One in five firms unprepared for the economic downturn

One in five UK companies had made no contingency plans ahead of the current financial crisis for managing their workforce during an economic downturn, according to research by Watson Wyatt, a leading global consulting firm.

Watson Wyatt’s 2008 Global Strategic Reward survey found that 79 per cent of UK companies had contingency plans in place by the summer of 2008.

This compares with 80 per cent on average across Europe.

UK and continental European companies appear to have been more prepared than those in the United States, where only 67 per cent had made contingency plans.

Figures vary across Europe. 100 per cent of French firms in the survey had made contingency plans, as had 87 per cent of German firms, 85 per cent of Irish firms 82 per cent of Italian firms, 75 per cent of Dutch firms, 74 per cent of Swedish firms and 57 per cent of Spanish firms.

“Whether or not they made plans for managing their workforce before the current financial turmoil, organisations should now be concentrating on preparing the ground for a potentially troubled future,” said Carole Hathaway, head of European strategic reward at Watson Wyatt.

“HR leaders need to conduct strategic workforce planning so that if and when they need to make difficult decisions they can be confident that they keep the right people to maintain performance of the organisation in the short term, and ensure they have the right skills to come out of the downturn in a stronger position.

“They also need to ensure they have the necessary systems and processes in place for effective reward management to ensure they can manage costs, but they are also still flexible enough to incentivise performance and maintain an engaged workforce.”

The Watson Wyatt survey found organisational restructuring to be the most popular consideration for contingency planning in the UK.

Of those that had made contingency plans for an economic downturn, 92 per cent in the UK (70 per cent in Europe, 69 per cent in the US) had made organisational restructuring part of their plans.

A freeze on hiring was the second most likely at 58 per cent (63 per cent across Europe, 58 per cent in the US), then layoffs with 55 per cent (55 per cent across Europe, 77 per cent in the US) and slowing the rate of salary increase with 50 per cent (46 per cent across Europe, 41 per cent in the US).

According to Watson Wyatt, strategic workforce planning is likely to differ from country to country.

“Differing regulations and business cultures drive much of the country by country differences to planning for an economic downturn highlighted by our global survey,” said Carole Hathaway.

“For example, our survey shows that US employers are quicker to consider laying workers off while European employers, with less flexibility in that regard, are more likely to consider pay and hiring freezes.”

The survey, which was conducted by Watson Wyatt and WorldatWork and covered a total of 1,389 organisations across 37 countries, found other measures companies had considered to include a salary freeze, offering early retirement, a reduced working week and sabbaticals.

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