PROJECT REPORT

ON
ROLE OF HR IN EMPLOYEE MANAGEMENT DURING
RECESSION

By

___________________

MBA

Under the Supervision of

_________________
Professor
Department of_________

In Partial Fulfillment of the Requirements for the Degree of

_________________ UNIVERSITY
________________________________

2014
 CERTIFICATE

I Prof. ________________ hereby certify that

Mr./Ms_________ student of Masters of Business Administration –

HR at ________________ University has completed the Project

Report on ― Role of HR in Employee Management during

Recession, under my guidance.

________________

Professor, Department of________

2
 ACKNOWLEDGEMENT

“It is not possible to prepare a project report without the assistance &

encouragement of other people. This one is certainly no exception.”

All praise to the almighty with whose auspicious blessings I have been able to

accomplish my research project report successfully. Equal credit goes to my

parents and teachers who made me what I am today by their hard labor,

devotion, support & prayer.

My special thanks to for generic cooperation coordination and valuable

support. I pay my gratitude towards my other faculty members. I must not forget

to render my deep feelings of gratitude and thanks to all the respondents whom

I visited during the survey for valuable information, co-operation, advice and

suggestion to make this endeavor a great success.

I am grateful to my guide Mr. __________________ for his efforts during my

thesis work. My sincere thanks to all other who were associated with the project

directly or indirectly for providing me the excellent guidance during the project.

I appreciate the co-ordination extended by my friends and also express my

sincere thankfulness to the entire faculty members of ____________________,

giving me the opportunity to do this project/study and also assisting me for the

same.

3
 CONTENT

S.No. Topic Page No.

1. Executive Summary...............................................................5

2. Introduction............................................................................7

3. Literature Review.................................................................36

4. Research Objective.............................................................67

5. Research Methodology........................................................68

6. Data Analysis and Interpretation ........................................69

7. Conclusion...........................................................................81

8. Recommendation................................................................82

9. References..........................................................................84

10. Annexure – Copy of the Questionnaire...............................85

4
 EXECUTIVE SUMMARY

Human resources professionals often struggle to obtain the resources they

need to effectively manage people in the workplace, and the difficulties that

they face are augmented when economic conditions worsen. The current global

recession has caused most companies to review their allocations of resources

more critically and as a result, organizations of varying sizes have laid off a

significant number of workers at all skill levels, putting the American

unemployment rate at its highest since 1983 (Bureau of Labor and Statistics,

2010). As human resources departments try to keep their remaining employees

engaged, motivated, and appropriately trained, they face many challenges

including reduced human resources staffing levels and program funding,

psychological hardships for workers dealing with the crisis, and employees with

different generational mindsets and priorities. These and numerous other

difficulties make it difficult for human resources managers to not only manage

their people through the downturn but to ensure that their companies are

adequately staffed with talent when economic conditions improve.

Recessions are never purely economic events. As businesses shed jobs, profits

fall and investment is cut back so families find their main breadwinner looking

for a job, communities see industries they have depended on contract and even

disappear. Recessions are social and so political challenges as much as

economic ones – a challenge of collective and collaborative adaptation to

radically changed circumstances. The underlying causes of the recession that

5
has just begun, and to chart a way through. At its heart is a simple idea: this is a

recession brought on by the ultra-networked character of the modern economy

and the solutions will be more effective if they work with and reshape those

networks. Networks are the key.

6
 INTRODUCTION

The economic recession that began in the United States in 2007 has created

significant uncertainty for American businesses and laborers as tightening credit

markets, a burst of the housing “bubble,” and a financial markets collapse have

not only caused employers to analyze their cost structures but to ask, “when will

it be safe to invest again?” Though corporate spending is increasing and the

gross domestic product is expanding, many companies are hesitant to hire

again until they have experienced several quarters of improving economic

conditions and the outlook for their businesses is less volatile. This means that

the unemployment rate is unlikely to contract significantly in the near future; in

fact, the unemployment rate, which stood at 9.6% as of November 2010, is

projected to fall to only 9% by the end of 2011 and 8% in the following year. In

addition, many companies have cut spending for their current employees, often

one of the first line items slashed in budgets during difficult times, and are less

likely to significantly increase wage rates, spending on employee benefits, and

investment in recruiting and training and development programs until their

financial pictures become clearer.

These difficulties place constraints on a human resources (HR) manager’s

ability to effectively manage his people in all aspects of the HR function.

Uncertainty in business performance as well as in the labor market provides a

HR manager with challenges in predicting both demand and supply for labor.

When recruiting budgets are reduced, hiring managers can struggle to

7
effectively find talented employees when they need them. Smaller training and

development budgets can impair an employee’s ability to obtain the requisite

knowledge and skills to effectively perform his assigned tasks. Employers are

faced with questions, both practical and ethical, regarding the appropriate level

of compensation for current and new employees. Though many companies face

these problems even in prosperous economic times, they are intensified in

times of economic decline.

