Strategic Role of HRM During Recession Period

Since human resource management is dealing with the implementation of the strategies and policies relating to the management of individuals, the department become one of the most responsible to bring the organisation on the right track during recession time. There are some important steps that a business should follow in order to maintain their competitive position on the market. Some of these vital steps are the improvement of prices in order to grow margins, the increase of the financial and operational efficiency, but also the concentration on the market share.

The purpose of the human resource management is to make sure that an organisation is able to perform well through its staff, but also to increase the efficiency and the capability of the business. Furthermore, it also helps the business to reach it goals by using the resources available to their best use.  HRM is one of the most important factors that, in any organization play an important role as a change agent during the period of recession; HRM has to assist top management in recession period.   Recession provides an opportunity to HRM and organizations to cancel out old policies and introduce some new and modern techniques with high standard to make their organizations better than before to keep working when economies are slow down.

One of the first processes affected by a recession is the recruitment and selection policies which have been massively affected by the recession. Recruitment and selection process involves making anticipation about what will happen, so that decisions are made about who is the most suitable person for a certain job that can increase the performance of an organisation. Now managers and recruitment agencies are being extra careful who they bring in, and they prefer to rethink and implement new strategies in order to improve their relations with the customers. In addition, companies are even more demanding than before, making sure that they recruit the best candidate that can bring real value to the company.

Most of the businesses stop recruitment completely or they reduce it to minimum. This affects the activities of job analysis and planning, as there are no incoming employees. The HR department is really careful of identifying the needs in personnel of the company and designs work positions that cover a larger field of duties and have less specialization. Additionally, they can build a “brand name” this period, creating job campaigns that will attract talents with the minimum cost. They reschedule simultaneously the planning of the working force of the company and its organizational structure, redirecting the employees in other departments. In this way the costs in money and time from recruitment are almost eliminated instantly. The crisis enables companies of mapping and targeting the really talented employees that maybe they are working for the competitors or are victims of the recession. And all these will cost to the company less than in a growth period.

Training will follow the pace of the recruitment as it is costly to train the new employees, as long as they exist. It has huge costs in time and money, so the companies prefer already experienced employees, victims of the recession, to avoid these costs. On the contrary, development is really significant during the recession time. This is the HR practice less affected by recession, as can be done with low cost, using IT solutions, and prepares the business for the exit of the economic crisis, maximizing the performance and contributing in the long-term success. The development can be diminished to the key personnel, identify the top performers and concentrate to the really capable of achieving good performance.

Another significant effect on human resource management which impact an organization in recession time is the cost cutting. Organizations are conscious about the situation of the business and try to do everything to maintain their competitive position on the market. They started to cut working hours, holidays, labor costs, and travel expenses and they don’t offer long-term benefits anymore. Organizations needed to reduce its cost not only to their store level, but also to their head offices.

From what the business can save a huge amount of money are the bonuses that can be significantly reduced, without touching the base salaries of its employees, as they are really sensitive in this. In the same manner, in the appraisal process, the promotions can be re-evaluated and can be done only the needed ones, trying to minimize the salary augmentation and strengthen their development programs.

The career and development process have been also affected by the recession, so that managers offer limited training’s to their staff. Selecting and training employees with great potential, contribute to the increase of the sales and organisations performance. It also leads to a more structured career path which ensures that staff has the necessary skills to improve the quality of services and products of a company.

Introducing flexible working arrangements and part-paid sabbaticals is another effect of the recession that has a significant impact on an organisation. Managers prefer to make these changes, rather than implementing redundancy programmes, because it allows them to manage every cost. This measure eliminates the need of hiring extra staff for busy periods such as Christmas or Easter holidays.

A very  decent  example of dealing with recession can be given by keeping China in mind, because of the fact that a very large huge number of labor is working in China but no firing or reduction took place when recession hit. If we compare the HRM function in China and other parts of the world, the only thing which comes to mind is that China produces goods at low costs, which is the ultimate objective of all the organizations. In china 3-4 peoples work for the same amount of money compared to Europe or USA where 1 person does the work for the same amount. In China the cost is being neutralized rather than being cut. The focus is to produce more with more workforces at lowest possible price and cost. Remember, laying off employees is not the only way to reduce cost, there are many other ways to reduce cost during recession, one of the ways to reduce cost by not laying off is by, utilizing man power with lower salaries, until the company can stand back on its feet.

In bad economic periods, companies neglect investing in HRM, as they think of these periods suitable for cutting benefits and firing employees. In the contrary, companies should take advantage of these periods, to prepare themselves for the next period of strong economic growth.  The innovations that HRM can implement in organizational culture of the company during recession periods are: collaborate with ecological ways of communication reducing costs; increase the satisfaction of employees making them feeling important, sharing with them the vision of company; introduce the flexible working transforming it from an employee benefit to a cost controlling strategy; increase the employee engagement to the performance of the company; and finally attract and keep talented employees. In this way, HRM, through innovative strategies contribute to the exit of a company from the recession, lowering the costs and maximizing business performance. Being focused on organizational culture, through its processes and the help of technology, HRM can offer real benefit to the company.

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