The HR profession has spent the past two decades clawing its way into the boardroom, fighting to convince the likes of marketing and finance that HR can be strategic, while still making a difference to the bottom line.
So what happens when recession looms? HR retreats back into its shell, and begins to look like its old reactive self. The old-school HR managers who dealt with the last recession 15 years ago are long gone, while those who replaced them find themselves in a quandary – at risk of undoing their predecessors’ good work and being seen simply as the people who do the firing.
Faced with just such an economic crisis, what is HR doing? The answer, as TV magician Paul Daniels used to say, is “not a lot”. According to research from employee engagement consultancy TalentDrain, seen exclusively by Personnel Today, only 30% of organisations (16% in the public sector) have adapted their HR strategy in line with today’s economic context.
Anthony Miles, TalentDrain’s director of research and development, says: “What really struck me is that only one in three organisations has changed its HR strategy. In fact, 61% said they haven’t changed it. Without being pessimistic, I hope this doesn’t mean that HR departments are being too reactive.”
Miles adds that his core message to HR practitioners today is: “If you’re not changing your HR strategy, why not?”
But what of those who have moved with the times? According to the survey, their priorities lie very much with keeping existing staff. Rather than spending on recruitment, 72% of them are prioritising performance management, 67% organisational communications, and 54% employee engagement and retention.
Miles says: “The nature of the HR market is changing. It has become much less candidate-driven, and more about redundancies versus recruitment. The onus is on HR professionals to manage their existing employee base as effectively as possible, to get the best return on them. And that means paying attention to talent groups and high performers”.
As he points out, there’s even more pressure now to ensure that people who are brought on board engage properly with the organisation, and don’t leave before they begin contributing to the bottom line.
One survey respondent told TalentDrain their organisation was “focusing on alternative career paths and development opportunities rather than increasing pay and benefits” in a bid to keep good staff.
A market likely to be particularly badly hit by the recession is the charity sector.
Liz Booth, HR director at child protection charity the NSPCC, admits that the economic downturn has forced the body, which relies on donations, to downsize. Although it is still recruiting – predominantly for its helpline services – the NSPCC has cut back on recruitment and has changed its induction process. Employee engagement and retention have risen up the corporate agenda.
“Good people will always be hard to get, particularly if you need specialists in their field, such as social workers, so we have to do all we can to retain and nurture our remaining staff,” says Booth.
“That means understanding their views and expectations so we can respond accordingly. As an HR department, we’ve also tried to become more efficient.
“The NSPCC’s aim is to end child cruelty, and around 800,000 ordinary people give us money to do that every month. We have an absolute duty to keep our costs low and spend as much as possible of that money on front-line activity.”
HR may be proving slow to adapt to the economic downturn, but management is moving swiftly to cut costs – including HR budgets. While 51% of those surveyed reported no change in their budget, 38% reported a decrease of more than 5%, and 13% had seen a cut of more than 25%.
More than half (56%) of larger organisations – those with more than 5,000 employees – have seen their HR budget cut. TalentDrain reports that organisations experiencing budget cuts are generally reducing the priority they allocate to HR across the board, with the exception of employee engagement and retention. Significantly, organisations are allocating more priority to this, regardless of changes to their HR budgets.
Where money has to be saved by HR, recruitment seems to the be the obvious place to cut costs – 56% of organisations reported giving less priority to recruiting, with the figure rising to 71% among organisations that have experienced budget cuts in the HR department.
Miles expects HR budgets to be further slashed in 2009, and says: “I suspect that if we carried out the survey halfway through 2009, the number of organisations having their HR strategy affected and HR budget cut would be higher”.
Anonymous exit interviews increase
One of the key findings of the previous TalentDrain survey of HR practitioners was that anonymous data is the most accurate and, therefore, the most valuable to employers.
Last year, just 4% of companies conducted anonymous exit interviews. In the most recent survey, this leapt to 18% – an improvement, but still a relatively low figure.
Anthony Miles, TalentDrain’s director of research and development, believes the growth may be due to an increasing awareness of the value of anonymously sourced information, where people feel they can speak frankly without burning their bridges.
He says: “There’s not a huge amount of research comparing anonymous interviews with face-to-face ones, but what there is tends to suggest that people distort information in a one-to-one situation”.
HR practitioners are also beginning to see that online interviews produce more data that they can use in a greater variety of ways.
For instance, hard statistics can be compared across different groups who are leaving, such as male staff, female staff, or different departments. It’s much more difficult to use information from interview transcripts, which tend to get filed away and forgotten about.
Alternatively, Miles speculates that the increase could be down to the cost benefits of doing an anonymous, online survey, particularly in terms of HR time saved by avoiding face-to-face discussions.
Miles says that quite a few of the organisations that TalentDrain works with still offer leavers both a survey and an interview: “Some people still prefer the human touch. We have a section on our questionnaires where they can tick a box to request an interview, but probably only about 5% of people do that.”
Participants seem happy the surveys are anonymous, he adds. “They accept that the information is dealt with by a third party, and certainly some of the things that we see wouldn’t get written if people thought they would be attributable.”
The slow growth in the use of exit interviews may be down to a degree of apathy among the people who commission them.
The survey found that the proportion of HR respondents who feel that anonymous exit surveys collect more honest data has increased from 37% last year to 43% this year. But 28% still disagree, with a further 29% unsure – an indication, perhaps, that the data is neither fully understood nor utilised.
Case study: King’s College Hospital
King’s College Hospital, one of London’s largest and busiest teaching hospitals, has doubled the return rate of its exit questionnaires after replacing its paper-based process with an online solution.
“Getting good quality information means we can improve the talent and professionalism of our staff by responding to the feedback they’re giving us,” says Peter Absalom, staff resourcing manager at King’s.
“It makes a significant contribution to keeping our voluntary turnover low and saves us millions of pounds in agency expenditure,” he says.
An online system removes the administrative burden of having to manually aggregate the responses and it issues reminders, so the trust doesn’t have to spend time chasing up responses, he explains.
“Our paper-based exit questionnaire only allowed us to collect basic information,” Absalom points out. “Now we have a return rate of 40%, which is extremely good for the NHS.
“We can ask more questions and benchmark our results against other organisations. We can also compare the responses of specific departments, directorates and occupational groups.”
Issues around pay and career progression have proved to be key reasons behind the desire to move on.
“You can’t change the pay system or create new promotion opportunities overnight, but you can achieve some quick wins if you’re given the information,” says Absalom. “For example, we had feedback from individuals saying that a vending machine in their area would make their life easier, because they were working shifts and the canteen was closed. That’s an easy thing to do and helps to demonstrate that we’re listening and responding to staff feedback.”