Restructuring for recovery

As many businesses start to focus on growth, rather than just survival, an exclusive survey suggests HR is already anticipating and driving recovery. Helen Williams reports.

Research commissioned by career transition consultancy CMC and seen exclusively by Personnel Today suggests half of all employers have already set up plans designed to drive recovery forward, while only a pessimistic minority (10%) are waiting for the economy to improve first.

HR steps to recovery

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For two-thirds of the 133 senior HR professionals surveyed, restructuring resulting in redundancy is seen as the most important step toward recovery, with further job cuts planned for the next few months.

Of those employers planning to restructure, one in 10 says that this is due to a planned merger or acquisition – something CMC managing director Robin Wood says we can expect to see more of as those organisations emerging positively from the recession set about acquiring those still struggling and undervalued.

Restructuring activity is now about much more than just cost-cutting. The results suggest that retaining key people, having the right leaders in place, maintaining business performance and developing managers to help drive recovery are among HR’s biggest concerns

“As the case study from Bentley [see below] illustrates, there is a new focus on ‘in-placement’, as organisations going through major restructure put just as much effort into re-recruiting key people as they do into helping those leaving the organisation find new employment,” says Wood.

“Those organisations which have tried to ensure best practice with their restructuring and downsizing will reap the benefits of that, and those that haven’t will have a real problem with retention.

He adds: “It’s clear HR is looking ahead rather than being reactive. There’s a lot more confidence. A year ago it was about survival or maintaining some profitability; now we’ve moved on to talking about recovery. I’m pretty sure in a year’s time the survey will show people are talking about growth.

“I’ve been doing this job for 19 years, and it’s fascinating to see how it’s moved from simply helping individuals to find new employment to helping organisations work through the whole restructuring process and come out the other end.

Research findings Although recovery is strongly anticipated, restructuring, reducing costs and making redundancies continue to pose major challenges for employers Unemployment is initially set to increase, with the number of employers planning to reduce headcount within the next 12 months up from 52%, according to last year’s survey, to 65% this year. Of the two-thirds of employers planning to let people go, half (48%) plan to do so within the next six months, with the number of planned redundancies set to tail off during the first half of 2010. Redundancies are now more likely to occur in manufacturing, construction and property than in the banking and financial services. The number of employers planning to shut down a part of their business has fallen from 27% last year to 17% this year. In a further sign of economic recovery, half (49%) of employers have already put a recovery plan into action, while a further 28% have a number of plans on standby. Just 10% are waiting for the economy to improve first. When asked about which factors were most important to their organisations’ recovery, most HR professionals surveyed cited having the right leadership team (88%), supporting managers to drive performance (86%) and retaining and motivating key employees (81%) as being most important. Two thirds (73%) of HR professionals surveyed say they are under more pressure to justify a return on investment on their spend compared to 12 months ago. Nearly two thirds (62%) say their budgets are smaller compared to 12 months ago.

“This reflects the wider evolution of HR. This is a very exciting time for ambitious people considering a career in HR because all of this is absolutely core to business activity. The challenge is to stay there through the recovery, to make clear the contribution that HR makes.”

Case study

When the economic downturn reduced demand for new cars, luxury car manufacturer Bentley had to dramatically restructure in a way that would not only reduce costs but also retain people with the right skills to drive recovery.

“The speed of the economic downturn shocked everyone,” says Christine Gaskell, member of the board for personnel at Bentley. “Before the summer, we had been experiencing year-on-year growth; by the autumn it was as if the world had fallen apart.”

She adds: “We simply couldn’t go on producing at the same rate. Oversupplying dealers would have led to huge discounting, devaluing our brand and destroying our market. We had to restructure to match reduced demand for our product and take cost out of the business in a way that would still enable us to produce the best quality cars.”

After halving production, the next step was to restructure the entire organisation. “We had to significantly trim the business and lose 16% of our headcount,” says Gaskell. “As we design, develop and deliver all our cars from a single site in Crewe, no-one was immune. If you weren’t facing redundancy, it was someone working for you or a close colleague.”

Although Bentley had to lose 250 jobs in total, the restructure and a commitment to maintaining production of its new models also created new jobs. “Those who didn’t want to take voluntary redundancy were encouraged to apply for a new role,” says Gaskell. “To help them succeed, it was essential that we offered top-quality career support to people at all levels. Some people had been with the company so long they’d never even written a CV.”

CMC was brought in to help. “CMC does all our executive outplacement and the effort they put into each individual is outstanding. In the 10 years I’ve been working with the company, the success rate has been 100%.”