There is no doubt that 2009 is going to be a tough year for employers. Many will need to cut costs and staff numbers, and keep their organisations going with what remains. It will be a year of difficult decisions for HR professionals, who are not immune themselves from cutbacks.
It is also a year of great opportunity for HR. This is an unmissable chance to show what the HR function can bring to a company. Yes, there will be tough choices to make, but by working closely with the rest of the business, HR can help ensure the right ones are made to bring your organisation through the recession and put it in the best possible position to take full advantage of the recovery – whenever that may be.
In this survival special issue, we offer some top tips for getting through the year ahead. We talk to a selection of top HR directors about their personal challenges and opportunities, and ask them for predictions and advice to help the wider community in the year ahead. We also bring you some timely advice on managing what are likely to be considerably shrunken 2009 HR budgets.
But first, Helen Williams asks three highly respected experts from the worlds of academia, economics and workplace policy, outside HR but keenly involved and interested in the profession, what they expect from the coming year. The message is remarkably consistent – it’s going to be tough, but 2009 really is the chance for HR to shine. And Personnel Today will of course be here to guide you through.
Nick Holley, executive director, HR Centre of Excellence, Henley Business School
I love this story from the Falklands war. In an interview, it was pointed out to the RAF fighter pilots about to set off that there were 20 of them against 450 Argentinean jets. “So what do you think about the odds?” they were asked. And they said: “Well, we don’t really see it like that – we see it as a target-rich environment.”
I see this as a target-rich environment for HR. I don’t think there is anything that HR needs to do differently, as long as it’s already doing the right thing, which is to be incredibly close to the business, and responding to the needs of the business, not driving an HR-centric agenda. I see this as a huge opportunity for HR.
That might mean that if your focus is on things like long-term talent management, maybe that’s not what you should be concentrating on at the moment – getting out and working one-to-one with managers and coaching and challenging them is more valuable.
Unfortunately in a recession – I’m 49, so I’ve been through it before – cash is king. It doesn’t mean you abandon the long-term stuff, but you may have to postpone it. A lot of businesses are in crisis, and it’s no good worrying about the upholstery in the first-class dining saloon when you’ve just hit an iceberg. And some companies have hit icebergs.
As for challenges, one is that a lot of HR people take their self-esteem from what they do, as opposed to taking it from the difference they make. They therefore become very emotionally connected to projects and pieces of work they’re involved in. Sometimes you just have to let them go. You may have put six months of incredible effort into something, but if it’s not relevant any more, you have to step away and be pragmatic.
I think a second challenge is speed. In this environment, it is pointless putting in place things that have a two to three-year payoff when the issues the business is facing have an impact tomorrow. Keep them on the back burner. You need to make sure you are looking at the timeframe of what you are delivering and speeding up the process.
The third challenge is who you work with. The danger is you work with the people you like and who share your passion. Perhaps you need to spend more time with the people who aren’t like you, and with the people who have the power to make a difference, even when they might not be the nicest.
The fourth challenge is you have to be rigorous in thinking how does this increase our revenue or decrease our cost, because if it isn’t going to, why are you doing it? What I often observe in HR is a tendency to work out what they want to do, and then work out a business rationale, as opposed to starting with a business rationale.
I think the final challenge is making sure HR itself is fit for purpose at the moment. A lot of fairly senior HR people have never been through a recession. You need a core of HR people in your function who are pragmatic, and understand that while there is still a lot of lovely stuff to do, this is the time to get your hands dirty, to support the business. It might be about unpleasant things like cost-cutting and redundancies.
It’s about balance. There have been periods over the past few years where the balance has been in favour of building long-term capability. At the moment it needs to be in favour of building short-term survivability. In the good times, HR is relevant. In the bad times, HR is just as relevant, unless it makes itself irrelevant.
Will Hutton, chief executive, The Work Foundation
In my view, unemployment next year is going to rise by 1.25 million, and some months will be absolutely wrenching. I believe it’s going to be one of the most challenging years for HR since the Second World War, and I don’t think the HR community knows what is going to hit it.
The scale of the layoffs and retrenchment is going to be enormous, exacerbated by the fact that some of the props that existed in the past, such as defined benefit pension schemes, which sweetened the pill because they allowed people to take early retirement on quite good terms, are rarely in place any more.
