2009: crunch time for HR

by 24 Feb 2009

2009 will be one of the toughest years for business in some time. Craig Donaldson speaks with experts about the challenges and asks how HR can step into the breach during the downturn

Business is entering unchartered terri tory in 2009. As a global recession continues to weigh down on the Aus tralian economy, many corporate leaders are understandably nervous about the coming year. While the fundamentals of the Aus tralian economy are generally good, the fact that the US and Europe are in recession has a psychological impact on Australia.

“There’s not a lot of confidence in busi ness about the coming year, and I think it’s safe to say that the first nine months of the year will be difficult for business,” says Phil Ruthven, Chairman of research firm IBISWorld. “Short of any other world shocks, we should be recovering by December 2009 and then into 2010.”

Christine Christian, CEO of Dun & Bradstreet, also expects the Australian economy to remain depressed during 2009, particularly as corporate investment falls. “Business confidence has already declined to levels not seen since the 1990s, and this may fall further as we progress into 2009.”

A recent Dun & Bradstreet survey found that at least 60 per cent of businesses indicated that their profits will decline over the coming year, and Christian said the flow-on effect will be fewer jobs and increasing unemployment.

What HR can contribute

Engagement and retention will be two key themes for HR over the coming year, accord ing to Ken Gilbert, Mercer’s human capital business leader. Focusing on engagement and retention are important because they can add value to an organisation in a way that deals with the current reality of managing costs in tough times, he says.

Similarly, workforce planning and talent management will also be of critical impor tance, Gilbert says, as companies come to grips with workforce requirements through these difficult times. “Avoid cutting critical roles and resources. Rather than the blanket cuts of 15 years ago, business needs to under stand the important roles in an organisation, the skill sets required for them as well as the talent in the business,” Gilbert says.

The downturn may push HR into the next generation of talent management, Gilbert says, where HR looks beyond the immediate term and toward the critical skill sets needed for competitive advantage for when the economy picks up again in 12 to 18 months.

“It’s about looking to the future and under standing what’s happening with your key peo ple. HR needs to know where the critical roles are in the business and be clear about what learning and development opportunities are needed to grow your high potentials.”

Where organisations do have to imple ment redundancy programs, Gilbert says HR has historically paid a lot of attention to people departing the organisation and treating them with due care and respect. In the current climate, he says HR can also add value by focusing on the survivors in the organisation and what the business is doing for those staying on.

“There is more accountability and they will have to work harder because the work force is smaller. HR can add a lot of value in the immediate term by being sensitive to what they are feeling,” he says.

Reward and pay also tends to suffer in a downturn, and many businesses are already deferring salary reviews or cutting related budgets. Gilbert says HR can add value here by making sure that budgets available for bonuses and pay increases are spent where they will have the most impact.

Given the uncertainty and a potential lack of confidence in business performance among employees, Gilbert also says that HR can run communication and financial education programs. “Those approaching retirement are more likely to have been hit by the share market crash, so understand ing what’s happening in the economy and what this means for them can be good for increasing engagement,” he says.

Looking to the future

While things have generally swung back in the favour of employers as a result of the downturn, Ruthven’s message to HR is not to take excessive advantage of this. “It’s currently a buyer’s market – but this power will not be with companies indefinitely. It will probably swing back to a seller’s mar ket in two to three years when employment is at about 5 per cent,” he says.

“Therefore, I think the HR department has to be particularly sensitive to doing the right thing by employees. Memories can be long in periods like this, so if companies do the hon ourable but tough thing they will be respected for this long beyond the hard times.”

Reducing risks

Many businesses will be looking to reduce risks as much as possible over the coming year, which will have a flow-on effect to staffing and skill sets. Companies are looking for as much certainty as possible in the current environment, according to Christine Christian, CEO of Dun & Bradstreet, so they won't have the bandwidth to bring in new unskilled high potentials.

"Many businesses will be going back to good old fundamentals and business management skills," she says. "Employers will also be looking for people who have worked through the hard times before, so business will be focusing on people who possess those skills."

Because many businesses are putting in cost-control measures, Christian says that to deliver these measures employers will need people who can support them. "It really takes people who have been there before. There will always be skills shortages, but, in the current environment, businesses should be looking to hire more experienced candidates who can stretch their abilities further."