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The topic of my term paper is "HRM Strategies during recession". During recession when the rate of growth is 3% every company had to adopt some unusual policies and practices to overcome such disruption. Further in this report I'll look upon the various strategies adopted by various companies. The HRM Function has to focus on cost cutting, management of Full Time Employees in the organization and keeping the organization in the shape.
The HRM Function cannot be a passive player in the changes in the organization. The recession is a moment for the HRM Function to show the potential and benefits from the proper work with the human capital in the organization.
The HRM Function has to play the role of the change agent during the recession and it has to co-operate closely with the top management of the organization. The recession is a good opportunity to cancel old policies and to introduce new and modern ways of Human Resources Management.
The current HRM Function was usually concerned on the overall employee satisfaction and protection of the key employees and top talents against the competitors. But, the change will come.
REVIEW OF LITERATURE
ARTICLE NO.- 1
The Innovator's Survival Guide: It's Possible to Adapt and Even Thrive in Tough Economic Times- Here's How By Kevin Bolen, Strategy & Innovation, Oct. 29, 2008 http://www.innosight.com/innovation_resources/article.html?id=671
In this article Bolen reveals that Innovators should accept the realities of the marketplace and lend their help to the cause. Several researches have shown that innovation can only succeed when the core business is stable. Without this foundation, management's time and attention will be overwhelmed by the need of stakeholders such as clients and partners. Their ability to think constructively about any concept more than three months out will be impaired.
ARTICLE NO.- 2
Innovate Out of the Economic Downturn By Sami Mahroum, BusinessWeek, Oct. 27, 2008 http://www.businessweek.com/innovate/content/oct2008/id20081027_851140.htm?link_position =link5
This article reveals that During economic downturns, innovation is the single most important condition for transforming the crisis into an opportunity. And while many businesses simply won't be able to afford further investment in innovation, governments should recognize that innovation systems, with all their academic, industrial, and public components, are strategic national assets that need to be protected, just like the financial and housing sectors.
ARTICLE NO. - 3
The Innovator's Dilemma and the U.S. Economy By Steve Shapiro, 24/7 Innovation blog, Nov 20, 2008 http://www.steveshapiro.com/blog/2008/11/20/the-innovators-dilemma-and-the-us-economy
In this article Mr. Steve reveals that he fears of the things that Instead of Disturbing technologies, we are talking about disturbing economies and countries. The "U.S. economy and most of the Western world"- is based on constantly improving everything: becoming bigger and better. But what if affordability and accessibility becomes inaccessible? How will we compete with China or India? This poses a serious dilemma. In these situations, the superiority often loses. The Western world is the current superior.
ARTICLE NO. -4
Layoffs and Creativity: Are You Expelling the Innovators? By Bob Sutton, Work Matters blog, Oct. 16, 2008 http://bobsutton.typepad.com/my_weblog/2008/10/layoffs-and-creativity.html
In the article bob states that while keeping and cutting the people take a close look that Are you unawarely protecting those people just like your favorite person? And are you consistently expelling able people who assure that your organization won't be condemned to be stuck in the future?
ARTICLE NO. -5
When Times Get Tough, the Tough Invent By Kurt Cagle, Reilly blog, Nov. 20, 2008 http://broadcast.oreilly.com/2008/11/when-times-get-tough-the-tough.html
When times are bad and money becomes scarce, the problems typically become much more intractable, and throwing money at the problem becomes both much less attractive.Ironically enough, this is probably a good thing - the money serves only to get in the way. This is a time for inventors.
HRM Role in Recession
The recession is healthy, from time to time. The recession helps to terminate the businesses, which are not carrying with value added and the human capital is forwarded to more vital businesses at lower costs. In the companies, which withstand the recession, the role Human Resource Management is very important.
Overall, the recession is very risky for the companies. Throughout the times, when the business grows in a dramatic manner, the HRM Function introduces several different policies, which are concentrated upon spending money. The company was able to carry all the costs and the employees started to follow the policies as the standard.
In time of the recession, the HRM Role is to perform cost cuts and the HRM Function has to inscribe the policies and the procedures to be cancelled or terminated. The employees do not like it, but the company has to return to the healthy foundation for the future Development.
The HRM Function has to be capable of recognize the top capabilities in the organization quickly as the company needs to reduce the human capital of the organization. The HRM Function obliges to provide the tools to managers to inform their key employees about the security, the company desires to propose to key employees.
