The recession changes the priorities of the organization. The change of the organizationÂ´s priorities should be reflected in the HRM Function priorities and HRM Strategy as well. The HRM Function cannot live alone; it has to follow the general business strategy.
The HRM Priorities in the Recession can change quickly or they need to be adjusted at least. The organization has no resources to add to the new initiatives and the HRM Function can be asked to produce cost savings on current programs.
The HRM Management has to make a quick scan of current procedures and policies to be prepared for the cancellation or change, when asked to make an urgent cost cut. The recession is about cost cuts and designing efficient, cheap HR Processes.
The HR Priorities have to be assessed using a simple tool for selecting the processes and policies to be discontinued. The best tool is to use the simple matrix, which divides the processes and procedures according their costs and impact on the organization.
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Generally, the HRM Function should cancel the processes and procedures with the highest costs and lowest impact on the organization. The HRM Function has to be very careful as cancellation of some policies can be very sensitive for employees. Those are the processes and procedures with the highest impact.
The recession changes HRM Priorities. The HRM Function has to make a quick response to changed conditions by the cancellation of the least important procedures and policies, but the HRM Function has to change the HR Strategy to have a consistent approach during the whole recession period.
The HRM Function has to adjust the HRM Priorities in the recession very sensitive way as the employees feel some security and consistency and that they can trust the organization and its success in the war with the recession. The HRM Function has to keep the role of the employee advocate and this should be reflected in the decision matrix as well. The recession is not a chance to change and cancel everything, the corporate culture should not be touched by the change of the HRM Priorities during the recession.
The recession is about the creative Human Resources Management. The HRM Function is asked to bring new ideas, to change the HRM Processes and to develop or change the procedures. And this effort has to be cheap or it has to cut the costs of the organization. The HRM Innovation is easy in times of the business growth, but the recession is not good for big innovative HRM Initiatives.
On the other hand, the top management understands the effort to innovate the HRM Processes better. The top management is in the search for the potential cost savings and they count every single penny brought by the line management. The HRM Costs are usually a very significant cost to the organization and the HRM Function has to be proactive.
The HRM Function has to focus on unpopular innovations during the recession as the role of Human Resources during the recession is to save money to the organization. The top management expects all the support functions to bring innovative solutions, which will have to make the organization stronger, when the next growth era comes.
The HRM Innovation during the recession has to focus on the following topics:
Reduce the number of employees in the organization
Strategic initiatives to increase the productivity and efficiency of the whole organization
Redesign of the compensation scheme
Cancellation of several benefit schemes
Training and Development Programs cutting
Main tools of HRM
Skills:- Skill is an ability that has been acquired by training. In other words aÂ skillÂ is the learned capacity to carry out pre-determined results often with theÂ minimum outlay of time, energy, or both.
Here we are going to analyze skill as per human resource point of view. According to us everyone has various abilities but only few can utilize these fully. We have differentiated abilities of employees according to their utilization of these abilities (skills) as follows.
Physical (0 - 10 % utilization of skills)
Physical + Mental (Brain) (25 % utilization of skills)
Always on Time
Marked to Standard
Physical + Mental + Heart Feeling (50 % utilization of skills)
Physical + Mental + Heart Feeling + Direction (80 - 90 % utilization of skills)
Physical + Mental + Heart Feeling + Direction + Ability that How to deal with Situation? (Full utilization of skills)
Technology means the application of science especially to industrial or commercial objective. Science is what? It is a systematic study, analysis, and research for particular thing. As we know that there is great progress in Research and Development. As human being man always tried to change according to situation and develop himself along with resources being used by him. Many new technologies were originated. Technology is the part of this development. Technology refers to the application of Science used in industries and commerce. Some times there was a trouble while using and implementing technology successfully.
Before this recession we have skills and technologies too. But no one has thought that how we can integrate these both to get optimum output. Current economic slowdown imposed everyone to think on it and work according to it. Here we will see how this economic slowdown changed Human Resource Management.
Human Resource Management is the soul of any organization. And HRM have to suffer mainly if there is any problem. In current recession Human Resource Managers applied this concept to combat this current recession. They just integrated various skills along with technologies fruitfully which helped industries to gear up from this downturn.
HRM STRATEGIES TO COMBAT WITH RECESSION
Cost Cutting Strategies
Following are the strategies which are used to combat Recession:-
Diversification of Skills:
Diversification means the condition of being varied and if an employee have more than one skill will be helpful to increase productivity and minimize the cost.
Human Resource Professional acquired this skill and provided various training to existing employees to variegate them in different working skills. This is helped to delegate more responsibilities to one person and minimize labor cost by not appointing extra employees for same responsibilities.
