HR directors under the downturn gun

by 06 May 2009

A wide array of cost-reduction measures have been adopted by companies in response to the downturn, with the three most common measures being reduced use of contractors/consultants, hiring freezes and headcount reductions, a recent report has found.

Furthermore, most companies expect to further reduce their headcount in the near future, with 60 per cent looking to cut staff in the next six months, and, of those, 28 per cent expecting to make work force reductions of 5 per cent or more.

The report, which was conducted by the International HR Directors Forum, also found that salary reductions were being targeted by some companies, with 17 per cent having already reduced salaries, and/or planning to in the next six to 12 months.

Most HR functions have also been affected by the economic downturn. The report found that just on 60 per cent of HR directors reported that they had less resources than a year ago, and, of those, 19 per cent had had resources reduced by 10 per cent or more.

“The common experience of having to do more with less is unlikely to be unique to HR professionals in multinational companies,” said Mike Riddiford, author of the report.

“HR professionals everywhere are going to have to accept that, at a time when there are unprecedented demands on their time due to redundancies, greater need for internal communication, new IR landscape and so on, they will most likely have to tackle those challenges with less resources than they had 18 months ago.”

The report also found that parent companies were likely to want deeper cost reduction than local senior management teams, with 43 per cent of HR directors reporting that their parent company was arguing for deeper cuts than those being proposed by local management. That finding suggested that complex negotiations may be required on the extent and timing of cost reduction measures in the Australian operation.

Riddiford said cost reductions were paramount for companies everywhere, and there was no getting around the accounting fact that a big cost for many companies was people.

“People-related cost measures – such as pay freezes, less TTE expenses and so on – are going to be essential to implement. HR needs to take the lead in identifying, selling and implementing the measures that will best address the urgent cost management needs of their organisations,” he said.

Similarly, local operating autonomy for many HR directors had decreased as the downturn worsens. The report found 40 per cent of HR directors felt they had less autonomy than 12 months ago, and that they reported being more directed, more controlled and required to provide more information to the parent than was the case a year ago.

The report also found that employee morale and engagement levels had been affected at a majority of companies. Just on 60 per cent of companies reported that the onset of the downturn had had a moderate or significant effect on employee morale and engagement levels, which had led many HR functions to make communication with employees a higher priority than ever.


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