The HRM Function is not a department to make employees happy, the role of HRM Function is also about the cuts in the costs of the organization and the HRM Function's role is about minimizing the damages to the organization.
The recession can be a very fascinating period for the HRM Function. The HRM Professionals can design, develop and implement a lot of new HRM Processes in the recession, which are simple and really efficient
The HRM has to define its Vision for the Recession. The employees in Human Resources have to comprehend the goals for the troublesome period of the recession. Many activities in the organization can be cancelled, but the HRM Employees have to comprehend the reasons.
The HRM Vision for the Recession must be about the trust and honesty. The HRM Vision for the Recession can play a meaningful role in the success of the HRM Function in the recession.
Main HR Recession Initiatives
The HR Function has to take several HR Recession steps as soon as the recession is identified in the organization. The organization can grow even when the recession collapse companies around your organization. But, when the organization feels like it can't stand recession any more, the HRM Function has to take several HR Recession Initiatives.
The HR Recession Initiatives have to be centered on the study of the current situation and unbolting the potential for the future development. The HR Recession Initiatives are not just about the over coming recession, the recession initiatives have to be concentrated in more areas, some of them are given below:
Key Groups of Employees
Honest Information for Employees
The HR Recession Initiatives have to be balanced properly. The cost cutting is about the instantaneous activities to decrease the personnel expenses of the organization. The employees are believed to be the best capital resource of the organization and the HR Recession Initiatives cannot be concentrated on the full demolish of the human capital of the organization. The employees to be fired have to be selected cautiously and the rest of employees have to sure about the future of the organization. The organization has to promise the future for the most important employees.
The HRM Function has to focus on the crystal clear communication in the recession. The HRM Function has to communicate the employees fairly about the bonuses, salaries and number of employees in the organization in advance so that the employees can be able prepare themselves.
HRM Priorities in Recession
The recession impacts the priorities of the organization. The change of the organization´s priorities should be reflected in the HRM Function priorities and HRM Strategy as well. The HRM Function cannot live alone i.e. apart from the Organization; it has to follow the general business strategy. The Priorities of HRM in the Recession can change rapidly or they need to be changed 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 has to make a quick examination of current procedures and policies to be arranged for the cancellation or change, when asked to make an urgent cutting of cost. The recession is about cutting of cost and keeping efficient, cheap HR Processes.
The HR Priorities can be estimated using a simple tool for selecting the processes and policies to be discontinued or continued. The best tool is to use the simple matrix, which divides the processes and procedures according their costs and impact on the organization.
Generally, the HRM Function should terminate 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 delicate for employees i.e. processes and procedures with the highest impact. 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 and all this must be done in very sensitive way so as the employees sense some security and consistency and that they can rely on the organization and its success in the war with the global recession.
The recession can be fight by 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 the effort has to be cost efficient. 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 comprehends the effort to innovate the HRM Processes better. The HRM Function has to focus on unusual innovations during the recession as the role of Human Resources during the recession is to save cost to the organization. The top management expects all the support functions to present innovative solutions, which will have to make the organization stronger, when the upcoming growth era comes.
The HRM Innovation during the recession must focus on the following points:
Lessen the number of employees in the organization but not the key employees.
Strategic steps to increase the productivity and efficiency of the whole organization
Redesign of the compensation scheme of the organization.
Cancellation of several benefit schemes which are not going to impact more on employees.
Cancelling or Postponing Training and Development Programs in near future.
On the other hand, HRM Function has to find innovative solutions for the following points:
Identifying the real key employees and to strengthen their position in the organization.
Identifying the real top potentials and to strengthen their development program so that the innovation can be keep alive.
Recession and Employees' career options
The employees are the most significant and valuable assets of the organization. During recessionary time, the employees have to be protective about their future and the organization should put forward a clear plan to them. The recession rings a burglar alarm in the organization. The gossip about the recession and the layoffs spread rapidly around the organization and the HRM Function has to monitor the sentiment in the employees. When the employees starts talking about the recession, the key employees and top talents can farewell the organization within several weeks, as they feel unsecure about their future in the organization. The role of the HRM Function in Recession for the employees is being their real advisor. The employees normally fears from the recession, the top management has to inspire all the employees honestly about the viewpoint for the organization and it has to provide them with the vision to engage in.
