The Effect of UK Economic Crisis on the Recruitment Policy of the Businesses - Essay Example

The effect of UK economic crisis on the recruitment policy of the businesses  Introduction The UK economy was engulfed in a crisis from the middle of2008. This was due to the housing bubble burst earlier in the year. The UK economy followed the same trends of that of the US and the banks offered loans to the individuals without verifying the credentials for the repayment. The housing market was on the rise and the prices of the houses were steep. When the loans came up for repayment most of them defaulted and the banks lost much of the money. The financial institutions like the Northern Rock were the most affected and their share prices came down by 50%. The situation in the capital market was bad. The situation was further worsened by the fact that the housing loans were packaged as financial debt instruments and were sold in the capital markets. Companies around the world purchased the instruments and with the default of the loans, the instruments also became bad. Therefore, the economy overall was affected badly. (Walayat, 22nd August, 2007). The economy of the UK officially entered the recession with the decreased level of growth in two successive quarters. The Government and the banks helped the economy to face the tough situation with pumping in money and effecting rate cuts. This resulted in the Government borrowing money and thus was in a bad situation in the repayment of the loans. The companies were in a bad situation and they were looking to cut costs. There was huge job cutting among the companies and the unemployment reached massive levels. (Oxlade, 12th March, 2010; Bank warns of recession into 2009, 12th November, 2009). The recession was hard on the employees and the workers in different industries. The organizations restricted most of the benefits to the workers for cutting costs. A survey found that in the UK among a sample size of 704 organizations, 55% of the sample was planning to decrease the bonus and the pay or to freeze the process altogether. Among the sample size, 61% had no plans for recruiting new workers and 34% were contemplating on not recruiting the graduates. The labor market was in total disarray and the companies increased the off shoring process. The companies in order to cut costs were operating in flexible hours to allow the workers to work more. Bonus and incentives were not paid by most of the respondents. (Broughton, 10th August, 2009) . The situation was the same all over the world. Almost all the countries were more or less perturbed by the recession. Some of the major economies of the world were the most affected. In this paper, the countries of Japan and Germany will be taken for evaluation. Both these countries are economic powerhouses and have major companies incorporated. (Countries affected by the recession, n.d.). The companies are major recruiters from the labour market. The paper will look into the details of the HR issues of these companies during and after the recession. HR policies for selection The recruitment of competent staffs one of the most important activities of the company as this affects the operations of the company. Hiring the competent person for the job goes a long way in the development of the company. The company should develop a structured policy for the recruitment of the personnel. The company should evaluate if it needs the employees in the department. It should take care of all the rules and regulations developed by the federal bodies for the recruitment process. Then it should develop the policies for recruitment. The selection process should be interactive to know the details of the candidate. This should be done to decrease the chances of bad hiring. Bad hiring may affect the operations of the company and the company will have to fire the employee in the long run. The firing of the employees may create a bad working environment in the organization and the employees may be anxious about the future. In respect of the costs, the companies lose a massive amount of money. (Compton & Nankervis,2009;Pp 18-20) Therefore, the recruitment of the right person is essential for the company. Different companies different policies for the recruitment of the workers and for this purpose; a structure needs to be developed. The recruitment policy of the companies depend on the type of the company, its image and the post for which the recruitment will take place. The general policies of the company dwell on the requirement of the number of the staffs for the operations. The next stage is the invitation for the applications for the interview process through advertisement in the internet, newspapers, magazines etc. In this case, different companies follow different structures. The structure followed by the company depends on the post of the vacancy. The recruitment process may consist of a written test, interview, public speaking, evaluation of the expertise of the candidate through his work experience and many others. The process depends on the company and the post for the interview. For example, selection process for a marketing executive will place importance on the ability of the public speaking of the candidate. After the successful completion of the process a candidate is recruited. The company may invite individual applications for the process or may conduct the process in the campus of various institutions. (Brewster & Hegewisch,1994; Pp 68-69).  The policies in the workplace may differ among companies. In the modern day, most of the companies employ equal opportunities in the workplace. Some of the companies may follow definite policy of leaves and may state the number of leaves allowed in a year. There may be different types of leave allowed by the company like the Illness leave and the Pregnancy leave. (Family and illness leave, n.d.). Some companies may prohibit the use of drugs and alcohol in the workplace. The company may prohibit the employee to work if he is under the influence of alcohol. Some companies conduct random tests for alcohol and drugs. The consequences may be the termination of service if found to be guilty. (Drug-free workplace, n.d.). Almost all companies of the world formulate policies regarding the responsibility of the employees in the working place and the type of the work he/she has to perform. The companies expect the workers to behave professionally in the workplace and comply with the rules and the regulations of the company. The company expects the employees to work hard for the benefit of the company. (Professional responsibility, n.d.). These are some of the policies, which make the employee understand about the culture and the type of the work in the company. In addition to these policies, the company indulges in the training and development of the workers in the company. This allows for the