Mitchell claims significant external modifications will impact on 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 and 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. The fall in demand and supply has an impact upon the internal and external environment. Â 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 therefore, involving Best HR practises to support this change.
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.
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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) in this regard, there became a need for businesses to re-align their strategies and objectives in response to the significant fall in demand of goods and services.
The recruitment and selection part
The most obvious impact of the recession on organisations is that employers are recruiting less and making more redundancies. In fact, according to the latest CIPD/KPMG Labour Market Outlook survey published last month, the jobs market will carry on shrinking over the next quarter, as the number of employers planning to make redundancies will continue to exceed the number planning to hire. Plus, a third of organisations are still implementing a recruitment freeze. It would also appear that all sectors of the economy, as well as younger and older workers, are being hit hard. The survey found that the net employment intentions figure is now negative for all three mains sectors - private, public and voluntary - for the first time since the report started in 2004.
According to The Chartered Institute of Personnel and Development (CIPD), the recession caused the loss of 1.3 million jobs. It also states that two-thirds of people made redundant were paid 28% less when they managed to find another job. The greatest job losses were in the Manufacturing, Wholesale and Retail Trade industries which contributed to at least 39 per cent of the total job loss in the English and Welsh Regions. (ONS 7 JULY 2010) In essence, more staff lay- offs, means more redundancies, increase in unemployment rate and a perpetual recruitment freeze.
Recruitment means hiring in simple terms. Robbins (1982) provides, "Recruitment is 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"
Whether to recruit or not during recession is one of the important HR decisions. Recession is a time to cut costs and maintain profits. As such, the companies many times engage in massive layoffs. Large pools of employees are thrown out of the company, mostly the non-performers. The attrition rate thus reaches high and the labor market gets flooded with job seekers.
Recession is many-a-times conceived in a very restricted manner and thus all recruitment activities are postponed as a move to avoid costs. But there are several benefits attached to hiring during recession which the firms generally oversee. Recession causes supply of labor in excess to the demand thereby making labor cheaper and easily available. Companies, especially the Small and Medium Enterprises (SMEs) can take advantage of recession and do 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.
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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 do succession planning much in advance to avoid shortage of labor at anytime in the organization. Recession is the right time to prepare pool of talented employees for future. It also helps in avoiding the situations of hiring in a hurry which may not only lead to wrong hiring but also involves high costs. Recession must therefore be given a second thought from this perspective as well.
Reducing recruitment, hours, employee earnings, making people redundant or implementing part-time working are the main options available to businesses looking to reduce input costs, when faced by increased economic uncertainty. Over the 2008/09 Christmas and New Year period, some UK firms reported negotiating or recommending reduced hour contracts with their workforce, and some decided to close down for extended periods of the holidays