HR and the credit crunch

Hardly a day goes by where we don’t read something about the ubiquitous ‘credit crunch’ and the current economic crisis. Are we really facing a recession and, if so, what does it mean for HR? Phil Boucher asks the employment experts.

Q What should HR be doing now?

Peter Carroll
Associate director,
The Work Foundation

Horizon-scanning for strong evidence of a recession. HR needs to learn to read the signals and separate those that are part of normal ebb and flow of business from those that are genuine, clear signs of a trend towards lower sales or output. People can get slightly overexcited and use any piece of information as evidence of a recession when that’s not necessarily the case. Have discussions with the financial director about the implications for borrowing and what it may look like further down the line, so you can start planning for when the recession is upon you and start to lead some of the debates about the organisational response to it. That way you can set in place some of the framework before it arrives and create a managed response.

Jim Savege
Corporate director for organisation development,
Cumbria County Council

HR should provide feedback or engagement with staff that shows it knows what’s going on and recognises that it could be something people are concerned about. It’s basically about showing that you have empathy for people who are scared about their jobs and paying the mortgage. You also need to be considerate in your management of change and recognise that this may not be the best time to restructure a department as it may be taken the wrong way. HR needs to have a conversation with the top team to discuss shelving insensitive changes or introducing them in a slightly different way.

Q Should HR be trying to show leadership?

Peter Carroll: At a strategic level HR needs to understand the context of what the organisation wants to do in response to recessionary trends. It’s HR’s job to argue that a 10% cut across the board in operational expenditure perhaps isn’t the most sensible way of responding as you may give off more negative signals than it’s worth in terms of cost savings and do unnecessary harm to the business.

Jim Savege: Yes. HR needs to be on the front foot about preparation and say to people that a recession will affect the organisation’s services. So you need to demonstrate what things may be less affordable, what services can be ported, and ask what can be cut back to help the organisation. Every organisation has different circumstances and a different dynamic, so if the core focus is the profit line, that’s what you have to think about. You have to tailor it to the organisation.

Q What practical, nuts-and-bolts measures should HR be considering?

Peter Carroll: Running through the list of controllable and controlled elements, such as pay and benefits, and asking whether it is time for some new thinking around longer-term pay deals. Plus, you need to understand the fundamentals of your redundancy agreements, your policies and their legal ramifications, and the requirements for consultation, which were extended last month. Alongside that, you need to look at your communications strategies.

Jim Savege: Some form of financial support and advice, such as a debt counselling service so people are getting a broad package of support. Or an outplacement service if you have to resize as you will have staff at all levels exiting the organisation, from the front line to senior management. They will need appropriate support and re-skilling alongside their individual redundancy packages.

Q What mistakes do HR professionals commonly make?

Peter Carroll: I think HR tends to dive into the whole situation around employee benefits and that can be counterproductive. Particularly, around perks as it causes more waves than anything else and sucks up a lot of management time just because you’ve cancelled the free tea and coffee or changed the company car spec. It may have to be done but is it a priority? Is it something you want to be spending all your time arguing about with your sales reps for the coming months?

Jim Savege: Being short-termist. While it may help to slash and burn in the immediate environment, you will later have to make a big investment in rehiring. So you need to look at alternatives like re-skilling, retraining, redeploying, or shifting staff around in a cost effective way. In terms of priorities, you may have little pieces of projects that you’re keen to get on with, but in a recession pet projects are the last thing people are concerned about. You need to clear the decks and get on with it.

Q What sort of conversation should you be encouraging within the organisation?

Peter Carroll: HR needs to strike a balance between battening down the hatches and preparing to take a flying start when things pick up. The skill is encouraging the executive team to have that sort of constructive adult conversation around it. You need to create the understanding that you have to leave some pieces of work because they have a clear, compelling competitive advantage.

Jim Savege: HR should be asking the board what the implications of a recession may mean and how they want to play it as a management team. I believe it is important to get everybody contributing, from HR to the commerce team, as it’s all about supporting line managers to be able to work with their staff. You need to be able to talk about what the organisation is going to do and why in a pragmatic and positive manner throughout the organisation.

Comments are closed.