HR Planning

The economic recession that began in the United States in 2007 has created

significant uncertainty for American businesses and laborers as tightening credit

markets, a burst of the housing “bubble,” and a financial markets collapse have

not only caused employers to analyze their cost structures but to ask, “when will

it be safe to invest again?” Though corporate spending is increasing and the

gross domestic product is expanding, many companies are hesitant to hire

again until they have experienced several quarters of improving economic

conditions and the outlook for their businesses is less volatile. This means that

the unemployment rate is unlikely to contract significantly in the near future; in

fact, the unemployment rate, which stood at 9.6% as of November 2010, is

projected to fall to only 9% by the end of 2011 and 8% in the following year. In

addition, many companies have cut spending for their current employees, often

one of the first line items slashed in budgets during difficult times, and are less

likely to significantly increase wage rates, spending on employee benefits, and

8
investment in recruiting and training and development programs until their

financial pictures become clearer.

These difficulties place constraints on a human resources (HR) manager’s

ability to effectively manage his people in all aspects of the HR function.

Uncertainty in business performance as well as in the labor market provides a

HR manager with challenges in predicting both demand and supply for labor.

When recruiting budgets are reduced, hiring managers can struggle to

effectively find talented employees when they need them. Smaller training and

development budgets can impair an employee’s ability to obtain the requisite

knowledge and skills to effectively perform his assigned tasks. Employers are

faced with questions, both practical and ethical, regarding the appropriate level

of compensation for current and new employees. Though many companies face

these problems even in prosperous economic times, they are intensified in

times of economic decline.

Measures can be adopted to tackle the recession:

 Tax cuts are generally the first step any government takes during slump.

 Government should hike its spending to create more jobs and boost the

manufacturing sectors in the country.

 Government should try to increase the export against the initial export.

9
 The way out for builders is to reduce the unrealistic prices of property to

bring back the buyers into the market. And thus raise finances for the

incomplete projects that they are developing.

 The falling rupees against the dollar will bring a boost in the export industry.

Though the buyers in the west might become scarce.

 The oil prices decline will also have a positive impact on the importers.

Causes of Economic Recession:

Observation of economic recession:

The calculation of a country's gross domestic product or GDP is usually for two

or more quarters of a year, successively. Many economists judge recessions to

better understand the causes and find effective solutions to them. A period of

recession is a significant decline in economic activity. The decline could be

observed over a period of a few months. The abstract decline that affects real

people is sensed via a fall in the GDP, actual income on record, employment

data, production and sales etc. A recession is measured from the time of initial

decline, which is mostly just after the economy reaches a peak of activity till the

time the resultant ‘trough’ shows up on the graph. Most recessions are brief.

Wider implications:

A recession documents simultaneous decline in employment, profit and

investment, and an upscale inflation. During the economic collapse, the periods

10
of deflation and alternative inflation are part of a process studied by economists

as ‘stagflation’. A severe economic recession is a devastating breakdown of an

economy. Those economies that are market-oriented are usually characterized

by economic driving cycles and there it is debated whether or not, in such

economies, government intervention smoothes, exaggerates or creates it. A

period of recession witnesses a stock market drop at the onset. Sometimes,

nearly half of the stock market declines are recorded after the onset of the

period. The period of economic recession can also be sensed via the

unemployment rate and subsequent claims, a housing recession and the use of

the indicator index.

Possible solutions:

There are a number of strategies that can be implemented to help an economy

to move out of a recession. The strategy adopted and applied varies and

depends on the type of economic system and analysis followed by the country’s

policy makers. While some may advocate the deficit spending to initiate

economic growth, others may adopt tax cuts and yet some other may prefer

and recommend a non-intervention by the government in the market forces of

the economy! There is no difference between the deficit spending and tax cut

strategies and both increase the money within the economy. Economic

recessions are believed to be caused by wide based increase in rates of

interest or a loss of consumer confidence. Economists suggest that periods of

recession are actually caused by specific events that impact certain industries.

11
Factors that impact economic recessions:

Periods of recessions have followed dramatic increases in the price of oil. The

industries that depended on energy prices suffered a sharp decrease in

business and subsequently, reduced output and staff. An economy-wide decline

in demand and reduction in real is influenced greatly by the higher cost of oil

imports and a stringent monetary policy. The influencing factors slow down

overall demand, and lead to subsequent recessions. The economic recession is

the outcome of the impact on the economy by drop in demand, role of

aggregate forces and the allocative forces.

Reversing the situation:

Economists believe, backed by years of research, that paying attention to the

forces that impact reallocation may actually help us to predict future recessions

and upscale economy. The technology harnessed today and the survival post

1929-1930 has made it possible for economists to observe and make available

solutions if and when such an unfortunate slow-down affects an economy. An

economic crisis has a disproportionate impact on firms that trade with the

country or zone and this triggers reallocation. The advent of the internet

connectivity and the use of wireless technology to redefine communication and

information and similar sources of favorable reallocation, could prevent an

economic recession. The relative strength of the determining forces set the

future course of the business cycle and hence, helps to evade the impending

economic recession.

12
The causes for economic recession are many, but the solutions available today

are just as much. It is in a deeper understanding of the implications that we

stand to keep the situation at bay.

Predictors of Recession:

Although there are no completely reliable predictors, the following are regarded

to be possible predictors.

 A significant stock market drop has often preceded the beginning of a

recession. However about half of the declines of 10% or more since 1946

have not been followed by recessions. In about 50% of the cases a

significant stock market decline came only after the recessions had already

begun.

