The rate of change in the world today is occurring at an unprecedented pace. There are many implications for employers attached to the fragile state of the world financial systems.

Whilst Australia to date remains relatively strong in the wake of currently nervous economic conditions, Treasurer Wayne Swan is already on the media record with his prediction that the unemployment rate will grow in 2009. This may lend further complexity to the challenge of putting sustainable business strategies in place.

There has never been a more critical time to connect the dots between effective HR practice and sustainability. The real challenge for practitioners in 2009 will be to finally dispel the commonly held perception that the actions of the HR department are in some way unrelated to strategic and core business objectives. 

Dichotomies of change
Employers are dealing with some confusing dichotomies. For instance there is a continuing skills shortage whilst at the same time the rate of job shedding has reached levels not seen in over 10 years. In another example, Australians are repatriating from the embattled US and European markets and would seem to bring with them some relief to the skills gaps, but there is no visibility as to whether the skills they bring home with them are the ones needed to help those sectors most in need. 

Many employers have only just started to develop programs designed to help compete more effectively for new talent, whilst focusing on the retention and development of existing skills. However, if predictions for 2009 prove correct, the emphasis is likely to shift to job shedding and consolidation as enterprises across Australia steady in anticipation for a challenging 12-month economic outlook.

The importance of effective restructuring cannot be overstated. Maintaining productivity and improving process can be achieved without damaging the engagement levels of staff but not without careful consideration. Redundancies must be managed with extreme care to avoid negatively impacting an organisation's employment brand.

In addition to all of this, HR professionals have been tackling increasingly complex challenges compounded by many converging factors beyond the skills shortage. Intergenerational change, education and training supply chain lags, changing government and economic reform, rapidly shifting social values, globalised business processes and an increased trend toward outsourcing.  These environmental factors all impact on how HR professionals can work strategically within organisations to sustain market performance.

At the heart of many of the dilemmas being faced by business and Government is a central tenant of HR: workforce planning.  There can be little doubt that a lack of workforce planning leads to unforeseen shortages, surpluses, and a lack of optimised workplace conditions. It also exacerbates the likelihood that the education and training systems are not developing the right skills and qualifications to meet emerging future demand from employers. 

In order to address future workforce demands and ease some of the existing pressure, there must be a focus on the education-to-employment supply issues. It is therefore highly encouraging to see some of the central tenants of sustainable HR practice filtering through in the policies of the Victorian Government. 

Government leadership
In September, the Brumby Government announced a $316m investment into a program designed to reform the way the State plans for future workforce demands. This funding is the result of the Skills Reform Review undertaken by the Victorian Government, which has been a progressive and intelligent approach toward ensuring that the State will be able to generate the skills needed to meet workforce demand into the future.

Victoria is now the first state to both accept and act upon the need for skills reform. The Brumby Government's bold funding initiative places Victoria ahead of the rest of the country at a time when workforce planning is an obvious issue for many businesses.

The Victorian Government has recognised that workforce planning is a matter of sustainability. The Skills for Growth program is a perfect example of the kind of sustainable thinking that is needed amongst our political leaders, because it will ensure more Victorians have the opportunity to gain relevant qualifications and to develop new skills. It provides for a simpler system that businesses and employers can more readily access and understand.  

The Federal Government has also identified the impact of the skills crisis for Australian business across state and industry borders, and has set up an independent statutory body, Skills Australia, to report on issues surrounding the skills shortage.

However, government and industry need to go a step further than advisory boards and statistical data. In order to tackle the skills shortage, government and business need to identify where skills will be needed in emerging markets, what skills will be required, and what education pathway will be required to meet the demand.

An urgent national dialogue is needed if Australia is to appropriately contest its place as an emerging economic power and remain a competitive, productive economy through the height of the greatest market crash in history.

From the educated to the employed
The education-to-employment supply chain has suffered a considerable breakdown, and needs to be addressed by conducting workforce planning and managing education and training based upon this planning.

Government and industry need to be working together to get people into relevant skills training and ensuring this training will result in skills aligned employment.

The previous model of education to employment to workplace experience is now too simplistic. Therefore, workforce planning must recognise the need for continuous learning and development, and the probability that individuals will face a number of cycles through education and employment in their working careers. More thought should be given to opportunities to retrain and transfer skills from one industry to another, as this will becoming increasingly important in the wake of emerging markets.

The largest case in point within Australia surrounding the need for serious and immediate skills reform is the rise in demand for green skills, both in emerging markets and within traditional markets. With the CSIRO predicting 'green collar' jobs growth from 2.6 million to 3.3 million over the next 20 years, and the need for retraining of three million existing workers, the skills gap for this sector is already considerable and will continue to widen if action is not taken. In order to meet this incredible demand, industry will need to undergo huge economic and social reform.

