Sarah O’Carroll asks the executive panel about how HR can help their organisation during an economic downturn
Michael Coates, CEO, I.N.C
A good spread of sales across diverse markets is desirable in tough times; however most small-to-medium businesses have a lot of eggs in the same basket. I.N.C. is no exception. Approximately 70 per cent of sales are into the automotive industry, which is suffering substantially with the global financial meltdown.
These are difficult times for any business; however those supplying the automotive industry face unique difficulties. Not only are sales volumes in decline, but margins are being squeezed on several fronts. Reduced volumes reduce all cost recoveries, increasing the cost of sales substantially. Imported raw materials now cost 25 per cent more than they did two months ago.
Then there is the automotive industry speciality –annual costdowns. To those who are unfamiliar with this term, annual “costdowns” are price reductions based on theoretical cost reductions achieved through efficiency improvements. These are applied AFTER matching world competitive price targets.
For those of us in this unenviable situation, the challenge for manufacturers is to survive these difficult times.
It is an old adage, but true, that in manufacturing we make our profit in the factory. After the selling price has been accepted, and the lowest possible material costs have been negotiated, the only remaining variables are the cost of labour and fixed and variable costs.
It is critical, in these turbulent times, that communication between production operatives and management is clear and precise. The interdependency of the employer/employee relationship is now more important than ever.
Now is the time to work on manufacturing cost reductions, and to apply all of the principles of lean manufacturing. At I.N.C., 80 per cent of our factory staff have a Production Certificate level 1, 2, or 3. This was achieved through intensive training conducted in conjunction with RMIT University.
It is an essential time to make sure all of that training is put to use. With reduced margins there is absolutely no room for quality problems, for waste, or misunderstanding. Now is the time for all of the process improvements that have been on hold, for lack of time, money, or other incentive.
To achieve the required savings means leveraging the workforce. The expectation has to be that all employees have a responsibility to secure the future of the company. The role of the HR department is not to draw up lists for redundancy, it is to facilitate cost savings, through communicating clear expectations and implementing programs that enhance teamwork and help all employees to make a positive contribution towards surviving these most difficult times.
Greg Bourke, director human resources, 3 mobile
The uncertainty created by the current economic climate can impact on the confidence of employees in the business and indeed their own performance.
Human Resource organisations have many levers to put into play that, if used correctly, can be of great value to both the performance of the business and the employee. The most critical area of impact is the organisational culture. The culture defines “how things are done” in an organisation. More importantly in times of crisis, culture takes the driver’s seat. A constructive culture where people treat each other with respect and work together effectively provides a solid foundation to handle external pressures more positively.
As a consequence, if an organisation has a poor culture it is more than likely that its business results will be poor as well. So, in uncertain times, it is imperative that the culture is one in which employees can strive to do their personal best; one in which they wish to stay to pursue a career and one in which they actively promote the organisation as a great place to work. A culture that encourages people in these ways is one in which its people are actively engaged.
This is where HR can really add value. Creating an engaging environment in which people are inspired to do their best does not happen by accident. These environments typically have leaders that are open and honest and act with humility – these leaders love to coach and develop their people. Leaders that take full accountability for their actions and do not get into the blame game. They also are generally very curious about what is happening around them, genuinely interested in their people and keen to be constantly learning. The HR organisation has the responsibility to work with line managers to develop leaders so they can be role models for these behaviours.
Business symbols are also a key area that impacts on the culture – ie the type of decisions made, how time is allocated and prioritised, what the business spends money on, how communication occurs and the look and feel of facilities. For all these HR needs to step up and ensure that they reflect appropriate messages to the employee population.
Finally, having the right systems and processes to motivate people and reinforce a positive culture is imperative. HR must design recognition programs, recruitment processes, performance-evaluation processes and remuneration systems that provide the structure to encourage people to do their best and want to stay with the business.
If these levers are properly designed and implemented by the HR organisation, a business will manage through tough economic times more easily and will certainly have the competitive advantage when economic times improve.
Kellie Tomney, executive manager, recruitment & branding strategy, St.George Bank
Work with your Leadership Team and Strategy: I believe we need to be closer than ever to business strategy in these conditions. We need to fully partner with the business and understand and even push the organisational requirements for real planning around this.
The business will be scenario planning –depending on whether the economic activity rebounds quickly, sinks into a long, mild recession or hard depression for a year or two – and this has huge implications for the organisation’s people strategy.
Develop your revised People Strategy and scenarios: it is now more important than ever to work through the corresponding people requirements and required HR strategies with your leaders.
Workforce planning: this is now more critical to the business. What are the skill sets required for different scenarios? Who is talent in these scenarios? How does your organisation capability currently map to this? What proactive strategies can you put in place to meet these and create advantage out of this from an HR point of view?
It is my prediction that businesses will need more change-oriented leaders and they will be more valuable than ever in these times.
Employer Branding: we all know that talent can make or break a business. However, it is in these times, in particular, that top talent and high performers stand out. I believe you have to do all you can to lock in critical talent and top talent is becoming increasingly picky about who to work for.
The brand they associate with is becoming more important because that holds brand equity for them also.
You need to ensure you have an Employer Brand Strategy, and an authentic, unique, and desired Employer Brand for your business. This is a particular area of focus and passion for me and I believe this will create real competitive advantage for businesses in the future.
Focus on revenue generation and cost opportunities: we have all heard the saying that “you cannot achieve greatness by cost cutting alone”. I think we need to continue to know our business inside out, the business levers, revenue and cost savings opportunities, and continue to drive our businesses to really innovate to survive and create advantage in these times.
Engagement becomes even more important: I believe we also need to develop strategies to continue to keep our current employees focused, engaged and productive in this challenging environment.