 Inverted yield curve, the model developed by economist Jonathan H. Wright,

uses yields on 10-year and three-month Treasury securities as well as the

Fed's overnight funds rate. Another model developed by Federal Reserve

Bank of New York economists uses only the 10-year/three-month spread. It

is, however, not a definite indicator; it is sometimes followed by a recession

6 to 18 months later.

 The three-month change in the unemployment rate and initial jobless claims.

 Index of Leading (Economic) Indicators (includes some of the above

indicators).

13
Recession Innovation:

Crisis is often critical to innovation. A crisis provides an urgent sense of focus to

mobilize resources and break down barriers which normally stand in the way of

innovation. The economic crisis in the US following the 1907 San Francisco

earthquake and fire led to the creation of the Federal Reserve System. The

Second World War was the spur to the creation of new technologies and

manufacturing techniques, advancing mass production and knowledge

management. The internet was created in part in response to the threat of a

nuclear attack on the US. The crisis in IBM’s traditional market of mainframe

computers created the conditions for it to mutate into the software and services

company it is today. Biology offers innumerable examples of how complex and

interconnected systems can generate and then recover from crises. Adaptive

and resilient organizations find the upside in downturns. Joseph Schumpeter

argued recessions could provide a platform for innovation and economic growth

by unleashing a process of ‘creative destruction’. Periods of economic

turbulence have been associated with the development of new technologies

and ways of working – like the spread of mass production between the wars. A

different metaphor is to see recessions as a ‘pit-stop’: a pause in the race which

allows firms to make smaller adjustments and to rethink their strategy. The

challenge for government policy beyond the immediate fiscal and monetary

measures to stimulate the economy is to create opportunity out of adversity.

Policymakers face an unfolding set of challenges. The primary focus, so far,

has been to avert a wholesale meltdown of the world financial system.

14
Preventing the financial crisis from reigniting will remain a pressing concern,

even as attention turns to ameliorating the impact of the recession on the real

economy. The main focus is not on crisis management, nor on the fiscal and

monetary measures needed to counter recession. The concern is how can we

respond to the crisis and even use it – to promote innovation that will help

create a more productive and sustainable long-term economy. That matters

because the recession arrives with the India already facing strategic and

structural challenges which will require sustained innovation from many

sources:

 The rise of Asian economies which offer new markets, competitors and

partners.

 The continued rapid spread of new technologies, most obviously the mass

participatory web, but also biotech.

 The need to shift the economy onto a much more sustainable growth path,

with significantly lower carbon emissions.

 The social challenges of meeting the needs and aspirations of quality of life

for an ageing population.

These challenges meant it was already clear that the India needed a more

comprehensive approach to innovation – drawing from the public and private

sectors, manufacturing and services, social and commercial sources. The

particular features of the current recession, such as the deflation now occurring

15
in many product markets and the creeping pensions crisis, are compounding

many of these longer term, structural problems. The response to the recession

must strengthen our capacity to deal with these long-term challenges. It would

be all too easy for innovation to be sidelined by the recession. Investment in

new technologies is likely to be reduced. R&D spending is usually pared back

by cash-strapped firms. Start-ups will have to compete more fiercely for venture

capital that will be in shorter supply. Innovation must be central to our response

to the recession, across the board. Investment in innovation may be in shorter

supply but there will be a premium on making more effective and creative use of

the resources that are available. Innovation on the job – not in the lab will

become more important.

Climate Change in Recession:

Most of the companies questioned reject the notion that the issue of climate

change might be sidelined within their businesses during the current global

economic crisis. In the short term the message is essentially business as usual;

most companies felt the issue was too high a priority to be pushed to one side.

Mitigation of climate change is seen as long term, whereas the economic crisis

is largely considered to be short term. Where climate change is already

integrated into company policy, many companies feel that there will be little

impact during the current recession. They expect that organizations will carry on

with established activities, focusing on low carbon measures that will reduce

costs and resources. However, some companies predict that major capital

climate change investment is likely to be held back or postponed in the short

are more optimistic in their outlook than that elsewhere, with two thirds saying

that they do not believe climate change will be sidelined. This compares with a

50/50 split in the UK and Japan between those that feel there would be no

impact during the economic downturn and those who think that there will be a

short term impact. Management in the insurance and financial services, metals

and mining, and pharmaceuticals all feel there will be little or no impact; while

those in construction and food and beverage industries are predominantly

expecting short-term impacts, such as more stringent criteria for investment and

delays in non business critical expenditure. A large number of companies

believe that the requirement to reduce carbon emissions will actually provide

them with significant new business opportunities and that by continuing to

invest in climate change measures they will be better positioned once the

economy begins to stabilize. The biggest factor in reaping benefits from a low

carbon economy is seen as being well positioned before the change and

therefore having a competitive advantage when a low carbon economy begins

to be fully realised. Overall, the view is that most companies will not reduce

their spending in this area on the grounds that they have no choice but to try to