smooth deployment of the labor. The training process of the company is essential for the employees and the company because it helps the employees to learn the necessary skills as well as giving them inputs about the company. Understanding about the company is useful for the employees as this affects the growth of the individual by knowing the vision and mission of the company as well as its operations. Training and development go a long way in safeguarding the employees form the competitors. The increase in the tenure of the job and other such facilities will help the employees to understand the essence of the organization towards the labor. (Masbey, Skinner & Clark, 1998; Pp 98-101) Germany and Japan- industries and the main companies Germany is one of the developed economies of the world. In terms of the “purchasing power parity” (PPP), the country lies in the fifth position in the world. In the continent of Europe, the country is the largest economy and is one of the most advanced nations industrially. The main industries of Germany are the machinery and the vehicles. Most of the production of Germany is exported to various parts of the world and the industries of the country have a worldwide reputation. The country was one of the most effected in the recession and the growth rate ran into negative in 2009 from 1.7% in 2008. The unemployment rate has been a major problem in the economy before the time of the recession.  (The world factbook, n.d.). The German companies were renowned for their engineering during the 20th century. With the development of the economy and the increase in competition, the companies have changed their policies of production. The car manufacturing took a place of pride in the industries of Germany. However, in the changing times, the economy of Germany has been able to integrate different types of industries in the economy. Some renowned companies like the Volkswagen still remain in the field of car manufacturing. The company is one of the leading manufacturers of the global car industry and has a prominent place in the industry due to the engineering capabilities. It is the 4th largest car manufacturer in the world and has prominent brands like the Audi and Bentley in its repertoire. (Volkswagen, n.d.). BMW is another prominent manufacturer of cars in the country. The other prominent companies of Germany are in the fields of finance. One of the biggest companies in this field is the Allianz Group, which is the leading financial provider of the company. (Allianz Germany, n.d.). Other prominent companies in the country are the Lufthansa, Deutsche Telekom etc. All the companies are big names in their respective fields and have been the major contributor in making Germany one of the leading economies of the world. (Industries in Germany, n.d.) Japan is another major economy of the world and is said to be the 2nd biggest behind USA. The economy of Japan is based on the production of the electronic items and the manufacturing of the cars. The Japanese car manufacturing companies have been responsible for the destruction of the European and the US car-manufacturing giants. With developed engineering and lower costs the Japanese products have been able to capture the markets worldwide. The Japanese products are exported mainly in the USA and the China. However, the economy of Japan is fully dependent on its industries with only 2% of the GNP being agriculture. The availability of the raw materials in the country is scarce and thus most of the economy in Japan has become dependent on the industries. (Japan guide.com, n.d.) The economy of the Japan has been affected by the recession primarily because of the exports. During the recession, the currency of Japan became strong and it had a detrimental effect on the economy of the country. This resulted in the bad performance of the capital market in the country. (Ogura &Lah, 17th November, 2008). The companies and the industries in the country were affected by the recession. The economy exported most of the goods to the US and with the US economy in a huge crisis most of the products were unsold. The companies of Japan are renowned for their engineering capabilities and the ability to innovate. The Japanese are revered in the car manufacturing industry and the electronic manufacturing. The most influential companies of Japan are the Toshiba Corporation, Toyota Motors, Yamaha, Honda Motors, The Mitsubishi Group, Panasonic, Sony etc. The companies are well reputed brands in their respective arenas and most of them lie within the Fortune 500 companies of the world. The companies are world leaders in the field of their industries. The car companies like Toyota and Honda were the leaders in the US market. Honda is the principal manufacturer of motorcycles in the world. The electronic companies like Sony and Toshiba are revered for their quality in the field and are world leaders. The innovation and the engineering in these companies have made them the topmost companies in the world. (Major Japanese companies, n.d.) HR policies in the times of recession The recession was one of the most difficult times for the managers of the top organizations. The companies expect all the departments to innovate for the development of the company and the HR department is not an exception. The HR practices of the company dwells on the cost cutting measures and as a result the department has to take unpopular decisions like the downsizing of their staffs. There is a cost reduction in the training and the development of the employees of the company. The HR management is expected to identify the key employees in the organization and place special impetus on them. The main motive is the optimization of the human resources. For this purpose, the management may look to fire a number of employees and retain key figures. Another main motive of the HRM in times of the recession is to motivate the employees and to keep them away from the grasp of the competitors. There is a hard fight to get access to the limited talent pool of the employees in the world and in the turbulent times like that of the recession, the situation is further aggravated. The existent policies and the rules regarding the HRM may change during the recession.