The Role of the HR during Economic Downturn - Coursework Example

Running head: Student’s name Institution Course Professor Date Economic downturn is a period of significant decline in economic activity that is spread across the economy, visible in production, employment, real income, and other indicators, (Claessens and Kose, 2008,p.52). Economic downturn has had high negative effects to the business performance and thus must be dealt-with as soon as it occurs. The bottom line of most businesses is the economic motives of profit maximization, expansion of the business and sustainability. Currently many businesses and firms are placing more emphasis on their ongoing sustainability as their key objective, (Bary and Kurucz, 2007, p.21). Performance and policies of the human resource management should have a link to the bottom line of the business. Bratton, (2003, p.38) advocates for strategic human resource management that is a managerial process requiring human resource (HR) policies and practices to be linked with the strategic objectives of the organization. Human resource policies and practices need to change during dynamic times like during recession period in order to have a link with the main objectives of businesses or organisations during such times. During economic downturn, the greatest bottom-line of the business is sustainability of its activities in order to ensure the business performance in terms of market-share and profits is maintained. In economic downturn, human resource management is required to play a leading role in guiding the business out of the recession. The role of HR during these times needs to change to provide strategic solutions to organisations. Recessions present businesses with a dilemma, this thus calls for the change in role of HR to end the dilemma. Various researches carried out showed a clear link between the HR practices and the bottom line of the organisation. Human resource has evolved over time to comprise a wide range of professionals at all levels with contributions are grounded in business and finance (Clark, 2001, p.17). During economic down turn they are great strategic collaborators to organisations. Human resource vision should change during recession period for the HRM function to realise success during this period. The HRM team needs to set it as the first priority and transform the vision into actions quickly. According to survey conducted by Economic Intelligence unit in 2009, HR usually faces numerous organisational, financial and technological obstacles and challenges during economic downturn. The HR has to be more engaged than before in developing and retaining talent, reducing and containing costs, communication and development of various HRM strategies for the organisation sustainability during this time. This essay analyses the changed roles of human resource management during economic downturn while clearly showing the link between these new roles of HRM and the bottom line of the organisation. During economic downturn the role of the HR should change and concentrate on starting several HR Recession Initiatives. The initiatives should be focused in solving the current problems while unlocking future growth potential. They are not just on cost cutting to cope with the situation but focussed in a variety of areas. The HR should be focused in optimizing manpower strength, taking strategic initiatives to increase productivity and efficiency in the entire organisation, restructuring compensation schemes and employment policies, redesigning training and development programs, restructuring organisation policies and cost cutting measures. Human resource and the general human resource management should undertake to change their daily policies and practices during this period and undertake the following policies changes and practices: During this period, the HR must consider downsizing. Economic downturn causes organisations to experience financial difficulties and thus not being able to meet both current and long-term financial obligations. The HRM function at this time need to change and focus on cutting costs. One of the methods of doing so is through reduction of the workforce of the organisation. In many organisations, the biggest current expenditure is the cost of payment of wages and salaries. Implementation of cost cutting in this area is hence a great exercise in the general reduction of expenses (Baumol et al, 2005). Downsizing is a difficult exercise that needs careful and professionalism implementation. Downsizing should be well planned and undertaken effectively to reduce the expenses of the organization. While undertaking downsizing, the HR must consider a wide range of factors. Downsizing must be systematic (Farago, 2002, p.91). For instant, difficult decisions must be made on who are laid off, how much notice they are given, the amount of compensation or severance payable to them and how they will be gathered for after retrenchment among other issues. The HRM department should ensure that the organisation does not lose its highly dependent on workers and specialists since it will make production activities stop, which may lead to the eventual collapse of the organisation. The HR should be able to differentiate between their good and average employees in order to know how to keep them, (Gandolfi, 2006). They should be able to listen to them, keep them motivated and busy and show them the long-term vision of the organisation. If the current departments are affected deeply by the economic downturn, the human resource should also consider redeployment of its work force to other departments. During economic downturn, some branches or sectors are highly affected than others leaving most of their employees idle, the human resource should undertake redeployment of workers in this sectors to other areas where there may be work still going on. Redeployment acts as an alternative to layoffs (Cascio, 2002). However, some human resource managers and consultants are against this acquiring that the redeployment may affect the efficiency and quality of production in other departments. This problem may be solved through giving them on-job training that is usually cheap. Redeployment reduces unnecessary payment to idle workers and helps in improving productivity in other sectors that may eventually help in upsetting losses earned in affected departments. This HR function in many occasions has seen many organisations improve their bottom line. Reduction of number of employees is a great cost cutting measure. The expenses payable to a high pool of workers