hit carbon emission reduction targets, whether mandatory or voluntary. By

continuing to invest in climate change measures, most believe that they will be

better positioned for growth once the economy begins to stabilize. Moreover,

companies taking action now feel they would benefit from the advantages of

being the “first movers” in developing new technologies. If government were to

17
help encourage customer demand for energy efficient products and services,

then these would be developed to meet that demand. In turn, companies feel

this would make them more efficient and robust in withstanding high energy

prices and dealing with issues of energy security. Alongside the desire for

Government intervention and support is the recognition that businesses can

reap huge benefits from a low carbon economy. The key is seen as being well

positioned before the change. Companies that have invested in, developed or

deployed low/zero carbon technologies feel they are likely to emerge as market

leaders and experience growth. With increased competitiveness and an

improved corporate image, they believe they will be better placed to adapt and

to focus on innovation. Adopting low/zero carbon solutions, such as electric

vehicles, renewable and improved energy efficiency, would also reduce the

current extreme volatility in energy costs tied to the price of oil and would

increase energy security. The current economic climate is also seen as a

reason to focus on the energy efficiencies that businesses had already planned

in order to reduce costs and strengthen energy management For some

businesses, the slow down in production will also provide the opportunity to

review and look for efficiencies in manufacturing processes that will reduce

operational expenditure in the long term. All businesses feel they will be forced

to examine their use of resources and how to improve efficiency. By reducing

costs they will automatically increase energy-efficiency and thereby reduce

greenhouse gas emissions. The economic climate will also make them look at

more efficient ways of working to reduce business travel, such as video

18
conferencing and the use of home working programmes. At least two

companies noted that the current economic downturn would help to make

innovation and investment more attractive to their customers if they could

demonstrate a reduction in end-user costs, for example through lower energy

bills.

Recession: testing times require tried and tested HR tactics:

Any downturn in 2008 is likely to mean a squeeze on HR budgets. But as our

'credit crunch' feature points out, when the going gets tough, HR can choose to

be either a victim or part of the solution. Perhaps it's time for the profession to

stand firm against calls from the top for a headcount review and possible

recruitment freezes.

If redundancies are required, HR teams need to make sure they are up to

speed with the latest case law which, in effect, forces employers to be more

transparent about proposed cuts.

And now, for the first time, thanks to a landmark ruling in September, UK

employers will be forced to involve both unions and employees in the decision-

making process.

On the back of this, warnings are inevitably coming thick and fast from lawyers

about handling redundancies in the right way. Traditionally, employers have

only had to consult on ways of reducing the impact of the closure. But that is no

longer enough. Not only should consultations start earlier but, most importantly,

19
HR will need to give more careful thought to the reasons it gives for

redundancies.

The penalties for failure are severe and will force a culture change across the

UK as the unions delight in their increased opportunities to challenge the

rationale for closures that lead to redundancies.

HR must now step up its efforts to minimise any negative media stories about

employee misery over job cuts, by doing what it does best - communicating

effectively and following the correct procedures.

EMI recently got caught out by failing to do either - potentially to the tune of tens

of millions of pounds. Don't let their organisation be next on the list.

The credit crunch: Crunch time for human resources?

The credit crunch is the defining event in the current economic cycle. It began

with a housing slump in the India. It then developed into a global liquidity crisis

in late summer and resulted in a financial crisis in the India in the autumn and a

collapse in business and consumer confidence in the winter.

The good news is there are signs that the first phase of the credit crunch is

over. But the damage to the prospects for the Indian economy and for

recruitment markets has been done.

The financial climate for 2008 is now set and it is much frostier than in 2007.

The downturn will mean a squeeze on HR budgets and an increased emphasis

20
on the retention of core personnel. Unemployment will rise and skill shortages

will ease - although they won't disappear altogether. Where skill shortages are

the result of supply side constraints then these will remain. But skill shortages

that grew because of buoyant demand will disappear. The war for talent will

continue, but at a reduced level, and talent management will become more

focused on retaining key personnel.

Wages growth will be moderate, especially in sectors where bonuses make up

a significant proportion of pay benefits will be squeezed as more companies

look to cut costs wherever possible and final salary schemes will come under

even greater threat as companies seek cheaper ways to fund their

commitments.

The squeeze on earnings, especially in the public sector, together with the cuts

in benefits, will make wage negotiations more difficult and spark a rise in

industrial unrest in those sectors where trade unions still exert influence.

The HR recruiter:

So far, the credit crunch hasn't had any major effect on HR recruitment. In fact,

employment within the human resources sector is currently at a record level,

with companies remaining optimistic about prospects for the year ahead. Some

of the large investment banks have indicated that HR will be busy this year due

to growth in graduate recruitment, as well as an increased focus on learning

and development - driven by the need to retain in-house talent and to further

develop existing employees. This is a good time for anyone building an HR

opportunities and challenges. For instance, an unstable economic climate may

not affect HR specifically, but it will have an impact on business. We may see

companies encouraging global mobility, with UK employees taking up

secondment opportunities in emerging markets and foreign staff coming to the

India. HR teams should consider how this emigration and immigration will affect

the profession, its workforce and their skills.

The Chartered Institute of Personnel and Development (CIPD) have predicted

that job creation will fall in the private sector and there will be continued

redundancies in the public sector. If this proves to be the case, the months

ahead will be a key period for attracting talent as there could be more skilled

professionals on the market. HR professionals will find it useful to be on top of

redundancy best practice, while ensuring that the rest of the workforce remains

committed and motivated.

