2012 was a year of wait and see, considerable moments of economic ‘breath-holding’. Finally, it seems that we have a consistent stream of positive economic signs: Growth in industrial output, growth in the Shanghai composite and an increase in the rates of both replacement recruitment and new hires.
However, as I return from my Christmas vacation, and am encouraged by the good news being reported, I’m mindful of both the situation in early 2012, and 2009, and it seems appropriate to remind ourselves that sound HR practice for tough times is often sound HR practice in good (or improving) times too.
If we cast our mind back to early 2012, there were regular stories about redundancies and restructuring in some of the less-well hedged sectors, including banking/finance and technology. According to the statistics from Bloomberg News, the total number of layoffs published by multi national enterprises all over the world was reported to be 94,369 over a period of 40 days starting from 10 January in 2012. This was 26,561 more layoffs than were reported in the same period in 2011. This affected a variety of fields ranging from finance to IT, to cosmetics and even the food industry. China for a long time was thought to be a ‘redundancy immune’ area, but this conception has changed. In October, 2012, Motorola announced that they were reducing their workforce by 4,000 all over the world, retaining only 3 research centers, which are in Los Angeles, Chicago and Beijing. This leaves 500 highly educated employees in the Nanjing Motorola Research Center facing the prospect of redundancy. Chinese companies such as Li-Ning and Vancl reported similar cuts being made to their work force. This places a great deal of responsibility on HR departments in the upcoming year. In 2013 HR departments must be prepared to balance areas of their business which are growing, with areas of the business where cost-control pressures are highest.
Supporting departments are usually the first place the senior management of a company looks at when cuttings costs. There is a logical reason for this when looking at the short term. Support staff members do not directly generate revenue for a company. Meanwhile, human capital in a company is generally the first or second largest expense, in some industries representing 45% of the average gross expenses. And unlike fixed capital, labour expenses are not directly attached to a loan obligation so a reduction in the work force immediately impacts the company’s income statement. There are also reasons that reducing labour costs may not seem as attractive when taking a long term analysis. US Federal Reserve Chairman Ben Bernanke points out that capitalist production goes through four part cyclicality; it must go through a depression, a period of increasing activity, a period of prosperity, followed by an overproduction crisis and stagnation. The world had experienced 7-8 of these economic cycles since World War II. Therefore, we should consider the changing of economic environments when coping with economic downturns. This is why we must face a period of slower economic growth efficiently and take appropriate measures and implement proper strategies.
Here are the some solutions which RMG has provided to its customers that can save considerable costs without causing redundancies:
• Reorganise working time. Strategic adjustments to working time during special periods may be enough to help the company meet its goals. For example, some companies’ workforces accept having their working time adjusted from 8 hours/day to shift work of 4, 5 or 6 hours, or they change the working time from 5 days/week to 4 days/week. There are various kinds of working time reorganising patterns like this that some employees actually welcome. This is also a good example of a solution which might be appropriate during good times as well as bad.
- Reorganise working time by training. Under this circumstance, shortening the working time is encourages employees to carry out training in their spare time rather than forcing employees to have days off. This leads to greater long term efficiency from the employees while saving the company money in the short term.
- Red reorganisation. Fixing wages for a certain time and eliminating redundant workers is one solution. Whilst reducing redundant workers the company should still pay special attention to key employees who add the highest value. Steps should be taken so that they do not leave the company because a competitor is offering a higher salary.
- Human Resource contracting/Human Resource recruiting company. This is different from the former point. In this case, the companies have the flexibility to re-employ staff on a more flexible basis- although of course at a premium on their monthly salary. This might be the solution if the company does not expect various productions every day from their employees, because the human resource agencies help to take risk for them.
- Telecommuting. Telecommuting is one of the ways human resources departments can outsource expensive labour. It is not widely utilised because of some hidden faults. If it is lacking proper infrastructure and controls, the company may find itself losing productivity. This can require special human resource supervision and if the company is not properly setup to handle these challenges, the additional time and expenses associated with telecommuting may not prove worthwhile.
- One year sabbatical. When using this method, the company promises the employee to take a year off of work with the understanding that their position will be waiting for them when they return. For certain employees this may prove to be very attractive as it would allow them time to travel, start a family, or care for a sick relative. For the company, they can reduce their labour costs in the short term without losing their talent long term.
The reason why the HR department is unique is that their management is related to various aspects of the enterprises. All of these activities should improve efficiency, resist downsizing when possible, and maintain growth potential whilst waiting for the economy to rebound.
Short-term activities aim at reducing internal and external costs and it takes up to 3 months to see full results. Short-term activities will be realised by identifying personal costs savings potential, analysing and optimising development and training costs and the optimising HR service provider cost.
Medium-term activities aim at streamlining processes, infrastructure and optimising internal sources. They tend to takes 6 months in total and many includes:
1. Process and organisational optimisation of HR. Focus on the utilisation of individual positions within the HR department and on individual processes in terms of their efficiency. Propose or optimise indicators (KPIs) to measure the performance of individual HR processes and principles of the motivation system applicable to HR employees;
2.HR information system optimisation.
3. Optimisation of total rewards and review of the employee performance management system.
4. Increasing sales team efficiency. Improve the efficiency of your sales teams by optimising the sales process and organisational structure of the sales network, and by optimising the sales people’s remuneration and training system covering the sales area.
5. Outplacement. If the redundancy is inevitable, use outplacement programs and help employees to cope with their difficult situation. By doing so, you will promote the positive image of your company to other employees and strengthen their confidence in the company.
Long-term transformation activities aim at increasing efficiency and modernising the corporate strategy. These usually take about 1 year and mainly includes:
1.Key workforce segments management and motivation: Identify employees with high potential at all organisational levels and key employees whose skills are hard or very expensive to replace. Focus on these particular groups of employees and find out what motivates them to deliver high performance services and stay with your company. Adjust motivation programs for these key employees.
2. HR Strategy: Review or design a new HR strategy in cooperation with other managers, which will reflect your business needs and be aligned with long-term corporate objectives. Analyse your HR processes and propose their redesign as to make HR activities more efficient and devote saved time to projects.
3. Leadership development: Keep or restructure your budgets for development activities. Review your training and development system so as to develop those skills of employees which are really needed by the company. Introduce the system of differentiated development; focus on individual development activities such as mentoring and coaching for selected employees who are good prospects for the company in the long term.
4.Talent management and workforce planning: Ensure that the key employees stay with the company. Identify the demographical situation of the company. Are there any qualified staff members who may retire in the near future? Consider up front possible departures of your employees and their potential replacements. Identify successors internally or start looking around on the labour market well ahead of time. At the same time, use your time to develop your current employees who will help you, together with new hires, to lead the company out of the crisis and increase its chances of fast growth in the coming period.
5. Corporate culture: Strengthen internal communication to make it implicit within the corporate culture. Organise regular meetings with employees and inform them of the company’s latest results and development, build a strong corporate culture and keep them as key ‘links’ between employees and the company and as an important retention factor.
It should also be kept in mind that slower economic times are also opportunities. Many competitors choose to sleep in tough times, meaning that client-acquisition is actually opportune. Tougher economic times are chances to get the enterprise (big or small) in good order, and to cut the fat, so that as better times return, as they seem to be in 2013, the business is leaner and more nimble, and therefore better able to capitalise on a returning market.
by Robert Parkinson
Link to the article: http://businesstianjin.com/index.php?option=com_content&view=article&id=5933:hr-hr-in-a-gradually-rebounding-economy&catid=182:2013-february&Itemid=100