Measuring the impact of war

War in Iraq heralds a period of unprecedented uncertainty for employers in
the UK already under pressure from a depressed domestic economy. Personnel
Today asked a panel of experts to comment on some of the issues and the
challenges employers can expect to face over the coming weeks or months

Debbie Jones, vice-president business infrastructure at satellite
communication specialist Inmarsat, said the conflict would put employers under
even more pressure to manage issues such as productivity, business travel and
work-life balance.

Jones believes the war could have an impact on productivity as,
subconsciously, people start to reassess their values.

"I think there will be a greater emphasis on work-life balance. People
will increasingly start thinking about how long they have got left and what
life is about," she said.

However, Jones also predicted that for some staff career plans and
appraisals will become even more important.

She explained: "The other side of the coin is that some people will be
determined to make the most of their time at work by valuing their careers and
trying to get on."

Jones said her company was assessing how much business travel was essential
and had invested in information services that give on the ground updates on the
safety of certain locations.

"We have a lot of people going abroad and we have to decide what is
safe and essential. The amount of business travel will slow up enormously and
the situation could also be the push needed to really encourage employers to
rely on video-conferencing much more."

Jones said the company has drawn on the experience of its staff with
military backgrounds to ensure internal communication on safety and security
issues is done in such a way that it does not alarm or alienate employees from
a wide variety of cultural backgrounds.

Rebecca Harding, chief economist at The Work Foundation, is advising
employers to wait and see how events unfold before making any major strategic
decisions.

She does not think employers will be forced to make large-scale redundancies
unless a drawn out conflict leads to a fall in consumer demand combined with a
further decline in share prices.

"If there is a short conflict, it could provide a boost to aggregate
demand, but if there is a long, drawn-out battle with significant loss of life
it could be a disaster.

"Companies will not want to carry on investing in physical or human
capital when there is such uncertainty," she said.

"Organisations tend to cut research and development budgets first, then
the HR budget, beginning with the development side of things."

Harding believes that any conflict would mask fundamental flaws in the
economy such as creeping inflation, as well as on-going problems in transport,
health and education.

Graeme Leach, chief economist at the Institute of Directors (IoD),
said the duration of the war would have a critical impact on the fortunes of
employers in the UK.

If the conflict is a short one, Leach predicts that employers will be able
to proceed with investment plans in an improving economic climate that would be
boosted by falling oil prices.

However, if the war continues into the second half of the year, the UK could
face a recession.

"From the IoD’s business opinion survey it is clear that companies have
put their investment and employment plans on hold because of the uncertainty. I
would think that employers would feel confident enough to proceed with their
investment plans if the war turns out to be a short one," he said.

"If it becomes drawn out oil prices will rise much higher, profit
margins will be squeezed and companies will start to think about their head
count."

Brendan Barber, TUC general secretary elect, anticipates that some
organisations will use the conflict as an opportunity to make redundancies.

"Any war is bound to have an effect on the world economy, as well as
individual companies. However, we are braced for war, and even the threat of
war, to be used as an excuse for bad economic news. We confidently expect at
least some redundancies – even if they have been planned for months – to be put
down to events in the Middle East, even where there is only the most tenuous
connection."

Barber said companies should resist the temptation to make redundancies in
the short term as he is optimistic that the UK’s economy and company share
prices will quickly recover once the conflict has been resolved.

"There is every possibility that conflict will be relatively short and
we could all be bouncing back in the near future," he said.

Barber urged companies to work with union and staff representatives to resolve
problems arising from the conflict.

"Management through rapid external change is by far the hardest
challenge for any organisation. Partnership is likely to be the most useful
part of any management tool kit," he added.

John Philpott, chief economist at the CIPD, predicts that employers
will only be forced into making tough decisions on cost cutting and possible
redundancies if the war with Iraq becomes a drawn out conflict.

"Other than sharing in the obvious humanitarian concern, a short sharp
war would barely make any difference to the day-to-day pressures already facing
HR practitioners in difficult economic times. Only HR managers in organisations
employing significant numbers of military reservists – where temporary
replacements will need to be found for any staff called up for duty – are
likely to be hard pressed directly as a result the conflict."

However, according to Philpott, the situation would be very different if
Saddam Hussein cannot be overthrown quickly, with economic uncertainty fuelled
by rising oil prices.

"The longer the campaign, the greater the likely negative impact on
consumer and investment spending, especially if terrorists opposed to Anglo-US
military intervention in the Gulf try to take the battle to British and American
shopping malls, leisure complexes and transport networks," he said.

"In these circumstances, HR practitioners would be under greater
pressure to help organisations reduce staff costs while at the same time
preserving staff morale, motivation and commitment. HR would thus take on a key
role on the home front of war, guiding organisations.

"Security and surveillance would also be growing concerns."

Paul Sanchez, worldwide partner at Mercer Human Resource Consulting,
urged employers to ensure they put an even greater emphasis on communicating
with staff during the war with Iraq.

Sanchez said staff morale and productivity is much more likely to be sustained
if employers keep staff informed over changes being made to the business as a
result of the conflict.

"There may be a real threat of terrorism or hostilities affecting the
safety of staff or disrupting sales and operations. Or the continuing economic
downturn may impact on performance, with issues of organisational restructuring
and redundancies needing to be addressed," he said. "Whatever the
scenario, a communication vacuum can only work to the disadvantage of the
organisation, its employees and even its customers.

"Human Resources together with corporate communications bear prime
responsibility for crafting a coherent communication strategy, creating key
messages and ensuring there are efficient and effective ways to get this
information to employees in a timely way."

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