and idle workers are cut-down. Cost cutting is one of the ways of improving the profits or reducing the losses of a business. Given that during this period many organisations have reduced sales, the reduction in the costs of the organization will see organisations improve on their financial status. The cost saved after downsizing will help the company in carrying out urgent and précising matters in the company. The HR should redesign compensation and benefit schemes during recession (Mellahi and Wilkinson, 2010, p. 2291). Compensation is the payment of employees for their contribution towards the organisation. It mainly involves the payment of wages, salaries, allowances and bonuses, etc. While employee benefits, refers to retirement benefits, insurance and assurance schemes. They are generally forms of value other than payment provided to workers for their contribution to the organisation hence an expense to the organisation. During this time, the HR needs to undertake pay freezes and freezes on pay increments, on progression through salary bands and on promotions. Cutting workers compensation is an option of saving on today’s costs (Grusky et al, 2011) The HR should analyse to see if it is applicable in their organisation. This is through comparing it with compensation of other related organisations, analysing the risks of the possibility of losing talented employee experts to other organisations and analysing the way workers will react to the compensation redesign. The HR should have in place a compensation recovery strategy of how they will re-adjust them when the economy turns. The use of methods like mandatory holiday shutdown, reducing work shifts, reducing overtime, provision of employee temporary leave and reduction in employee benefits among other methods reduce both the compensation and employee benefits (Verma, 2013, p.201). Redesigning or cutting down on employee benefits and compensation aid in the general reduction of the costs and expenses of organisations (Philis, 2013). The reduction of the costs as said earlier will help the organisation in reducing losses by increasing its profits during these hard times. This will also improve its liquidity levels since there will be reduced financial outflows. These two factors are highly advantageous to organisations during economic down turn. The HR should consider cutting down expenses on training and development programs. The focus of organisations at this point is greatly on cost reduction and training and development is one of the areas the HR should cut costs. Training and development of workers is a long term measure in organisations and since there may be little funds during this time, the HRM should plan to reduce expenses on these programs. Training and development expenses are reduced by adopting innovative measures, (Reyes, 2002, p.84). Some of them include, organising internal training and development measures that are usually cheaper, arranging for product and material training at the supplier’s manufacturing plant, tying up with government institutions, arranging in house training, collaborating with NGO’s trainers and generally reducing workers on these programs depending on the demand of the need for training among the workforce. There should be greater accountability amongst all staff in the financial management to ensure unnecessary budgets in training and development activities eliminated in the organisation This function of the HR in many occasions helps the organisation improve on their bottom line of cost cutting. During economic downturn, organisations suffer from low working capital and the status of the economy makes it hard for it to obtain credit from banks and other financial institutions leaving cost cutting as the only viable solution to its financial problems. By undertaking this practice, they will help the organisation achieve its goal through cost cutting. Unnecessary current expenses that are forward able to other times when the company will be in good financial or that are avoidable are reduced. This makes it possible for organisations to concentrate spending in core current activities that aid in overcoming economic downturn. The HR should increase and make communication with its workers to be more effective during economic downturn (Roche, 2009, p.126). Since the effects of the recession are cross cutting, there should be good communication to all parties in the organisation. Communication is very essential at this period in order to keep the workers in the organisation while keeping them away from the organisation competitors. The Human Resource Management should device motivation means for its workers and device more engagement means with the workers. This is a challenging time to workers and effective communication and consultation is necessary for them to understand the current situation and have trust in the organisation. Keeping the workers motivated and informed of the current situations in the economy will aid in reducing resistance to newly introduced policies and strategies in the organisation. The human resource management should offer guidance and counselling to employees (ACAS, 2008) since the effects of economic downturn are sometimes psychologically disturbing to employees. Employees who are affected by the economic downturn or the measures of reducing its effects in the organisation should be counselled on how they should overcome those effects in order to continue enjoying effective lives. The human resource management should increase its communication and negotiations with trade unions and workers representative during recession (Roche et al, 2013, p.83). Negotiations during this time are very important to both sides in coming to a comprise in carrying out various measures affecting the labour force like retrenchment, pay-cuts, increase in working hours, among other changes. Effective and efficient communication will aid the company in overcoming challenges of the economic downturn. This practice or undertaking of effective training has a clear link with achievement of the organisation goals. This is because it creates understanding among the various stakeholders in the organisation on the different measures undertaken to overcome the negative environment. Those affected in one way or another understands the causes of such effects and the eventual outcomes during and after the recession. The human resource should formulate work intensity and management of performance policies and practices. During these dynamic times, the firm HRM should change their policies to foster high performance