Role Of Hr Department In Recession Business Essay


In the past, human resources have been thought of as bean counters, whereas today, where the economic climate starts to put the squeeze on tight budgets and cost cutting measures are implemented; the department must justify their roles within an organisation or face the inevitable cut. With this in mind, the human resources department have largely redesigned themselves. "The industrial age practice of employing people 'from the shoulders down' is out-dated. In today's knowledge economy, human resources must capitalise on individuals 'from the neck up' to create a culture in which every employee is liberated and contributes meaningfully (Adams, 2010)." For the purpose of this study we are going to analyse the role of the human resources department in recession and how it must evolve in an uncertain future, how to make human resources effective, we will look at the changes made through communication, motivation, line management, training and development, and remuneration.

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An approach to human resources can be, but not expressly defined in two categories: Traditional and Strategic. In the traditional method, the main focus is on employee relations where its role is transitional, a change follower as such. Using strategic methods, the focus is on external and internal customers leading change. In other words, a traditional approach can only react to what is going on, whereas a strategic approach can be proactive and anticipate change and direct it in a controlled fashion. One of the methods adopted by human resources departments is to view people as human capital. Viewing people as such means there is a greater likelihood of a return on investment. By insuring that the knowledge base of employees is strong, the work is done to a higher standard and on time. The main purpose and focus of the human resources department is to communicate with managers and help them get their job done. In such a resistant climate, the question we seek to determine an answer for is thus, in the analysis and evaluation of the organisations strategic human resource management functions, what steps must be taken to maintain the organisations strength and what actions must be carried out to maintain this position in the future?

Employee Engagement.

One of the critical tasks that should be identified by the HR department is that the means to succeed cannot pay dividend if the company's employees are not on board. Human resources must pose the question, how does the organisation ensure that all of its employees are working towards the same goals? "Employee engagement remains the number one challenge for HR professionals, with recognition given to the damage done by the recession and the consequent need to focus on it as a priority as the economy recovers (Kings College London, 2009)." The necessity of this function has become more important in recent years, especially in recessionary times. Engagement is a critical route to success in a time when worries over job security and or company policy dominate the thoughts of an organisations employees. If left unchecked, this can lead to employees feeling a dislocation from, and even resentment of, company actions.

An organisation has to adopt an environment of openness and good communication with its employees if it wishes to truly engage them and maintain a sound company moral. Communication is particularly important as uncertainty among employees can lead them to question the organisations motivation and its orientation concerning them. Such an atmosphere can foster feelings of disengagement from the organisations goals and lead its employees to think about their security as recession takes effect thus reducing productivity when it is most essential.

Proactive strategies must be implemented to minimise the fracture of engagement or avoid it completely. The organisation must lay out its position truthfully and transparently and then disseminate this throughout the hierarchy. Communication lines must be opened up from senior management to the shop floor so that everyone within the organisation is on the same page and understands what needs to be done to survive and the repercussions of the failure to do so. Once the employees feel that the HR department are being honest and clear with them, they then need to know what they need to do to ensure that one, the organisation remains in existence and two, their position within the organisation is safe. "Job security is the number one aspect of job satisfaction this year, topping benefits, compensation, and feeling safe at work," said SHRM President and CEO Laurence G. O'Neill(SHRM, 2009). If the organisation can ensure that everyone feels an invested interest in its success, it creates a team-like environment where the "players" know their position and thus can strive together towards accomplishing their goals.

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Senior management must ensure, like a team captain, that it listens to its players and fosters an environment where information from all ranks of the team as regards their suggestions, worries or ideas are acknowledged so that the team can work together to effectively accomplish their goals and eradicate their oppositions. Another critical factor, to continue the team analogy, is to ensure that when things are taking a turn for the worse like during a recession, the team's high value players remain with the team.

Motivation within the Organisation.

Real meaningful effective communications is the key needed within the organisation to enhance motivation by the employee's especially in the times of recession. "The definition of motivation is to give reason, incentive, enthusiasm or interest that causes a specific action or certain behaviour (Pan, 2008)."Why is it important to motivate in times of a recession and how does the Human Resources (HR) department do this effectively? When employee's lose their motivation and de-motivation sets in, especially in recessionary times, a noticeable decrease in employee moral due to cutbacks and the big fear of unemployment, their job performance suffers, they become less efficient and productive, less innovative and less of an asset to the organisation. This is the time when the HR Department needs to stands up and become leaders in developing a strategy to create high performance and a positive culture. Poorly motivated employees in the organisation are more likely to work below their standard performance and can demotivate other more positively motivated individuals within the organisation.

By the HR professionals taking a strategic viewpoint, which involves considering the employee's as 'Human Assets' as detailed in (Mello, 2006, pp. 6), this will improve motivation throughout the organisation. Having a proactive HR department asking questions 'like what stimulates people at work or what drives people to do the things in their jobs' helps motivation within the organisation.

In general people are highly motivated when they are well suited to their jobs and it is the fit between the person and their specific job that really determines an employee's level of motivation. The HR Department needs to develop and direct the behaviours of all its employee's in order to enhance job performance. By looking at employee's as all different and adding some value to the organisation, this will instil internal motivation (from deep within the employee is the best form) giving a sense of well-being to the organisation.

Employee motivation is the result of the following:

Individual Needs

As stated by Douglas McGregor, Abraham Maslow and David McClelland's theories

Incentives (such as rewards)

As stated by Frederick Herzberg by Hygiene and Motivators theory


Individuals levels of ability influence their perceptions of their jobs

By using intrinsic rewards, like feeling valued, sense of self-worth, being recognised or being involved helps best to motivate the employees to the highest level possible, this is what our group believes that people really want from their jobs and it is what the HR professionals should concentrate on in organisations.