The public sector employer:

Unstable economies are often characterised by growing unemployment levels,

fear of change among employees, and a slowing of innovation and growth in

the workplace. At a personal level, employees may experience a sense of loss

of personal security, and worse, a potential breakdown of the family unit

resulting from debt and personal crisis as salary levels face downward

pressures. Employers may experience less confident workers, less flexibility,

22
lost productivity and potential downsizing as an extreme result of financial

instability generally.

The academic:

When the going gets tough, HR can be a victim or part be of the solution. In the

current uncertainty, HR needs to be working particularly closely with the

business - assessing priorities and looking for ways to prepare for potential

market downturn, or indeed, new export opportunities as the pound slides. It is

a good time to do some workforce planning, keeping an eye on the broader

labour market and retain a long-term perspective on organisational health.

In the short term, retention could be a key priority, and where reward is tight, it

is a good time to revisit the psychological contract. What do employees value?

And might options to buy additional leave, have a more flexible working pattern

or development opportunities be acceptable alternatives to increasing the wage

bill? Communicating with and involving employees in such discussions helps

alleviate unnecessary anxiety and instils a sense of shared urgency in

maximising performance. Performance management processes may need to be

revised to encourage line managers to set and review shorter-term goals to

match changing strategies as the organisation navigates stormy waters.

Extreme cases may call for more radical organisational change, and HR needs

to prepare itself for the role it wants to play. It may provide a good opportunity to

undertake an HR skills audit. Identify relevant skills and ensure HR staff is not

complacent. They should find ways to monitor morale, to support line managers

23
and teams, to improve communication channels, and to keep themselves up to

date.

The talent management technology specialist:

Following recent events in the financial markets, a dark cloud has been cast

over future economic growth. At times like these, some might think that this

reduces job creation and makes candidates more plentiful, putting less

emphasis on talent management. However, smart companies understand that

proactive talent management happens regardless of market conditions and that

the search for top talent is a continual process. In leaner times for the domestic

economy, organisations will still need to hire. Every workplace has turnover,

and many will still be expanding in overseas markets such as China and India.

More candidates applying for each role increases the need for automated

systems that identify the best applicants ahead of the competition. Many skills

will still be in short supply as the UK workforce ages.

Forward-looking companies recognise that a tougher market can be an

opportunity to strengthen their talent pool while competitors face cost

pressures, thus emerging even stronger from a downturn. Ultimately, lower

spending means fiercer competition, and talent remains the best sustainable

competitive advantage in good times and bad. Those of us that have seen

downturns or blips in the economy in the past know that a recruitment freeze is

not the answer. When the market returns - and there's nothing to suggest this

will not blow over in six to nine months - organisations need to know they have

24
the people in place to deal with new business, regardless of the industry or

sector. Short-term action, such as looking to put a hold on recruitment, is a

dangerous tactic. HR directors should be advising their management teams that

a long-term view is more sensible. Some industries that are already starved of

talent should particularly look to the future. Skilled people who are made

redundant now could decide to leave the sector completely, leading to an even

greater talent shortage when the market eventually improves.

HR directors also need to guard their training budgets. This is another area for

short-term and short-sighted cuts in a tight economy. Training and development

is essential for staff retention and, given the skills shortage, now is not the time

to lose employees to competitors that are continuing to recognise and invest in

their greatest asset - people. Now is, however, a good time to invest in building

networks and to seek out former employees who will need less time on the

learning curve and be ready to hit the ground running when this minor blip is

over.

Human resources are Input key to managing recession risk:

A rallying call has been sounded for HR to help save organisations from the

dangers of recession. After shares plummeted across the world last week,

senior figures spoke out on the key role for the profession in a damaged

economy. According to Dave Gartenberg, HR director at Microsoft UK, "In

turbulent times more than any other, there is not only the opportunity, but the

need for HR to provide leadership to the business. "The ability to attract and

25
retain workers when times are tough really requires leaders to be at their best."

The Chartered Institute of Personnel and Development - which has already

issued a warning over the grim economic conditions and HR had a huge role to

play. According to Reward adviser Charles Cotton "HR needs to step up to the

plate. It is crucial to businesses getting through a serious recession."

In the short-term, HR staff in the financial services sector will be the worst hit,

but if a full-blown recession develops, every sector will be dragged in. There

may well be recruitment freezes, job losses and a lull in the war for talent. There

will be a need for pay restraint as budgets fall. Companies will have to focus on

rewarding outstanding contributions - those people they cannot afford to lose.

They will see an increased emphasis on talent management. However, they

warned that training budgets could be decimated, and pension schemes closed

- leaving HR professionals with a huge task keeping employees motivated.

Wayne Story, managing director of outsourcing firm Capita HR Solutions, said

HR had to be on top of its game. Proactive, early interventions will be expected

along with strong credible plans. Business leaders backed calls for more HR

vigilance. According to the Patricia Peter, "HR is vital to an organisation in a

recession. If they want to survive, then they have to keep their best people."

Constraints and Challenges of recruitment during recession:

26
Being an HR professional in an organization, what are their major training

challenges? Some of the challenges of recruitment during recession are listed

here: Recruiting, as they know, needs a good business perspective, the

expertise to find and place the best candidate for a particular job and more. The

trouble comes when, during a recession, though the right candidates are now

available, the jobs no longer are and visa versa, therefore making applying the

right candidates to the right jobs becomes difficult.