Affected HR Processes by the Recession
The recession affects different HRM Processes. Some HR Processes can be affected by the recession very badly and other processes can be completely protected from the recession impact. The HRM Function has to react very rapidly and the response has to include the whole HRM team as all employees must help the most influenced employees to keep the level of the satisfaction. The organization needs to save the costs and it needs to identify and potential additional source for the cost saving and starting a new growth era. The HRM Function has to prepare a new HRM Vision and a new HR Strategy for the future as the cutting down cost is not the only way to build a stable organization standing against the recession.
The most affected HR Processes are the following:
Recruitment - The first HR Process with the change in the recession. The job vacancies are cancelled and the HRM Function to come up with a new recruitment and selection strategy. The organization can hire a new set of skills and competencies to reinforce the position of the organization in the market.
Training - The training are cancelled or postponed as it lead to cost cutting rapidly. The training can be later concentrated on more technical training session and more internal training courses can be introduced.
Compensation and Benefits - The department can be asked to put forward a new compensation scheme, which will not only save the costs and but also motivate employees to be more proactive.
HR Front Office - The HR Front Office have to have an eye at clients all the time as they will need a strong instruction and facilitation during the recession.
The HR Processes are heavily influenced by the recession, but the HRM Function should take this as the opportunity to change and to bring new innovation. The recession is the best time to formulate a completely new approach of the organization to its human capital.
The HRM Function has to prepare the HRM Recession Quick Wins.
The HRM Recession Quick Wins should include the following actions:
Stop and prioritize the recruitment process. The vacancies should be cancelled and all the vacancies should be strategically re-shifted. The organization can need a completely different set of jobs to survive the recession. Why the continuing recruitment process should make the situation even worse?
The FTEs in the organization has to be evaluated. The number of FTEs can be fine, but the structure has to be reviewed. There is no company in the world, which cannot decrease the number of FTEs. The HRM Function has to offer the methodology for the FTEs review and the HRM Function has to act as the facilitator in the process of the FTEs review.
The bonus schemes have to be reviewed. The bonus scheme can support the organization in the time of the strong growth, but it can de-motivate employees in time of the recession. The HRM Function has to prepare a good analysis of the bonus scheme performance and its impact on the motivation of employees. The HRM Function can propose additional changes to the bonus scheme to provide the employees with some kind of the stability.
The talents have to move around the organization to play their strategic role in the change of the organization during the recession. The organization needs to awake its creativity and the shift of the talents can help a lot.
The HRM Recession Quick Wins are not hard, but they need a lot of courage from the HRM Function. The HRM Function has to reflect itself and it has to be proud to say, it made some mistakes in the past. The recession is always about the restart and the HRM Function needs to restart its processes quickly at the beginning of the recession.
Recession and Recruitment
Recruitment is one of the most affected HR Processes by the global recession on the market. The companies do not offer vacancies, the number of job applicants grows rapidly and the organization has to manage the recruitment smartly.
The organization has to change the focus of the recruitment and the recession is a good moment to focus on the recruitment process development and redesign.
The talents on the job market
The recession is a good moment to hire the top potentials from the job market and other competitors. The HRM Function has to act quickly to hire the best class employees before their current employers take the action to protect them.
The HR Recruiters should always ask the managers and key employees of the organization about the excellent people, they know on the job market. The HR Recruiters should have a list of the job candidates, who can be asked to join the organization.
The talents are usually known in the industry and the recession can make them to be more sensitive to the job offers from the competitors. When the organization has a clear plan for the fight with the recession.
The talents from the job market do increase the personnel expenses of the organization, but they can bring new sources of the revenue and they hugely increase the trust of the existing customers.
The role of the HRM Function is in the quick reaction to the recession, making the proposal to the top management and having a good contact with the recruitment agencies to start the hiring process as soon as possible.
The HRM Function has to co-operate closely with the top management, as the talents from the job market need to know the clear plan and clear expectations from them. The HRM Function cannot communicate the clear expectations itself, but it can co-operate with the middle management of the job positions, which can be created for the top talents from the job market.
The HRM Function has to monitor the personnel expenses added to the payroll of the organization as the company does not exceed the agreed rules and the HRM Function has to co-operate closely with the recruitment agencies to get the best class employees from the job market. The recession is a tough time and the top talents from the job market will definitely help to win the battle on the market.