Recession Has Impacted On Recruitment Commerce Essay

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One presentation explained how an organisation had recently changed the approach to recruitment and selection to cut costs. Critically examine the way that the recession has impacted on recruitment and selection within organisations

Projecting the numbers of staff required to achieve organisation's goal and ensuring skill sets needed, are available in-house remain crucial aspects in the human resource management practices of a business. Sourcing for the right staff is pivotal for businesses in their recruitment and selection practices, as with this lies the decision for who will be managed and developed, to add value and increase performance in an organisation. Recruitment means hiring in simple terms. Robbins (1982) defines Recruitment as the discovering of potential applicants for actual or anticipated organizational activities. Barber (1985) defines recruitment as "those practices and activities carried out by the organization with the primary purpose of identifying and attracting potential employees"

Pilbeam and Corbridge (2006, p 142) provides the importance of recruitment and selection as a key driver in the operations of a business as the workforce strength determines the functionality and productivity of the business. Hence, getting the right selection methods is mandatory to avoid organisation ineffectiveness, poor performance of employees and unequal reward strategies. Essentially, human resource planning, forecasts sufficient numbers of personnel required to suit overall company objective, while recruitment and selection focuses on ensuring the right types of staff are employed, developed and rewarded. Bratton and Gold (2007) stress on the differences between recruitment and selection, buttressing a relationship between both. In their view, recruitment is a process of creating a suitable people talent pool while selection involves practices of choosing the most suitable candidate for a role, given an organisations requirements for the position. Foot and Hook (2005) lay more emphasises on the similarities between the two functions, suggesting that both require different sets of skills and expertise as recruitment may be outsourced but not selection.

Although recruitment and selection remains a key part in people management and leadership processes in a business, it is suggested that its importance is widely recognised as organisations now regard their employees as a source of competitive advantage. In essence businesses have placed more emphasis on creating valid, fair and reliable selection methods when recruiting. However, these plans are highly dependent on the external and internal factors that affect the environment within which a business operates, as recruitment and selection practices remain dependent on changes in economic and social activities. Recruitment policies, skills shortage, size of the company, social unrest, government and industry policies, changes and forecasts in demographics, and the economy to mention a few, are some of the factors that can influence an organisations overall HRM practice. Mitchell (1989) claims significant external modifications will impact on overall HRM practice, the culture of the organisations and the way management behave. In addition, Kitchen (1923) states; for numerous years there has been an apparent impact of large scale economic downturn on labour markets which has affected management behaviour. It is arguable this decline has led to a reduction for labour practices, placing a strain on large and small organisations with cost reductions. A CIPD 2009 survey report shows how the HR world was affected by the recession, giving rise to a decline in employee resource budgets and practices.

For the purpose of this essay we examine the impact the global financial crisis has had on HR in relation to recruitment and selection, within organisations. It also delves further into how affected organisations have had to change their recruitment practices to save costs therefore, involving Best HR practises to support this change.

The recession

According to the ONS (2009) recession is an overall decline of economic activity in a country over a period of two or more consecutive quarters. This is typically, followed by tremendous economic setbacks, such as reductions in levels of goods produced, reduced credit facilities, and reduction in labour forces which automatically increases unemployment rate. The UK economy officially declared to be in recession in January 2009, after almost 16years of unbroken GDP ONS (2009). This was apparent as the economy's GDP suffered a 1.5percent fall over the last quarter of 2008, and a 0.6percent drop, during the previous quarter; creating a double contraction in the economy's growth.

The impact of the general decline in economic activity globally results to a major drop in demand, which in turn reduces demand for labour and simultaneously places pressures on firms to effect cost reductions, including labour costs (Personnel today, 2009) Undoubtedly, the recession has affected the employment market, causing significant changes, in businesses recruitment and selection practices. In this regard, there became a need for businesses to re-align their strategies and objectives; lowering operational cost becomes businesses prerogative. Both private and public sectors experienced an Increase in redundancy levels as companies hiring practices reduced; more staff layoffs would give rise to redundancies, unemployment rate and a perpetual recruitment freeze. The manufacturing and wholesale-retail industry sector, in the UK were hit the hardest during the recession (ONS 2010).

Evidently, the recession caused 1.3million job losses and a 28percent fall in salary rates for two-thirds of people who found new jobs after being made redundant (CIPD 2010). In addition, the CIPD/KPMG labour report ( add the year) proposes that redundancy levels will increase over the next quarter as businesses looking to hire employees are far less than those recruiting. This is due to the recruitment freeze adopted by companies in their HR practices.

The recruitment and selection part

Whether to recruit or not during recession is one of the most important HR decisions as recession is a time to cut costs and maintain profits, thus making recruitment of new staff seem as an added unnecessary cost. In addition, recession is many-a-times conceived in a very restricted manner and all recruitment activities are postponed as a move to avoid costs. By itself, companies many a times, engage in massive layoffs and large pools of employees are thrown out of the company, mostly the non-performers; adding to the numbers of the unemployed. However, recruiting is important regardless of tough economic conditions or downturns, and it may seem necessary for business owners to view the economic challenges as an opportunity to re-structure their workforce. Recession causes supply of labour in excess to the demand thereby making labour cheaper and easily available. Clearly, the recession has created an excuse for companies to downsize in their workforce, whereas they are simply making a restructure in their workforce. For this reason, managers must endeavour to make quality decisions in appointing the right candidate, particularly in recessionary times (Armstrong, 2012) Some companies, especially the Small and Medium Enterprises (SMEs) can take advantage of this and arrange massive recruitment for present and anticipated organizational vacancies. These companies otherwise don't get enough opportunities to hire the best talent at a cost they can afford, as cost is a great factor to consider while recruiting.

Moreover, recession is also a good time for succession planning. Zero attrition is neither possible nor desirable, and therefore, the companies must be prepared for attrition uncertainties. A way out is to introduce succession planning much in advance to avoid shortage of labour at any time in the organisation. Recession is also the right time to prepare as pool of talented employees for the future. It also helps in avoiding the situations of hiring in a hurry which may not only lead to hiring wrong employees but also involves high costs. (Nickell et al, 2001) also states that bad shocks in businesses like a recession can create opportunity for businesses to make organisational improvements. Recession must therefore be given a second thought from this perspective as well.


With this notion, companies may look into reorganising their activities such as restructuring of jobs and investing in new ideas which can save costs. As (Bloom and Van Reenen, 2007) suggest; tougher times makes managers work harder, just as competitions improve companies management practices and economic performance.

As the recession intensifies and its effects on society increase with the growing rate of unemployment, it may seem companies are not willing to involve themselves with recruitment practices until the recession ends. Contrarily, some organisations are still involved in recruitment practices and keep their recruitment needs furtive from their competitors, regardless of the recession. Nevertheless, options open to businesses looking to reduce operational costs would include cutting back on staff salaries, working hours, creating flexible working arrangements such as part-time working, extended leaves or shut down of businesses during holidays. For example, one of the major accounting firms in the UK, KPMG, introduced a flexible working scheme that includes a four-day working week or a sabbatical of between one and three months on 30% pay. Other options would involve terminating contractual agreements with other companies.