Asides from this, there is heavy competition among recruiting agencies and HR

teams. None want to lose their job or a chance to benefit their company. As

such in addition to finding the right candidate, this can be a problem that needs

to be overcome.

Along with these previous mentioned issues, HR professional and recruiters

need to stay up to par with the changing global times. It is no longer a walk in

the park. The ante has been upped and so has the difficultly level.

There can also be a major lack of motivation when facing so many problems

internationally. However, this can be overcome and just as any other problem,

can be worked through.

Recruitment Strategy during recession:

27
The recruitment strategy of the organization is the first document to change

during the recession. The company would like to continue in the current

recruitment strategy, but the job candidates expect a completely different

approach to their needs.

The recession makes the recruitment process very hard. The job market is full

of the average job candidates, who apply for every job position, but the majority

of the companies are looking for the experts and top potentials.

The recruitment strategy has to be redefined in the recession. The company

has to focus on the key issues and key initiatives of the organization. The

recruitment strategy has to focus more on the recruitment white spots in the

organization and the general recruitment marketing has to be just kept at the

suitable level.

The recruitment strategy has to be aligned with the general business objectives.

The recruitment specialists cannot speak about the great business strategy how

to survive the recession, when the plan does not exist.

The general recession business strategy has to be defined and the top

management has to define the gaps in the current human capital of the

organization. As the top management defines the basic needs, the HRM

Function can define the job positions with the management and the job

positions can be posted and advertised. The job positions should be advertised

in one and complex advertising as the top potentials on the job market can

28
make their own picture of the organization and the plan for the war with the

recession.

The top talents do have to see the future of the organization. They do not need

the guidance, they do the picture of the strategy on their own, but the

recruitment strategy has to be smart enough to catch their minds and to raise

their attention.

Smart Recruitment Budget Management:

The small company has a very limited recruitment budget and the money have

to be spent smartly. The recruitment budget cannot cover all the needs and the

company has to decide about the best recruitment channel and the best

recruitment source to promote.

They can see it very often. The small company with very limited budget and

other resources try to win the battle with the approach like big multinational

companies. The small companies have to be smart in the management of the

recruitment expenses budget to be visible.

The small company has to decide about the recruitment strategy and they have

to find their own clever recruitment idea. The small company cannot use big

recruitment web sites as their main source of job candidates, the small

company has to develop its recruitment uniqueness.

The small company has to invest its time to the recruitment sources research

and it has to choose one to build a recruitment name. The small company
29
cannot be known as the employer of the first choice, but it has to be well known

in its target group.

The small company can spent its recruitment budget smartly and it can build a

constant flow of really good job candidates. The channel has to be unique for

the organization and the job candidates have to know the specialty about the

company.

Recruitment Strategy for small companies:

Small companies have no advantage of the strong brand name, which brings a

lot of attention of the job candidates. The small companies cannot use their own

website as the main source of the candidates as there is no enough traffic from

the target audience. The recruitment strategy for small companies has to be

different.

The small company has the issue with its brand name for general job position.

The specialized job positions are usually no issues for the small company as

the experts in the functional area know the company and they know about the

vacancies in the organization.

The recommendation from the business partners is usually the best way of the

recruitment for the small companies. As the business partners are connected

with several other businesses, they are usually able to recommend a person

from a different company to join the team.

30
The best recruitment strategy for small company is to offer some kind of the

benefit for its employees and business partners when they recommend a

successful new hire. The employees like to recommend their friends as the

employees for the company, when they are satisfied with the job and the job

content.

The business partners have a sense to find out unsatisfied employees at the

competitors and they want to cooperate with the partners they know well and

they can be sure about their reliability. The business partner has an interest to

recommend a good candidate when the business partner is satisfied with the

company.

The small companies cannot use their website as the source of the job

candidates as the visitors are mainly focused on the products and services

offered and the specialized job web sites are not that useful as the big job brand

names have a better chance.

Recruitment Agencies under Pressure in the Recession:

The recession is good for the HR Recruiters. They have less open job

vacancies and they can focus their effort to the recruitment agencies. The

recessions are a market for the companies, not the recruitment agencies. The

recruitment agencies are a very special business. They sell people as job

candidates. They have some general contracts with the potential employers, but

they do not have to send the excellent job candidate to the company, which

could be the best target. They can send the job candidate to the company with
31
the best payment conditions for the recruitment agency. The HR Recruiters

have a good opportunity to make the recruitment agencies really work for the

company. The job candidates for the job position by the organization should be

the candidates for the organization. This is a simple recruitment rule, but the

recruitment agencies are not following this simple rule many times. The

recession makes the life tough for the recruitment agencies and they accept

new conditions to the contracts, as they do not want to lose another client. The

HR Recruiter can set new conditions for the relationship with the recruitment

agency as they have the power. The recruitment agency should work for the

organization and the organization has a good opportunity to set the conditions

for the cooperation. The recession is not just bad for the recruitment and

selection process.