There are going to be some extremely difficult decisions to make about losing people and handling survivors. Remember that the way that you let people go is fundamental to the morale of those left behind.
The wider economic context is one of extreme uncertainty and extreme economic retrenchment. But HR professionals have lived through very good times for many years. These young men and women in their late 20s and 30s have never seen anything like it before, and can’t be sure they’ll weather the storm themselves.
This recession is going to be much worse than the early 1990s, and certainly as bad as the late 1970s and early 1980s. There are a number of reasons. Last time there was a lot of talk of having a better tomorrow, that Thatcher had got things wrong. This time, it seems to be inexorable and unchallengeable. People are really concerned that the economic model that has worked for 30 years is plainly wrong.
And although we’re still a significant industrial power – the sixth biggest in the world actually, although it doesn’t feel like it at the moment – we don’t feel as though we make much. Everyone knows that the service sector in Britain has been very reliant upon high consumer spending and the property market, and everyone also knows that that’s now bust. The banks that provided all that are in severe trouble.
People are very concerned about the future. We will reach peak oil production in 2020, they’re worried about climate change, reassuring things like defined benefit pension schemes are gone, so people are being asked to take more risk, not less, in a more uncertain environment. And there’s not really a belief in the government’s ability to help.
I do think there will be a better tomorrow. The world will carry on, we will all still be here in five years’ time. All the evidence from past downturns is that companies that handle this well, that can minimise the damage to themselves, don’t cut into the core, really preserve the organisation’s capabilities and the people who can sustain them going forward, will survive.
There is an enormous amount of kudos to be gained in hard times by behaving honourably. Those organisations and HR departments that carry on supporting good work practice, transparency, work-life balance, fairness in dispute resolutions, balanced performance appraisal – all those good things, we all know what they are – will do well. These things are more valid than ever. When so much is uncertain, the anchorage of holding on to those practices is absolutely fundamental.
Don’t panic. If you are already doing these things, carry on doing them, and do them better.
Bryan Finn, economist and founder of consultancy Business Economics
The UK economy is at the beginning of what most commentators believe will be a very nasty recession. The implications for recruitment markets are profound and disturbing.
Recruitment is always an important issue for HR, and changes in the economy can shift priorities. In an upswing it’s more about the war for talent how can we get the best people to work for us. In a downturn people will go for a safe haven, but once things pick up their plans may change, particularly on the graduate recruitment side.
You might be getting some fantastic candidates right now, but the ones that might look the best on paper you’ll probably only keep for a year or 18 months, and then they’ll fly away. You need to be sifting a bit more in terms of who you’re hiring.
When I ran a larger consultancy we used to recruit the best and the brightest, but they would stay with us for a while and then go off to a bigger firm. It took us a while to realise that we didn’t necessarily want the best and the brightest we wanted a particular type of candidate who was more committed.
Now is the time to go back to your core competencies. Organisations shouldn’t panic. A lot are shedding temporary and contract staff, which is fairly obvious, but you need to look very hard at your workforce and decide where you are going to be in a year or 18 months’ time. The dumbest thing you could possibly do is get rid of your research and development or marketing department, or whatever else happens to be key to your business, and then try and hire them back. You won’t get them back in 18 months – you will get a different bunch who have to go through a journey to acquire the skills and experience that the old lot had. These are people who you’ve invested in, they’ve got a huge amount of knowledge, and to disband that team would mean another 10 years to get it all back again once things pick up. Whereas if you want a brilliant young gung-ho salesman, you might be paying top dollar for him in 18 months’ time, but fine, you don’t need him at the moment.
It’s time for a really strategic look at your workforce, a real chance for HR to add value. If the finance director comes in with the axe and says: ‘Right, it’s a numbers game – we need to get rid of this whole department’, HR needs to argue for a more strategic approach.
No-one knows when the recovery will happen. We are in absolutely unprecedented times, we have not had this sort of banking finance crisis before. But I am reasonably optimistic that towards the end of this year and going into 2010 we should be seeing the beginnings of the recovery.
The other upside is that the economy is different to how it was in the previous recession. It is much more vibrant and therefore a bounceback could come much quicker. But it’s anyone’s guess really. At the moment the economy is slightly in freefall, and as soon as we can see things bottoming out, people can start planning for the future.