity and inclusion strategist.

But the market’s sharp recovery a day later, experts say, gave corporate leaders—and investors all over—a serious case of whiplash. “It’s all hard to interpret,” says Tapia. “It’s just one month.”

To be sure, there are plenty of signs of an economic slowdown, or at least a lack of growth. According to FactSet data, S&P 500 companies grew their revenue by 5.3% in the second quarter, which is significantly below the five-year average of 6.9%. Smaller organizations have been complaining for a while that higher interest rates have made it tougher to grow their own businesses. Over the past three months, the number of new jobs in the US has declined, while the unemployment rate, now 4.3%, has risen to nearly a full percentage point above its post-pandemic low. Hiring experts have said that the economy has been in a “white-collar” recession for a while, wherein companies have been hesitant to fill professional roles unless it is absolutely necessary.

But many leaders have already accounted for this slowdown. They’ve pushed back on major decisions not only on hiring, but also on mergers, reorganizations, AI adoption, and other strategic moves. Others have put major decisions on hold until after the US election. “So many clients are already treading water right now,” says Tamara Rodman, senior client partner in Korn Ferry’s Culture, Change and Communications practice.

At the same time, leaders have recently gone through a similar economic head fake. In early 2023, many prognosticators predicted high inflation would lead to an imminent recession. That didn’t happen. Many leaders appear to be trying to act with caution amid Wall Street’s wild ride so far this week. “Don’t overreact,” says Miriam Nelson, a senior client partner in Korn Ferry’s Assessment and Succession business.

Indeed, experts say, it’s healthy to take a little time for reflection, absorbing new insights—like the most recent economic and financial news—and weighing it against current business conditions. “Taking time to evaluate what is actually happening can be incredibly valuable,” says Kevin Cashman, vice chairman of Korn Ferry’s CEO and Enterprise Leadership business. At the same time, experts warn that leaders, who are accustomed to taking action based on only partial information, can’t put off making decisions forever. This kind of postponement can often sap the morale of both executives and rank-and-file employees. “The stakes are high, I don’t dispute that, but at some point you need to make a decision,” Tapia says.

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