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Staying Afloat in the Face of a Recession

By Cynthia Miller Murphy, MSN, RN, CAE, FAAN

It has been more than 10 years since the U.S. economy experienced a recession. The Great Recession of 2007-2009 lasted 18 months and was the most severe economic recession since the Great Depression of the 1930s. A decade is a record-setting span of time to go without an appreciable economic downturn and economists are warning that we are overdue for an economic correction. Though there is uncertainty among economists, most believe the U.S. will tip into recession by 20211

A recession is generally defined as a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters2. The good news is that most economists do not expect the next downturn to be anything like the Great Recession3. Though the economic forecast is uncertain, it is prudent for governing boards and chief staff officers to anticipate how an economic downturn may affect certification organizations and how advanced planning can protect the organization should a recession occur.

Lessons from History

Experience during the last recession provided valuable lessons for certification organizations. It became apparent that the effects of the recession were directly related to the populations and professions the organization credentialed and how the economic downturn affected those professions.

While jobs disappear during a recession, there are some that are considered recession-proof. Many healthcare jobs fall into this category because regardless of the economy, healthcare professionals remain in high demand4. Healthcare certification is considered by some to be counter-cyclical during a recession wherein applicants for certification increase, rather than decrease. This was particularly true of nursing certifications.

During the Great Recession, while national employment decreased by 5.4%, nursing employment increased by 7.6 % 5. This was apparent in my experience with the Oncology Nursing Certification Corporation (ONCC). Initial and recertification candidates increased by approximately 20% from 2008 to 2010. Nurses continued to seek certification, despite the recession, perhaps to ensure their place in the workplace in the midst of an unpredictable economic environment. However, this did not hold true for membership and participation in continuing education (CE) provided by our affiliated membership society.

While our colleagues in the membership society were cutting staff and implementing forced employee furloughs, our certification staff were working overtime. Though nurses were still employed, their employers cut back on professional development benefits. This negatively impacted the membership society because it depended heavily on conference attendance revenue, which steeply declined during the recession.

In the years following the recession, the increases in certification applicants slowed and plateaued, but an appreciable decline was not experienced. Unfortunately, national conference attendance also plateaued and never returned to pre-recession levels. This presented the membership organization with the opportunity of developing other sources of revenue. Certifying organizations that depend on revenue from professional development activities should consider how they might develop other sources of revenue, should another recession occur.

Fresh Opportunities

Typically, the stock market begins to fall months before a recession starts and, depending on the length of the recession, will continue to fall until it recovers shortly before the recession technically ends. 6 The decline in the market during the Great Recession was steep and affected the reserves of certifying organizations. In my experience, though certification operating revenue was not affected, a decline in reserves due to loss of value of the investment portfolio negatively impacted the long-term financial position of the organization. This provided the opportunity to review and revise investment policies to balance risk and security.

Many nonprofit organizations maintain a policy of ensuring at least six months of operating revenue in reserves. The Great Recession caused some organizations to rethink this policy when their reserves shrunk by as much as 30%. The Board of Certification for Athletic Trainers (BOC) was one such organization. According to Denise Fandel, who was the CEO of BOC during the Great Recession, though the organization had not needed to use reserves for operating expenses, the recession caused them to revise the reserve policy to ensure that reserves would cover an entire year of operating expenses.

As a result of the recession, BOC also worked to cut non-staff related expenses, diversify revenue streams, increase fees for approval of CE providers and set a policy of consistent application fee increases, based on inflation, to avoid major increases to “catch up” with increasing organizational expenses. Board members, most often certified themselves, can be reluctant to raise fees. It may be helpful to raise awareness that slow steady increases will be more acceptable to candidates and keep the organization ahead of increasing expenses. Other organizations chose to defer fee increases until after the recession. Chris Damon, executive director of American Medical Technologists (AMT), indicated that AMT decided not to raise fees during the recession because of sensitivity that applicants may be less able to pay. To handle this issue, BOC provided an option for candidates to defer fees, based on financial need.

During the recession, AMT did not make any changes or adjustments to compensation and benefits, and actually added new hires. ONCC and BOC did not cut any positions and maintained all benefits, but were conservative in not providing pay increases or bonuses. BOC provided employees with additional help for health savings accounts to make up for the lack of a pay increase. Thinking more broadly than this small sample of organizations, a recession may be the time to look at reorganization and take the opportunity to get rid of those employees whose performance has been historically borderline.

Sensitivity

During an impending or actual recession, it is important for employers to be sensitive to increased anxiety and declining staff morale. This is true, even if the industry and organization are doing well during the recession. A financial downturn creates a great deal of uncertainty. Keep in mind that even though your staff may not have not been directly or immediately affected, their spouses, partners or other family members may be directly impacted with job losses or salary cuts. Two-income households may suddenly need to make do with one income. Employees may also be worried about losses in their retirement accounts and anxious about what is to come, especially if they are nearing retirement age. Transparency, ongoing clear communication and employee assistance programs are key to helping employees cope during a recession.

Summary

Whether the predicted recession materializes or not, healthcare certification organizations should take note of the lessons learned and opportunities observed during the Great Recession including the following:

  • Review investment policies with the help of an independent advisor to ensure a balance of risk and safety appropriate to the needs of the organization.
  • Review policies on financial reserves to ensure they meet the needs of the organization during a time of serious economic downturn.
  • Diversify revenue streams, especially when the organization depends heavily on revenue from professional development activities.
  • Consider a policy for steady certification fee increases based on inflation.
  • Consider a policy to permit candidates to defer fee payment, based on financial need.
  • Take the opportunity to reorganize and make the most efficient use of staff.
  • Ensure that you communicate impending changes openly with staff.

 

  1. https://www.washingtonpost.com/business/2019/08/19/out-economists-predict-us-recession-by-survey-finds/ accessed December 2, 2019
  2. https://www.lexico.com/en/definition/recession- accessed December 1, 2019
  3. https://www.usatoday.com/story/money/2019/08/19/recession-what-does-mean-and-what-like/2030642001/ -accessed December 2, 2019
  4. https://www.shrm.org/hr-today/news/hr-magazine/spring2019/pages/how-to-prepare-for-a-recession.aspx -accessed November 24 2019
  5. https://www.bls.gov/opub/mlr/2017/article/nursing-and-the-great-recession.htm -accessed November 24
  6. https://www.usatoday.com/story/money/2019/08/19/recession-what-does-mean-and-what-like/2030642001/- accessed November 24, 2019
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