Recruitment of Multi Skilled Employee:
This is the most significant change in HRM processes. Human Resource Professional always tried to search "right person for right job". But now it is changed Recession enforced them to minimize cost and search for "One person who consist of varied skills to perform more task with perfection". It is very beneficial to industry as well as employee also. When a person is doing more than one work with accuracy it is helpful to organization in reducing their labor cost. On the other hand employee is working with his full capability which enables him to develop on his own and become more successful in his career. Recruiting multi skilled employee facilitates industry to reduce various cost which are directly or indirectly related to employee. Like Salary, Wages, Incentives, Cost of providing welfare facilities, Cost of resources being used by every another employee. Recruiting multi skilled employee serve up organization in direction of reducing cost and which is the most essential weapon to combat recession.
Training means activity leading to skilled behavior. The termÂ trainingÂ refers to the acquisition ofÂ knowledge,Â skills, andÂ competenciesÂ as a result of the teaching ofÂ vocationalÂ or practical skills and knowledge that relate to specific useful competencies. This is what required to combat recession when employee learns skill it will be beneficial to get optimum utilization of employee and results in reducing labor cost and other expenses incurred for employee, because if one employee is performing more than one task, organization need not recruit extra employee for the same work.
Organize Team Meetings to improve efficiency:
Efficiency directly depends on ration of input to output. To improve efficiency there is need of team work. Also Team meetings should be well organized. Every team member should know importance of meeting and task given to him. Due to it every member gets informed about working of every other colleague and hence if there is need of any cooperation it will be easy to everyone. Team meeting should be organized which will result in better performance with optimum utilization of resources.
Delegate More Responsibility:
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As we know that if an employee has to do particular task then He will not ask for the extra work. And if already he has been delegated more responsibility then it will be helpful to get more work done by that person. Due to this organization get more labor productivity. It is helpful to minimize labor cost. Human Resource Professional now implementing this to cope up with recession.
Develop Competitive Marketing Strategy:
Current economic slowdown sales decreased and decreasing sales become another cause of economic slowdown. Therefore there is need to increase sales. To increase sales there should be effective marketing. Marketing is continuous process and if it is planned earlier turn into fruitful decision for organizational development. Marketing people took countless efforts to determine good marketing strategy and implemented it successfully. They just did few additions in marketing strategies:
1-Changed promotional appeal
2-Add more distribution channels
3-Increased market segmentation efforts
4-Diversified into other products and businesses
5-Spent relatively more on radio and print ads
Following are the other strategies which are used to combat Recession:-
Go slow is the most important technique had been used to combat this hard - hitting state of recession. As there is reduction in demand for product it is necessary to slow down production also. Instantly shifting production from large volume to low volume this technique is necessary. As BOSCH CHASSIS SYSTEM INDIA LTD. BAMBHORI JALGAON has adopted this technique. There are three important steps should be followed:
Reducing number of Shifts
Reducing no. of shifts means convert working from 3 shifts to 2 shifts and 2 shifts to 1 shift. This helped to minimize labor cost as well as other cost required for operating one shift. This has been practiced in BOSCH, Jalgaon during the period of October 2008 to December 2008. Many other industries also practiced same in that period and continuously practicing till date.
Reduction in overtime:
Recession enforced to minimize cost and as we know according to law there is provision to pay double wages to employee when they are working extra than their schedule work. It directly effects as more labor cost. Due to this many organizations reduced allowing overtime to their employees. At BOSCH, Jalgaon they directly stopped allowing overtime to employees.
Temporary leave means force employee to take leave for few days i.e. 15-20 days because of no need of production. Another type of temporary leave is organization restructure week from 6 days week to 5 days week and allowing employees to take 2 leave in a week. BOSCH also allowed few employees such temporary leave.
Controlling Inventory Level:
Many organizations used this technique to minimize cost of investment as well as expenses needed to store inventories. In this they restructured inventory control system technique and maintained minimum inventory level.
Increasing Credit Limit:
It is important to spend few and earn more to survive in recession. For this many industries had increased their credit limit i. e. increasing credit limit from 30 days to 60 days. This was helpful to sustain cash for any unforeseen expenses if any.
Improvement of Operational Efficiency:
Operational Efficiency means what occurs when the right combination of people, process, and technology come together to enhance the productivity and value of any business operation, while driving down the cost of routine operations to a desired level. The end result is that resources previously needed to manage operational tasks can be redirected to new, high value initiatives that bring additional capabilities to the organization.
This new technique which is being practiced in BOSCH, Jalgaon named as Maynard Operation Sequence Technique (MOST) are helpful to improve operational efficiency. According to this technique every employee has to keep record of his work. This is the technique due to which idle time of employee can be reduced. This is helpful to increase productivity and minimize cost of production through utilizing standard time of each worker.
