Step up to training and recruitment, by Pam Travers, Stepping Stones Training and Development Ltd
If there is one thing that companies are learning in the current economic crisis, it is the importance of resilience, that is, the ability of an organisation to withstand shocks and remain sustainable under prolonged periods of duress.
Being strong on the inside means having a values-driven culture; a highly aligned, cohesive and effective leadership team; a high level of staff engagement; and a low level of cultural entropy (this will be covered in more detail below). Not only do these qualities create resilience, they also lead to internal cohesion which is a key component in building a strong internal community that can drive the goals and performance of the organisation. The current crisis shows us that organisations that are strong on the inside are also strong on the outside.
Cultural entropy is the degree of dysfunction in an organisation. It is the amount of energy unavailable for useful work. Cultural entropy arises from the presence of limiting values such as bureaucracy, internal competition, blame, short-term focus, firefighting, etc. Research shows that low levels of cultural entropy are accompanied by high levels of financial performance and high staff engagement. Companies with these attributes are able to grow their incomes three times faster than companies with high entropy.For many, the past few months have turned out to be one of the most challenging periods of our professional careers. Globally, a large percentage of private and public sector enterprises have already made personnel reductions. We saw this in the late 1980’s and early 1990’s, and we are now seeing it again in 2009. The question we are all asking is how long will this last?
The challenge for human resource professionals is to help guide organisations through these choppy waters. In practice this means managing costs without damaging the organisation’s competitive positioning, critical services or growth prospects.
HR must help their organisation avoid a knee-jerk reaction that could damage their flexibility, customer service, and even introduce additional risk. This implies taking a leadership role in intelligent cost management. A weary executive team is less likely to do the hard thinking required to respond intelligently to cost pressure.Different actions are needed to deliver great service and HR may feel pressured to ‘do something radical’ for short-term gains. This can drive morale to an all-time low, prompting top talent to desert the organisation as soon as the recovery starts. Cat Rickard and Allan Boroughs from People Management Magazine, which is a UK based magazine; ask “what should the role of HR be in a recession? Should the profession forget the past 10 years and revert to the safe territory of ‘hirer and firer’, assembling assessment criteria and writing redundancy cheques? Or is now the opportunity to demonstrate that HR acts as a true business partner, delivering real value in difficult times?”
To ensure that your business emerges in a stronger position than its competitors, here are some do’s and don’ts based on research by Cat Rickard and Allan Boroughs from People Management Magazine, into the experiences of HR leadership teams during economic downturns;
DO get your house in order. Do you have the right HR capabilities to manage the demands of the downturn and stay ahead?
Take stock and make sure you have the right people who can find and act on opportunities (your team may be top-heavy in the wrong areas). In the previous recession one pan-European organisation took the chance to increase capability by recruiting technology consultants from organisations that were downsizing. This enabled it to tap into new talent pools that weren’t available locally, creating significant new business opportunities.
DO refocus your HR agenda on new business priorities. It may have taken much effort to set out your HR strategy, but it’s essential that you now rewrite this agenda in line with the revised business plan. Ensure that your senior management team understands the role that the HR department will play. Equally, guarantee that your HR team understands the priorities and expectations of the organisation. The clearer your communication the more likely they will stay focused and motivated.
DO tackle the basics. Are the right foundations in place? Review HR operational effectiveness. Check workforce management information so that problems such as poor performance and absenteeism are addressed. Review policies for the potential to provide flexible employment options, such as flexible working, contract working and job sharing. One example, in October 2008, JCB, UK negotiated a £50 per week wage cut with its employees – a controversial move, and unthinkable in most circumstances, but one that was designed to save 350 jobs.
DO focus on top talent. Is your organisation still retaining the right people? Often high-performers in their specialist fields may not be the right people to lead during a downturn, so reappraise talent definitions to check that they still stack up. Communication is key, because talented people may start to question their long-term prospects if they see budgets being cut. During the previous downturn, one bank revised its talent plan, starting by reviewing its talent definitions. It then invested in a 360-degree feedback process, coupled with development planning and coaching, to signal commitment to staff and bond this group more closely to the organisation.
DON’T lose your identity. Is your team still the independent voice of reason? It is easy, under pressure, for HR to take a reactive role and start taking instructions. During a downturn, HR’s business partnering capabilities should come into their own, identifying opportunities and challenging short-term management thinking – for example, drastic cost-cutting measures that would damage your firm’s employment brand value. Focus the business on the long-term impact on the organisation after the recovery, using data and analysis to prove your points.
DON’T stop recruiting the best talent. A blanket freeze on recruitment, or on learning and development, can have a catastrophic effect. The current leadership shortage in the oil industry is a direct result of the recruitment bans put in place during the recession in the late 1980s. Ensure that you are ready to capitalise on great talent when it becomes available. When Lehman Brothers collapsed in 2008, carefully primed competitor recruitment teams were able to respond instantly to snap up the bank’s departing talent.
DON’T ignore opportunities to increase revenue. Have you focused on reducing your operating margin without fully exploring opportunities to promote revenue growth?Training and development budgets are often the first to suffer. But one telecommunications provider deliberately set out in a recession to develop the account management skills of its marketing and sales teams and thereby improve their chances of winning and retaining customers. This resulted in a significant improvement in staff retention. Consider other development methods, such as stretch projects, mentoring or action learning sets, which can be delivered at virtually no cost.
DON’T lose the wrong people. Implementing headcount reduction plans too rapidly without reference to talent plans will lose key skills and information. For example, there is a significant risk that customers may desert if key members of the account teams leave. If there’s a rapid push to cut jobs, HR needs to have a clear understanding of the criteria for success.
DON’T cancel capital projects that you will need for the upturn. HR technology investment is often one of the first items to go. But this may put the organisation years behind in terms of HR systems and information once the economy recovers. Furthermore, investments in technology can yield significant savings. For example, establishing shared-service technology can help to drive more than 30 per cent of the support costs out of HR, finance and IT.
In our next article we will be discussing how HR practitioners need to be pushing the leaders of their organisations to do the right thing for the long-term value and sustainability of the business as well as providing some pointers on how to manage a workforce in a recession to help organisations to prepare for the eventual upturn.
Don’t miss part two of this fascinating and highly topical article in next month’s Journal.