Recruitment and Business case:

The recession changes the situation in the recruitment and staffing area

dramatically. As the organization have no issue to fill every single vacancy, the

proper management of vacancies has to be put in place in organizations. The

HRM Function is fully responsible for the recruitment and staffing process and

as the process owner it has to propose the right recruitment measures to keep

the recruitment process fair and useful for the whole organization.

The recruitment and staffing process needs a redesign in the recession and the

era after the recession. As the recruitment process was focused on finding

people and making the organization attractive enough for the potential new

32
comers. Currently, the organization has no issue with hiring the new

employees, but the organization has to manage the demand of the managers to

have new employees.

The current recruitment measures are about:

 Quality of the recruitment and the quality of the final job candidate

 Cost of the recruitment process

 Speed of the recruitment process

The future will make the recruitment measures richer by one other recruitment

measure. The manager will have to deliver a detailed business case for the

vacancy and the value added to the organization, when the HRM Function will

decide to hire a new employee. Let us be honest, the HR Recruiters did not ask

for any evidence about the need for the new employee in the past. As the

economic growth allowed paying additional salary easily, the organizations

were not careful in hiring new employees and they allowed huge additional

costs resulting from the over employment.

The HRM Function has to develop a standardized business case for the

managers, when they want to open a new job vacancy as they cannot complain

and they can see a fair treatment for all the managers in the organization. The

Human Resources and Finance specialists should prepare such a business

case together as both functions can benefit from it.

33
The recruitment business case has to cover all the typical topics of the business

case:

 Motivation for opening a new job vacancy

 Roles and Responsibilities of the new employee

 Expected additional income and benefits for the organization

 Risks of not hiring a new employee

 Goals of the new employee for the next 3 and 12 months

 Expected salary and additional compensation components

The recruitment business case has to be standardized as the HR Professionals

can make ranking of the individual business cases, when they have to decide

about opening the right new job vacancies. Each manager wants to have a

bigger unit as it brings more responsibilities and a bigger influence on the whole

organization.

The recruitment business case is the only efficient way to select the right

requests for opening a new job vacancy. As the organizations have to redesign

their organizational structures and their own business model, the recruitment

business case is one of the most important recruitment tools. The top

management will have the security of hiring the right job positions and the

managers will have right recruitment measures for the decision about opening

the job vacancy.

34
35
 LITERATURE REVIEW

Ladislav Sojka

The role of human resource management in the period of recession, 2012

Papers deals with human resource management (HRM) main function in period

of recession, which is today reality. Pointed are the HRM methods for

establishing of balance between employees needs and organization needs.

Described are methods of HRM that shall to ensure workforce reduction in the

way that impact on organization, survivors, dismissed persons and executors of

reduction will be minimized. Stated are measures for key employee retention,

especially knowledge worker. Described are also the HRM activities in

connection with trust reestablishing and new personal strategy formulation.

Significant part of HRM activities is preparation for recovery period. Today we

cannot ignore the fact that we are facing the economic downturn and this led to

many extreme situations. The price of oil one day has riseZn to record levels

and than fallen again. The stock markets are up one day and down next day.

The currency markets are extremely volatile The unemployment has risen and

many firms are struggling to survive the downturn. According experts and

professionals in the area of economic development, the recession can only be

confirmed if Gross Domestic Product (GDP) is negative for two or more

consecutive quarters. The agency that is officially in charge of declaring a

36
recession in USA is known as the National Bureau of Economic Research , or

NBER . The NBR defines a recession as a „ significant decline in economic

activity lasting more than a few month”. Both, managers and their employees

know that some of the feature of new business environment include competition

for knowledge workers, outsourcing and foreign manufacturing plants, the move

toward leaner and more efficient organizations, and prioritizing cost reduction.

Workers know that businesses must pay closer attention than before to

customer’s needs if they want to stay competitive. They are also aware of the

difficulties associated with maintaining customer loyalty in a global business

environment where the customer is more sophisticated and has more choices.

The role of HRM in each organization is to create and maintain the balance

between employee interest and organization interest.. Downsizing has negative

impact as a minimum on three groups of individuals. There are following groups

and organization as whole. The managers driving this process who are usually

perceived as hatchet man or the “implementers”. Some authors labeled them as

“executors”. Though not always understanding the reasons for either the

rightsizing decision or the attendant expectation, most are aware of social

responsibility falling on their shoulders, and are very sensitive to the potential

for unfairness. In principle downsizing executioner are individuals with

responsibilities for planning, carrying out, and/or dealing with aftermath of

downsizing activities. This definition is deliberately broad, encompassing a

variety of individuals who have formal responsibilities for downsizing. Therefore

this definition does not assume that certain type of person, such as line

37
manager, HR manager, or HR consultant serves as an executioner across all

organization and situation, rather it recognizes that different types of people

with different professional roles at different organizational levels may conduct a

downsizing activity depending upon the situation or context. Role of HRM is

prepare the whole downsizing process in the way that dismissed workers can

go away with dignity. Employee reducing and lay-off has to be last measure to

ensure the effectiveness of organization. Information about prepared layoff

should be given in advance, so they have enough time to seek other jobs.

Employee reducing cannot be result ad hoc activities, but it has to be a part of

overall firm strategy.