While the numbers may seem daunting, effective workplace training and education can help migrate existing skills, experiential capital, and knowledge into emerging markets. Government and industry need to work hand in hand to make this happen by identifying industries with complimentary skills sets, putting in place methods of education and re-training, and ensuring these new skills remain within Australia.

Vocational Education and Training is an important tool yet it is predominantly used to address short-term supply, rather than as a measure to overcome foreseeable skill gaps in the future. No national view is available on where rapidly emerging and future demand is coming from. A national view is needed to ensure the right skills and qualifications are being produced through the education and training system to meet demand.

While industry and state barriers remain, the skills shortage will become increasingly dire, and potentially divisive. The implementation of national workforce planning would provide a report on where the demand for skills will be, how this will affect different industries, and how these shortages might be best addressed.

With the skills shortage still a major issue, and with environmental markets expected to boom in coming years, now is the ideal time to develop and implement a national plan where all major stakeholders can jointly tackle the skills shortage now and put in place strategies for the future.

Getting sustainable HR practice right
It has never been more important to develop sustainable HR practices than in the current business climate, where the ability to obtain, develop, and retain skills can be the difference between business success and failure.

In Australian enterprise, skills and training best practice lags behind other areas of business. The human resource function is often left without the investment required to achieve improvements in performance. Companies need to commit to funding and supporting their HR functions to ensure they are attracting, retaining and developing the staff that will drive the success of the business into the future.

Some organisations in the public and private sector unfortunately apply a procurement culture to HR professionals involved in recruitment, regarding them as part of the 'labour supply' industry.  This culture of churn and disposability is the antithesis of sustainable HR practice.

Organisations also hinder their own progress where the HR function is treated as merely a personnel administration arm. Sustainable HR practice involves a continuum that runs through in the recruitment, development, training, retention and succession value of staff, and can no longer be regarded as a soft discipline within organisations. It is vitally important for HR professionals to raise the profile of the industry beyond that of personnel administration, and instead become a critically important part of business operations. HR does not equal a soft discipline, and cannot go soft on skills.

Beware the soft option
Viewed as either an extension of payroll, training, or simply a function of recruitment, HR is all too often considered a soft option for cut backs and this means there has never been a more crucial time to connect the dots between HR practice and sustainability. 

It would be prudent for employers in the private sector to take note of the course set by the Brumby Government initiative.  It offers a clear indication that workforce planning is an absolute imperative for continuity and sustainability. Both are inherently linked to effective HR practice but the connection may not be clear enough to prevent HR budgets from suffering through deepening market turmoil. 

The potential risks involved in slicing the budget for human resource management needs careful assessment. Effective restructuring strategies must be put in place in order to cope with the potentially volatile times ahead.

In order to protect business continuity, Australian organisations are increasingly opting for measures including automation of business processes, partial labour arbitrage through offshoring, or fully aggregated outsourcing of non-core business functions. Measures such as partial or complete outsourcing of non-core functions have been identified as ways to reduce costs and maintain focus on primary operations and HR is not immune to this trend, but is it a good option?

For SME's outsourcing part or all of the HR function can be an attractive option, especially for those that have grown organically and do not have formal HR process and procedures in place or where rapid growth finds existing HR systems bulging at the seams. Regardless of the size of the organisation, any decision to outsource must be undertaken with sustainable HR practice clearly defined and in mind, otherwise business runs the risk of losing crucial skills and the ability to nurture these internally.

Irrespective of measures taken by enterprise to overcome issues of contraction within the market, the need to ensure existing human resources are in place and are properly skilled, trained, experienced, and possessed of the right attitude and attributes remains absolutely core, essential and business critical.

Industry and government need to work hand in hand to develop a strong workforce planning strategy to secure Australia's economic future and there also needs to be workforce strategies put in place at an individual business level. By considering the best ways to manage and retain employees, and introducing strategies to ensure skills are being instilled within both incoming and existing staff, companies can reduce the impact of the skills shortage upon operations and play a vital role in assisting a national approach to tackling this issue.

Promoting sustainable HR practice and business continuity means safeguarding for the sustainability of Australia's future business prosperity. Just as economists are calling for immediate action to overcome the economic issues threatening global financial security around the world, businesses need to act now to ensure Australia can maintain a strong and skilled workforce into the future.

About the author
David Edwards is the strategic manager of Drake International and the former head of CPA Australia, VECCI and CEDA. He is currently Chair of the Commerce Advisory Board of Deakin University. David works with industry and employer groups to plan and implement sustainable HR practice in business. Contact David on (03) 9245 0292