No matter how small or big the organisation is, it is universally known that having a very highly motivated team of hard working employees gives a competitive advantage and is absolutely crucial to business success (Simple HR Guide, 2010). Human Resource professionals set the tools to manage the motivation, but it is the line managers who play their roles in delivering and being responsible for the employee's motivation and performance (Simple HR Guide, 2010). Performance improves when both ability and motivation improve as stated by Kakabadse. (Kakabadse et al. 2005, page 71)

Senior / Line Management

The definition of a line manager is someone who is a core force of the organisation, who operates in financial, production, sales, operations and other functional divisions. The line manager should not only take responsibility for the enterprise strategy, but also help with the development of staff. Cooperation should not just be limited to other departments in the same level; it should also include integration and coordination of internal and external resources. The line manager should undertake to both achieve the annual targets and manage the department. It is for this reason that the line managers are the most onerous group in business management tasks.

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'A line manager should be an excellent human resource manager,' is a viewpoint shared by many modern human resource management professionals. Unfortunately, although the line managers are adept at business in their own department with good professional qualities and a high sense of responsibility, some still consider that the management of staff and their needs as still a core human resource function and thus should be left to the human resource professionals. Compared to the department's human resource management, they prefer to pay more attention to specific work processes and output in their daily work. As a more strategic approach is needed, the line manager must become more like a hybrid line and human resource manager, taking responsibility for not only the output of their department but the core human resource function associated with the management of the employees that make up their department, hence becoming the local HR manager.

Training and Development

During a period of economic instability, the first place businesses will look to cut is there training budget. Training is seen as an extravagant waste of resources that should only be done in times of economic prosperity. For an organisation to emerge from the recession successfully, it is important that information is retained in what is known as the transfer of training. "Of the $60 billion invested in training only 10 per cent results in transfer". (Mello 2002, pg. 282)

The question should be asked then, if there is so little return on training, should it be done during a recession, or should valuable resources be placed elsewhere. However, some would see training not as a cost, but an investment (Wetmore, 1999). It is the responsibility of the HR department to measure the opportunity costs of not undertaking training and evaluate the training when it does take place. Cutting training could be detrimental to an organisation as its employees skills can soon become out-dated with technological innovations and lose its market share. Due to cuts on organisational budgets, employees are asked to do more work with less resources and effective training can prepare them for this, by creating more flexible, highly skilled workers.

If training is to benefit organisations the information must be retained and it is the HR department's role to implement policies to facilitate this. This could include performance based pay schemes that could be used when the training is successfully implemented. In Vroom's expectancy theory, a particular act will seek a particular outcome (Mclean et al, 2001). If employees feel that implementing training could lead to extrinsic rewards such as promotion, they are more likely to carry out the training in the workplace. Training can also be used to make the processes involved in the production of the product more efficient, reducing needless labour.

A needs assessment test and goal setting should be prioritised, as to see what objectives can be achieved from carrying out the training. (Mclean et al, 2001) This ensures that training is relevant to an organisations needs and money is not wasted. For example, health and safety training can dramatically reduce the number of accidents in a workplace, which tend to increase in a recession as employees sometimes sacrifice safety for cost.

Compensation and Remuneration

One would think remuneration wouldn't be high on the agenda of the HR department during a recession but one would be naive to think this. It is now critical for employers to retain their above-average and talented staff. In the knowledge intensive business environment bright people add value and human capital is increasingly becoming the true source of sustained competitive advantage (Edvinsson & Camp, 2005). It will be the star performers of the organisation that will pull them through the recession. As Western Compensation and Benefits Consultants put it, "being able to make informed compensation decisions is key to the attraction and retention of qualified and committed individuals (WCBC, 2010)."

So how will the HR department implement a remuneration strategy when their budget is small-to-nil? HR will have the challenge of thinking more creatively about how to keep their top talent. HR should look at the most effective ways of planning their remuneration strategies. The HR field guide gives 5 tips to effective remuneration planning (Softscape, 2010):

Simplify global compensation practices and processes.

Gain fresh insight by improving decision support.

Link Compensation to workforce performance & goals - programs that align employee's compensation to their performance and goals have proven to be very effective in driving actual performance. HRM should look at more and more at adopting a variable pay rate. It is no longer acceptable to simply give all staff a four per cent annual base salary increase and a Christmas bonus (Moyle, 2009). Variable/performance pay provides the flexibility that when the results are down the organisation is not tied to large fixed remuneration packages (Moyle, 2009). This is where many organisations got it wrong during the so called "Celtic Tiger". They were committed to a fixed remuneration package and when the bad times hit they had to resort to cuts and redundancies to stay trading and competitive.

Achieve Global Visibility while preserving local autonomy - preserving local action is contingent upon the flexibility of the central compensation planning system to support unique workflows and compensation cycles.

Optimize the approvals process - the compensation planning system should contain a model of the organizations existing hierarchy and be flexible enough to support complex organisational structures.


It is obvious that when a recession comes around, an organisation needs to be able to adjust to it to survive. What is actually the case is that when a the economic climate becomes harsh, an organisation must already have in place the inherent ability and structure to deal with it easily and quickly as the proactive measures that are already in place show their worth. We as a group have concluded that it is the organisation that is proactive in its human resource functions that is in the best position to survive a recession and indeed survive well. We have analysed that the importance of engagement, motivation, key employee retention, remuneration and performance procedures, training and development and intelligent human capital management cannot be underestimated. We have concluded that the use of proactive HR management implementing the above strategies can ensure that when the chips are down, a company can strive forward ensuring their continued success in a time when it is most critical. More than ever, the HR department has a pivotal role to play in the sustainability and success of an organisation during the present economic crises.