An economic downturn is an important time for HR to assist in executing business strategy. Craig Donaldson looks at what HR can bring to the table during a downturn
The economic downturn is putting significant pressure on many organisations.
In such times, CEOs usually turn to finance and operations to assist them in
adapting to the times. However, HR can also make a valuable contribution at
the executive table.
HR needs to play a pragmatic role in these times. However, this role may not necessarily
fall under the banner of strategy, according to Justyn Sturrock, human capital management
service line leader, A/NZ, IBM Global Business Services. “HR must have the skill set to
drive operational efficiency and effectiveness. This is about creating an adaptable work
force that can rapidly respond to changes in the market,” he says.
Sturrock says this is not a time for HR to start using strategy language and that execu
tion is more important in tough economic times. “The thing that frustrates me about HR
is the whole argument about being involved in strategy. Execution of business drivers,
which contributes to business performance, is what matters,” he says.
David Reynolds, executive general manager of Chandler Macleod Consulting, says that
it is important that HR takes an active role in providing advice on initiatives that meet
the organisation’s strategies, which may need to change significantly to survive such chal
lenging economic and business conditions. “Be the sounding board, but also the challenger
to traditional ways of achieving outcomes. These are extraordinary times and, as such,
require new ways of thinking,” he says.
Reynolds advises HR not to rely on what worked
before: “Think laterally and differently; change the par
adigm; use the current situation to strengthen leader
ship; move on poor performers; improve productivity;
work smarter; get closer to your customers; and grow
Jon Williams, a partner at PricewaterhouseCoopers,
says that in addition to the above, organisations should
be positioning themselves to prosper when the economy
strengthens. There is a strong opportunity for HR exec
utives to work as part of their leadership team to develop
and implement people, productivity and performance
strategies that will help an organisation achieve these
goals, he says.
“HR executives can demonstrate their value by: iden
tifying people-related costs; advising on how to reduce
these costs with the least impact on revenue, service or
productivity; advising on the right strategy to ensure per
formance levels are maintained or improved during the
vital periods of change that have to take place; and ensur
ing they continue to build an organisation that is attrac
tive to the best talent that will safeguard the future,”
What can HR bring to the table?
HR has historically had trouble in bringing hard, quan
tifiable suggestions to the executive table to demonstra
bly benefit the bottom line. In tough times, however, HR
is in a position to be able to add unique value.
Williams says organisations need to focus on the ele
ments of the employment relationship that are vital to
maintaining performance during a period of uncertainty.
To maintain productivity and workforce efficiency, he
says HR must be relentless in reinforcing the importance
“Employees need to trust the leadership team and its
ability to design and deliver an effective plan that will
carry the organisation through the current situation. Lead
ers must be more visible and communication must be
stepped up if employees are going to be able to be effec
tive and focused in what they are doing. That clarity of pur
pose, objectives and individual roles in the new environ
ment is essential,” he says.
Employees will feel more secure and be significantly
more productive the more they understand the direction
of their organisation and if they have had the opportunity
to reshape their personal goals and objectives to support
this direction, Williams notes. This is especially important
in retaining talent. “Voluntary turnover will drop during
any period of economic slowing or uncertainty – but not
for the top 10 per cent of talent, who will continue to be
just as mobile as ever. Organisations must keep their top
10 per cent, but, vitally, attract the best people from their
competitors,” he says.
Sturrock says HR first needs to focus on the develop
ment of formal processes for developing future business sce
narios and identifying needed skills based on those
predictions. “This will identify emerging trends and allow
companies to make decisions about the need to buy ver
sus build skills before they are fully needed,” he says.
“Workforce analytics data is key here; this is not basic
HR data. HR must understand the peaks and troughs of
workforce demand, how these peaks can be smoothed out
to reduce operational costs, what skills are available in
the business, where talent is located and how it can be
rapidly deployed. This must be underpinned by a model
that allows this to be done in constructive and productive
ways,” he says.
This workforce analytical data must also be of the same
level of timeliness, quality and accuracy as would be
expected of financial or operational information. This is
critical to measuring and driving organisational efficiency
and effectiveness, Sturrock says.
Measuring business benefits
In tough economic times, HR should take an interest in the
operations and understand the pivotal, critical roles and
issues in the business, according to Reynolds. It is equally
important to ascertain the extent of skills needed to man
age through adversity, and those initiatives needed to steady
and lead the workforce, he says.
“Identify pivotal roles that will allow the organisation
to increase revenue and share of the market, and those
that will reduce costs. HR should also identify skill-sets in
the business that may be needed to focus on new initiatives
and develop new business opportunities.
“The bottom line is that all of these initiatives need to
be costed and demonstrate immediate and longer term
financial benefits for the business,” Reynolds says.
Williams says that it is a time for data and bench
marking – not hypothesis and speculation. There is plenty
of excellent data on people metrics that HR executives
need to be sharing with their leadership teams to help them
understand and control costs, and to make effective invest
ments that will both address immediate issues and build
a sustainable business long-term, he says.
“Above all, it is important not to lose sight of the
fact that the skills that have stood HR in good stead
during growth times are just as vital in a downturn.
These skills include talent management, organisation design, role definition, change management and building
and delivering a compelling employee value proposition,”
Future-proofing your workforce
Australian companies planning to outlast the economic downturn will need to ensure they have fast access to the right people if they want to be one of the first to take advantage of new market opportunities, according to Unisys.
"Corporate Australia will be keen to avoid the actions of the 1990s recession that saw training budgets and head counts axed, resulting in a decade-long skills shortage. Employers must consider their future workforce and which skills they may need now and how that may change in the future," says Petra Buchanan, vice-president marketing and community, Unisys Asia Pacific.
"Both the CFO and HR managers will look at staff output and use improved efficiency metrics to measure productivity, making return on investment (ROI) metrics a key HR tool in 2009. Such metrics will help employers make good use of less traditional workforces such as baby boomers, new mothers and those wanting to work part time. The ROI metric provides analysis of job sharing, part-time work and telecommuting to achieve productivity."
According to Unisys, the top five strategies for future-proofing a workforce are:
1. Create a flexible workforce model to scale to meet business needs
2. Identify skills needed to be a first mover in your chosen industry
3. Treat employees as a valued investment to get the best return
4. Use measurable metrics to support HR business decisions
5. Consider flexible work practices and non traditional workforces
Advice for line managers
Across-the-board cuts are bad and nearly always counterproductive. They depress the morale/motivation of your most talented people - the ones who can always get a job elsewhere. Advise your managers to be selective and support them to be so
Support all actions that will strength your organisation's ability to move speedily/grow rapidly once the recession is over (which it will be some day) otherwise you will be left behind by your competition
Help leaders who are new to a downturn to build on the experience of those who have been there before. Set up sessions where your more experienced managers share ways of coping in a downturn
Be creative in coming up with cost effective ways for your leaders to maintain and enhance the engagement of your most talented employees
Source: Richard Hardwick, MD Pacific Region, Hay Group
Tips for success in a downturn
Consider reducing costs by reducing working hours to four-day weeks - this means talent is retained while a 20 per cent cost saving is achieved and no redundancy costs are incurred
Develop a process for identifying the key skills and attributes needed to act and think differently in this market and ensure these skills are retained, fostered and developed
Up-skill leaders so they can effectively manage through difficult times. Provide them with assistance in training and managing stress and employees
Consider contingency workforces and project labour as a way to reduce overheads and still retain a level of specialist resources
Source: David Reynolds, Executive General Manager of Chandler Macleod Consulting