As published on Medium.com
Tariffs and inflation have economic headwinds blowing again, and with them comes a familiar business playbook: hiring freezes, budget cuts, and a laser focus on efficiency. But while companies race to shore up margins, they risk eroding something far more critical — employee morale.
In periods of financial uncertainty, engagement becomes a competitive advantage. Teams that feel connected to their work, supported by their leaders, and valued for their contributions are not only more resilient — they’re more productive. The challenge? Most organizations treat culture and engagement as “nice-to-haves” precisely when they’re needed most.
According to a recent Chief Executive survey, over 60% of global CEOs forecast an economic recession or slowdown in the next six months. As companies prepare for leaner quarters, many will cut learning budgets, pause promotions, or delay raises. On the other hand, savvy executives will lean into culture — not as a cost center, but as a lever of stability and strength.
Incentives and recognition play a key role in this strategy. According to Gallup’s State of the Global Workplace report, only 21% of employees feel engaged at work — yet organizations with high engagement report 23% higher profitability and 18% higher productivity. And these numbers don’t magically reverse during downturns; if anything, their importance compounds. According to the same report, disengaged employees cost the world economy $438 billion in lost productivity — dollars that are even more impactful when money is tight.
Recognition, in particular, is a low-cost, high-impact tool. From public praise and peer-to-peer shoutouts to milestone celebrations, consistent acknowledgment of effort sustains motivation when financial rewards are harder to deliver. According to SHRM, over 80% of employees say recognition improves their engagement and job satisfaction, two sentiments which positively affect productivity.
Crucially, incentive structures must align with evolving employee expectations. Today’s workforce doesn’t just seek performance-based bonuses, but meaningful noncash rewards tied to growth, values, and well-being. This could mean internal mobility or upskilling opportunities, flexible scheduling, or wellness rewards that acknowledge the whole person — not just job output.
Investing in these forms of recognition isn’t just about retention; it’s about performance. During the 2008 financial crisis, Harvard Business Review research found that companies that balanced cost-cutting with investment in employee support and innovation outperformed peers by more than 10% in sales and profit growth post-recession — a lesson that is growing in relevance today.
With remote and hybrid work here to stay, organizations must work harder to make employees feel seen, heard, and valued — regardless of location. Digital recognition platforms and real-time feedback loops can provide that connective tissue, especially when in-person touchpoints are limited.
Incentives cannot compensate for a toxic or disorganized culture — but in strong cultures, they can amplify purpose and performance. Recognition helps employees weather ambiguity. It reminds them that their contributions matter, that they are part of something bigger, and that leadership sees their effort — even when raises are on pause.
With economic uncertainty increasing and recession playbooks being dusted off yet again, recognition offers companies the unique ability to create certainty, meaning, and connection in the face of the unknown. Implemented correctly, the right strategy can serve as a bulwark against threatening headwinds and create a path toward sustained future growth.
The companies that emerge strongest from this cycle won’t be the ones that cut the deepest — they’ll be the ones that prioritize recognition and keep their people engaged when it matters most. Culture shouldn’t be a discretionary line item to be trimmed. It should be a foundation that is continually fortified.