SAP stands for Systems Applications and Products. SAP is the application which provides the capability to manage financial, asset, and cost accounting, production operations and materials, personnel, plants, and archived documents with its optimum utilization to minimize the cost and maximize the benefits.
Outsourcing refers to obtain goods or services from an outside supplier; to contract workÂ out. It is helped to minimize labor cost and other expenses too. Many industries outsourced their work to other who is providing them same work at minimum cost.
According to Industrial Disputes Act, 1947 lay off means the failure, refusal or inability of an employer to give employment to workmen whose name is on muster role of his industrial establishment because of unavoidable circumstances beyond his limit. Recession is also one of such circumstance that forced many organizations to lay off their employees to combat this hard - hitting state.
These are the various skills and technologies used by Human Resource Management Professionals. They just integrated various skills along with technologies fruitfully which helped industries to gear up from this downturn.
Most Popular Cost-Cutting Move in HR:
Streamlining is the most popular and effective approach to controlling HR costs, according to a survey conducted by the Institute of Management and Administration.
IOMA, in its just-released HR Management and Cost Control Survey, asked respondents to pinpoint the five categories in which they were most successful in controlling costs. Topping the voting, at 62.8 percent, was streamlining HR processes.
The most popular choice after that, at 54.7 percent, was using the Internet to recruit.
Streamlining occurred on a number of fronts, individual comments from respondents revealed. While one medical company with 56 employees put together packets of all required HR information and made a checklist so nothing gets overlooked, another company, with 949 employees, implemented Peoplesoft.
"Headcount reports passed through five different people seven different times," the HRIS/project manager admitted. "We removed five steps in implementing Peoplesoft, saving us two work days."
Another company melded its training and development functions into the employment function and uses one manager - rather than two - to oversee both functions. A non profit association with 1,095 employees, meanwhile, moved a number of processes and related paperwork onto its Internet. "We are more productive because employees can access an on-line policy manual instead of calling HR staff," the group's compensation manager reported.
Internet for hiring/retention
HR managers also focused on the Internet this past year to find and hire employees, IOMA's survey found. Whether mid-sized or large, companies reported saving tremendous money by relying on the Internet rather than recruiters or newspaper ads to hire new employees for their firms.
"Using the Internet for recruiting rather than [using] recruiters has saved hundreds of thousands of dollars," a director of compensation from a Midwest company with 14,000 employees told us.
Added the director of HR at a midsize consulting firm in the Southeast, "Using Internet-based recruiting has saved approximately $30,000 in recruiting costs in 2001. Implementation involved posting vacancies on Monster.com at about $350 each. Each posting generated about 10 usable resumes."
Other cost-control strategies
Other strategies that garnered high marks were automating HR functions via HR Internet or Web-based HR applications (41.9 percent overall) and asking staff to take on more responsibilities (39.2 percent).
For the former approach, employers reported moving all time card processes, benefits information, benefits and training enrolment, 401(k) administration, employee data changes and performance evaluations to a Web-based format, saving anywhere from $10,000 to $2.5 million.
Approaches by size
Smaller size companies, those with up to 200 and 251 to 1,000 employees) relied more heavily on the use of the Internet for hiring/recruitment to cut costs. Larger companies with more than 1,000 employees, however, relied on streamlining HR processes and procedures.
Companies with 251 to 1,000 employees are more inclined than other size firms to adopt or change HRIS systems/software to manage their HR department costs (48.6 percent).
Smaller firms with 250 or fewer employees, in turn, favored setting HR staff performance goals/increasing HR staff accountability (39.0 percent), rather than asking staff to take on more responsibilities.
Approaches by industry
Across all industries, firms cited either streamlining HR processes and procedures or using the Internet for hiring/recruitment as the most successful means to controlling HR department costs.
Interestingly, 100 percent of the transportation firms queried cited streamlining, whereas 100 percent of private practice firms cited Internet hiring/recruitment as their most effective technique.
Other interesting variances that occurred:
* 57.1 percent of wholesale/retail companies cited a cutback on staff travel and conferences,
* 66.7 percent of transportation employers noted a reduction in internal HR staff;
* 66.7 percent of transportation employers also cited outsourcing one or several HR functions;
* 47.1 percent of service companies said the adoption or change of HRIS systems or software was one of the most efficient cost-control techniques.
PERFORMANCE RELATED PAY (PRP)
The modern human resource management argued that PRP is the way to pay employees as it is a new way to pay, they believe new pay is the way forward and it is also a way to motivate employees to perform in their job.