(Storey, 1995; Pp 186-187). Another major area of concern for the HRM is the recruitment of the newer staffs. Most of the companies in the world view the recession as the time for cutting costs and there is huge offload of the existing workers. The companies are susceptible in recruiting the new workers and there is a general perception recruitment is bane in times of recession. However, braver companies will see the recession as the appropriate time for recruiting better quality work force at low costs. The recession is a bad time for the new graduates and with lower pay scales and lesser jobs in the market. The companies will give more importance to recruiting higher quality people and there will be a deficiency in the demand in the market. (Desai, 28th February, 2009). One of the aims of the HRM of the organizations is to measure the performance of the employees over time. This is very helpful in underlining the key employees in the organization. The companies may offer the key employees of the organization several monetary and non-monetary benefits to be in the job. It can be stated that hiring is important in the times of recession because as recruitment of the right people will guarantee the development of the company. The talent pool of this world is not huge. Therefore, the recession gives a chance for the recruitment of the right personnel at sustainable prices. The recruitment gives a chance for the employment of the knowledgeable employees in the organizations as seen from the experiences. The recruitment is one of the strategies for the future and in the normal times the organization will be at an advantageous position as the personnel will be familiar with the operations of the company by then. The companies all over the world may benefit by recruiting in the times of recession. (International Labor Organization,1994; Pp 13-14.) Recruitment and selection in times of recession in Germany and Japan The recession provides turbulent times for the businesses all over the world. The renowned business organizations in Germany and Japan also faced the bad consequences of the recession. Germany was one of the most affected countries of the recession. The employers in the country were cautious in their approach of new recruitments. The growth in the recruitment was 7% in the beginning of 2008, which was much lesser than that of the previous year. The healthcare companies and the social institutions freezed the employment of the new personnel which had a severe effect in the economy. (Peacock, 18th February, 2008). The condition in Japan was worse than that of Germany. There were huge cutbacks in the job market. This resulted in the increase in the suicides of the young persons. They were unable to get jobs despite being graduates from the best universities. The NEC Corporation shrinked the number of the personnel immensely. About 6000 persons lost their jobs during recession. Most of the job cuts were in the international operations of the companies. (Strom, 15th July, 2009). Both the countries with large number of companies in the economy were major recruiters in the international market. With the decrease in the recruitment in these companies the job market was severely affected. Methods to be used in times of recession regarding recruitment Recession provides a tough time in the job market. The recruitment of the new graduates stops and there are huge job cuts. The recruitment agencies face tough times during recession. It is essential for these agencies to maintain accountability and relationship with the client. These factors help in the development of the business in turbulent times. (Purcell, 1986; Pp 7-9) Recession offers a huge pool of talent from where the company can choose the right employees. The companies look to cut costs from in the hiring process. The traditional methods in the recruitment process like interviews and the campus selections are costly affairs. It is better to employ agencies for the procedure. Another important point is the hiring of the talented employees. This can be done with the referrals from the employees and workers in the organization. (Transit cooperative research program,2009; Pp 39-40). The recession is the right time for attracting the new talent as the talent pool is enormous and they can be recruited at sustainable cost. Various new methods have been used in the recruitment of the prospective employees. The use of the social networking sites have been used by the companies to interact with the new graduates. The use of the websites have also become prevalent in the new times. These type of the methods can be used for the recruitment of the employees as this would save costs and will also help to attract the right person for the job. The traditional methods like the interview can be used in the later stages of the selection procedure. (Taylor,2004; Pp 137-138) Implications for employees and employers The employers will be able to get new talents at reasonable prices, which will help them in the future. This is one of the most important strategic decisions for the employees. With the help of the new processes of the recruitment, the employers will be able to save the costs of the company. The recession meant that the opportunities in the job market are less. This had a certain implication for the new graduates. The graduates are looking for the stable jobs in the wake of the recession and are looking to sacrifice the chances of growth. They were more interested in working for a single company and switching between the jobs was out of question. (Recession-wary employees prefer sticking to stable jobs: Survey, 17th March, 2010). The use of the new methods in the recruitment process meant that the chances are few for getting jobs through the traditional methods. Therefore, they have to be more aware of the situation and the happenings. The use of the internet has also become internet for the recruitment process and the students should register in the online recruitment system. Conclusion The job market in the recession was bad all over the world. In Germany and Japan, there were huge job cuts and the recruitment in the companies stopped. The recession provides an attractive platform for the employers to recruit as they can get the best talents in the industry. However, most of the companies do not understand the fact and they look to cut costs. For the future development of the company recruiting young talented personnel is important. The company can recruit during recession at lower costs and the use of the untraditional methods like the use of the social sites and the recruitment agencies can be used in the cutting of the costs. The recession should be used in the recruitment of the young professionals and this would help in the development of the companies and the economy.                References 1. Allianz Germany. (n.d.). Maps of the world.com. Available at: http://www.mapsofworld.com/germany/allianz.html (Accessed on 30th March, 2010) 2. Bank warns of recession into 2009. (12th November, 2009). BBC news. Available at: http://news.bbc.co.uk/2/hi/business/7724215.stm (Accessed on 30th March, 2010) 3. Broughton,A. (10th August, 2009). Recession causing employers to modify employment practices. Institute for employment studies. Available at: http://www.eurofound.europa.eu/eiro/2009/07/articles/uk0907039i.htm (Accessed on 30th March, 2010) 4. Countries affected by the recession. (n.d.). Harrington books. 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