Among the most significant findings of this year's Sage Business Index are the current climate of business pessimism and its impact on HR. The Sage Business Index is an annual study of business confidence compiled with the input of more than 500 owners and decision makers across all business sizes and industries. Each year it shines a light on the attitudes, priorities and perceived challenges facing Australian businesses.
Although this year's Sage Business Index found a wide disparity in levels of business confidence it also identified much greater pessimism among business owners when compared to 2011. Almost half of all businesses believe that the economy has declined in the past 12 months and only one fifth of businesses consider that the domestic economy is recovering.
All this is despite Australia receiving the most positive economic forecast out of all OECD countries in May. It seems that companies just don't trust Australia's ability to navigate the global economic woes without being affected at some point in time. Unfortunately, this negativity is creating a self-fulfilling prophecy. Because they anticipate the worst, businesses are becoming more cautious and delaying expenditure where possible. This affects the revenue of other businesses that in turn cut back their spending, and so the cycle continues until there is less money changing hands and everyone's revenues slow. Almost nine in 10 companies interviewed for the Sage Business Index say they are concerned about their own business growth prospects as a result of economic issues and more than half of all businesses report deferring significant business decisions as a consequence.
One of the biggest areas of deferred decision-making across all companies is staff. More than one quarter of businesses have deferred pay rises and a similar number are postponing staff hires. Staff training and education are also being put on the back-burner. At the same time however, the skills shortage that has plagued most western countries for the past decade has not gone away and almost six in 10 businesses say they are struggling to find appropriately skilled staff.
All of this is helping to change the expectations being placed on HR. Looking for a fast return, businesses are becoming more firmly focused on sales and marketing, leading to a decline in priority for recruitment. Instead, the new challenge for HR is to find creative ways to meet staffing needs, and to continue to develop, engage and retain valuable staff while cutting back expenditure.
Begin with a plan
A good strategy right now – and one which almost half of all businesses have adopted – is to put in place a current, formal staff plan that details staffing estimates, key roles, assigns responsibilities, and identifies and provides strategies to redress skills gaps. Such plans provide an opportunity to establish, review and re-prioritise the allocation of human resources within the business. They help to provide an understanding of where staffing problems may arise and which staffing decisions can afford to be postponed.
Creating a plan requires require time and focus, so it's perhaps not surprising that the practice of planning occurs most frequently in large and medium organisations which are also more likely to have a dedicated HR function. As organisation size diminishes, so does the likelihood of staff planning.
Getting creative but not casual?
One change in staffing strategies between 2011 and 2012 has been an increased reliance on external staff, with almost four in ten businesses reporting greater use of contractors and part-time staff. It's a way of providing companies with flexibility in dealing with workload ebbs and flows, and avoids the costs incurred by carrying full time personnel.
Companies are also becoming more creative in their approach to solving staffing issues. The practice of “fly in/fly out” staff within the mining industry is an often cited example of this. At a more everyday level, the Index found that one third of companies are actively considering using older staff to help with staffing issues. This kind of flexible approach is only likely to increase as companies grapple with a tepid employment market and continued business uncertainty.
As an aside, it is interesting to note that casual labour does not appear to be one of the up-and-coming preferred staffing solutions. According to ABS labour force statistics released in April 2012 while the number of casuals in the workforce is increasing, it is increasing “at a rate lower than that of all employed persons.” In other words, the proportion of casual employees compared to all employed persons has fallen from a high of 21 per cent in 2007 to 19 per cent in 2011. It would be nice to think that is at least in part due to business' desire for the greater continuity of knowledge and skills offered by a more committed employee relationship.
Recruitment won't stop
Although recruitment has declined as a priority, it doesn't mean that all recruitment should or can stop. There may be an opportunity to postpone a staff replacement, thus saving on salaries for a month or two, but if a critical member of staff resigns you are going to have to replace that person. And this means being able to attract and engage a new recruit, or mentoring existing staff until they can grow into the role.
Doing more with less is not easy but the Sage Business Index 2012 confirms that with a little planning, creativity and flexibility, businesses are managing to meet their staffing requirements and continuing to develop their human assets.
About the author
Alan Osrin is the managing director of Sage Software Australia. For further information visit sagesoftware.com.au