PRP AS COST CUTTING TOOL
There are more and more companies that measure performance by profit make year-over-year. Companies that perform poorly in a quarter compare to the same quarter on previous year may react to the poor performance.
There are evidences that company in this situation have chosen PRP as a way to reduce cost. For example, Yahoo!, it was reported in Personnel Today, Yahoo introduced PRP to reward "only its best staff while recession looms" (Anonymous 2008). In this scenario, Yahoo's HR is facing a challenging task to relay a lower pay expectation to the employees. Yahoo has decided to manage recession risk by deploying HR practices such as PRP across the board.
COST CUTTING MEASURES
BY FORD MOTERS
.Â The auto giant has reportedly told salaried workers that their pay increments would get delayed. To make matters worse, Ford is also reducing costs related to salaried employees by 15 percent.
It has been stated that Ford has as many as 23,400 salaried employees. This number is a fall of 32 per cent compared with 2005 figures. The company had kicked off its restructuring exercise way back in 2005.
According to the new recession beating measures, Ford has decided to delay pay raises in the United States and Canada from July 1 to October 1, 2008. The company also is suspending tuition and scholarship programs for employees and capping life insurance at $25,000, said a report.
Tata Consultancy Services(TCS)has adopted measures like avoiding travel where possible, and moving people from abroad to India to cut cot cost,
These are difficult times. One of the things we have increased is the number of video conferences between cities in India... So we are making use of earlier infrastructure to a greater extent than before," TCS Executive Vice-President Kesav Nori told - "We are avoiding travel, using telephone and telephonic conversations, web casting... All these have increased internally. There is a greater move from people onsite to offshore," he said. There is also great emphasis on making people more productive, Nori said. Replying to a query, he said the commitments on campus recruitments made by the company will be honored.
BY GENERAL MOTERS
General Motors plans to reduce its U.S. labor force by 25,000 or more by 2008 and cut assembly capacity, saving some $2.5 billion a year, the company's chairman, Rick Wagoner, told its annual stockholders' meeting. On the surface, this sounds like a major corporate restructuring by company intent on digging itself out from a heap of trouble. But in fact it may be just eyewash. The employment reduction may not involve the sort of deep and dramatic layoffs one might expect from such a struggling company.
"Wagoner discussed GM's plans to close several assembly and component plants over the next few years, but this would not necessarily result in savings on wages, as GM's contract with the United Auto Workers still requires it to pay employees displaced by plant closures.
New GM cars such as the Chevrolet Cobalt and Pontiac G6 are just OK compared with their Japanese competitors. The company is betting its midterm financial well-being not on these kinds of passenger cars but on the overhaul of its full-size truck and SUV architecture.
BY INFOSYS AND WIPRO
India's top two IT companies are employing cost cutting measures on the HR front. In an internal communication sent to employees, Infosys CEO Kris Gopalakrishnan has urged the employees as the stake holders in the company to help in cutting the operating cost and controlling expenditure.
The company has set up a portal which invites employees to send in ideas which could range from ensuring all computers and lights are switched off at the end of the day to bigger business ideas which could be incubated.
So far the company has apparently received over 1000 such ideas which it is in the process of evaluating. It also says there could be more such measures in the near future.
Wipro on the other hand has asked the employees hired for the tech services arm to join the BPO arm instead. This it insists is a way to overcome delays in joining dates. This is being offered in Kolkata so far and Wipro says that such an option could also be made available in Orissa and Hyderabad as well.
The company insists there is going to be no change in salary structure for such employees. Employees who don't wish to take up such an offer will face a delay in on boarding by six months. It also says it will meet all 13,500 offers made for the year.
Companies can maintain their attractiveness to internal and external talent by using cost-cutting efforts as an opportunity to redesign jobs so that they become more engaging for the people undertaking them. A job's level of responsibility, degree of autonomy, and span of control all contribute to employee satisfaction. Headcount reductions provide a powerful incentive to use existing resources better by breaking down silos and increasing the span of control for challenging managerial roles-thus improving the odds of engaging key talent in the redesigned jobs.
As Cisco Systems' approach to downsizing during the last recession. In 2001, as deteriorating financial performance forced the elimination of 8,500 jobs, Cisco redesigned roles and responsibilities to improve cross-functional alignment and reduce duplication. The more collaborative environment fostered by such moves increased workplace satisfaction and productivity for many employees. Initiatives like Cisco's succeed when companies focus on redesigning jobs and retaining talent at outset of downsizing efforts.
1 http//www.boschchesissystem.com/ Maynard Operation Sequence Technique (MOST)/strategies. htm.
2 http//www.ciscosystem.com/downsizing during recession. htm.
3 http//www.infosys.com/cost saving strategies.htm
4 http//www.wipro.com/cost cutting strategies.htm