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."