by their employees. They should consider formalisation of policies and procedures in areas like time-keeping, discipline, grievances resolution during this time. Both the management and the workers have awareness on the external environment and the difficulties the organisation is facing and thus there is need for each of them to work harder. Workers should be encouraged to work extra hard while accepting lower pay (Messah, Gekara and Obuka, 2009, p.63) Vigorous management of performance will assist in improving productivity per worker, helping in elimination of poor performers from the organisation as well as ensuring uninterrupted productivity in case the organisation has implemented downsizing. There is a clear link between this practice and the achievement of the bottom line of the organisation during this time. Increasing work rate per worker cumulatively aid in lowering the cost of operation of an organisation. Poor performers in the organisation during this period is a liability to the organisation and tight performance will aid in their elimination and making those highly resourceful employees are identified and given more chance to continue serving the organisation. Productivity during this period should be increased or kept at the previous rates; given there may be reduction in the number of workers, the vigorous performance management will aid in achievement of this. By creating such benefits, this practice of HRM has a clear link with the ultimate objectives and goals of the organisation during downturn. The human resource management should ensure the leadership is led from the top management of the organisation. The HR should harness the senior management leadership in the implementation of the various policies they are implementing. Support by management team including the CEO in both the agenda implementation and the process of communication to the employees is crucial in smooth implementation and acceptance by the rest of the organisation workforce (Aniko, 2008). When the message ‘comes from the top’ or from the ‘horse’s mouth’ the message is seen to carry more credibility. If HR delivers the message, there is a risk that parties affected would seek to ‘go over their heads’ with potentially ‘disastrous consequences’. Having CEOs addressing staffing and participating in employment negotiation with unions signals, the top management leading the economic downturn initiatives processes. The top management and the HR should advocate implementation of professional values and policies. This ensures there is proper response to the commercial pressures to the organisation. Involvement of the top management in the process ensures all managers adhere to the accepted or espoused human resource policies and value, (Chumann, 2001, p.11). One advantage of this is that the possibility of some HR managers undertaking activities that are opportunistic or conflicts of interested are minimised. Direct involvement of the job management is a good practice in the human resource since it assists the company to achieve the intended objectives of the company during economic downturn. It has a link to the organisation bottom-line since they help the organisation to attain sustainability and growth during this time. This is through implementation of quality decision, avoiding opportunism that may negatively affect the organisation, attaining support from other stakeholders and generally getting necessary support required from the management. Good management and leadership of the organisation at this time and especially leading effectively from the top level will see the organisation deal effectively with the challenges of economic downturn and other dynamics in the economy and thus be able to achieve their grant vision and objectives. Conclusion Economic downturn is a big challenge to human resource management in their implementation of their policies and practices. This is because of the drastic negative challenges it creates in both the organisation. Occurrence of economic downturn forces the company to change its normal policies and practices and come up with implementation of relevant policies to cope and eliminate the challenges brought by it. This is one of the hardest times requiring implementation of tough measures by the human resource management. Human resource when faced with this challenge it should concentrate its efforts in maintaining the initial productivity and profitability of the organisation despite the challenges it faces. Human resource management should carry out mainly cost cutting measures and implementation of specific policies that aid in leading the company during the recession and out of the recession. Some of the measures that the human resource practices and policies that will help them in reduction of costs include, reducing the organisation labour force, reducing expenses in training and development programs, reduction in wages and salaries and tight cost management in the company. Reduction in costs helps organisation to be able to have more working capital at their disposal and thus be able to spend in other areas. This is particularly necessary given that during this period, there are low sales and the company cannot get credit easily. The HRM should improve its communication with other stakeholders in the organisation to ensure various measures in the company are easily carried out. The top management must be involved in the implementation of changes during this period. The functions of human resource during this time are usually linked to the bottom line of the organisation. Organisation bottom line during this period is overcoming the downturn and being able to maintain their profitability and productivity. The cost cutting measures implemented by the company ensures that the organisation is able to deal with funds shortage and therefore have something to spend in the organisation revival. Effective communication and involvement of other members of the organisation aid enables smooth change implementation of a wide range of measures that are crucial to dealing with this challenge. Clearly, dynamic times in the organisation require change in the functions of the human resource policies and practices and these functions are related to the bottom-line of the organisation. Reference ACAS , 2008. Layoffs and Short Time Working, London: Acas. 12(3): 4 Baumol, W. J., Blinder, A. S., & Wolff, E. N.. 2005. Downsizing in America: reality, causes, and consequences. New York, Russell Sage Foundation. 3(5): 55-79 Bratto, John,2003. 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