Lipscomb Student

Human Resources Management in a Recession, 2012

Human resources professionals often struggle to obtain the resources they

need to effectively manage people in the workplace, and the difficulties that

they face are augmented when economic conditions worsen. The current global

recession has caused most companies to review their allocations of resources

more critically and as a result, organizations of varying sizes have laid off a

significant number of workers at all skill levels, putting the American

unemployment rate at its highest since 1983 (Bureau of Labor and Statistics,

2010). As human resources departments try to keep their remaining employees

engaged, motivated, and appropriately trained, they face many challenges

including reduced human resources staffing levels and program funding,

38
psychological hardships for workers dealing with the crisis, and employees with

different generational mindsets and priorities. These and numerous other

difficulties make it difficult for human resources managers to not only manage

their people through the downturn but to ensure that their companies are

adequately staffed with talent when economic conditions improve.

In this paper, I review the primary unique challenges that human resources

managers face as a result of recessionary conditions and provide

recommendations for not only surviving the recession but ensuring that an

organization is ready to compete when expansion returns. I propose that

employers manage their human resources processes using an “investment

portfolio” approach whereby they allocate their scarce funding for human

resource programs during a recession and afterwards to those initiatives that

provide the greatest financial rewards. By measuring the benefits obtainable

from investment in distinct “projects,” employers can ensure that the financial

resources they allocate to human resources initiatives provide them with

excellent returns as well as strategic advantages over their competitors.

In this paper, I describe the most significant impacts of today’s economic

recession on HRM processes in the United States. I discuss this issue in two

contexts: (1) how the downturn’s impact on individual employees affects a HR

manager’s ability to effectively manage those employees and (2) how the

downturn’s impact on a HR manager’s employer constrains his ability to

manage people. Within each context, I discuss the impacts of a recession on

the processes of strategic HRM, including HR planning and the design of jobs
39
and work systems and the impacts on four fundamental functions of HR:

staffing, training and development, performance management, and

compensation (Mello, 2006). It should be noted that restrictions placed on HR

managers during one stage of the HRM process often impact other stages as

well. For ease of discussion, I avoid repetition except in those instances where

a problem causes distinct effects on individual HR functions.

After discussion of the impacts of recessionary pressures on HRM, I provide

recommended solutions, based on past best practices and innovative strategies

discussed in recent texts, to these unique problems within an investment-

focused framework. I also address how these practices can provide an

employer with a unique competitive advantage over other companies.

Economic uncertainty influences the process of HR planning as managers

attempt to accurately predict the labor supply available to the company for

meeting its employment needs. To estimate job transition probabilities, many

employers have historically used predictive mathematical techniques that rely

on historical data regarding turnover in specific positions. Predictions derived

from such modeling may no longer be relevant in situations where new factors

impact employee availability.

David Bart

40
HRM role in recession, 2013

The recession is healthy, from time to time. The recession helps to stop the

businesses, which are not bringing value added and the human capital is

transferred to more vital businesses at lower costs. In the companies, which

survive the recession, the HRM Role is very important.

The recession is very dangerous for the companies. During the times, when the

business grows dramatically, the HRM Function introduces different policies,

which are focused on spending money. The company was able to carry all the

costs and the employees started to take the policies as the standard.

In time of the recession, the HRM Role is to make cost cuts and the HRM

Function has to provide the list of the policies and the procedures to be

cancelled or discontinued. The employees do not like it, but the company has to

return to the healthy basis for the future growth.

The HRM Function has to be able to identify the top potential in the organization

quickly as the company needs to make the cuts in the human capital of the

organization. The HRM Function needs to provide the tools to managers to

inform their key employees about the security, the company wants to offer to

key employees.

The HRM Function is not a department to make employees happy, the role of

HRM Function is also about the cuts in the costs of the organization and the

HRM Function’s role is about minimizing the damages to the organization.

41
The recession can be a very interesting period for the HRM Function. The HRM

Professionals can design, develop and implement a lot of new HRM Processes

in the recession, which are simple and really efficient. But they need to have a

clear vision of the HRM behavior in the recession to be really successful.

The HRM Management has to define the HRM Vision for the Recession. The

employees in Human Resources have to understand the goals for the difficult

period of the recession. Many activities in the organization can be cancelled,

but the HRM Employees have to understand the reasons.

The HRM Vision for the Recession is needed for the employees of the HRM

Function as they should serve the organization as the change agents. Many

procedures, policies and processes can be cancelled during the recession or

they can be strongly changed and the HRM Employees have to be able to

explain the reasons for the change or cancellation of the policies.

The HRM Management has to push the top management to define the vision of

the organization for the recession as the roles in the organization can be clearly

defined. The top management has to set the vision for the strategic initiatives as

the whole organization can share the same goals. It is very painful for the top

management to define such goals, but the employees and managers can

support the painful way to prosperity, when they believe and trust their leaders.

The HRM Function can serve as the navigator and facilitator for employees, but

the HRM Vision for the recession has to be defined and clearly communicated

and explained to HRM employees. The HRM Management has to communicate

information and they can build a good picture of the organization’s health very

quickly.

The HRM Vision for the Recession should be about the trust and honesty. The

HRM Employees have to understand the need to make changes and to make

the cuts in the procedures they introduced and run for the organization. The

HRM Management has to be proud to announce the cutting of job positions in

the HRM Function and to explain the reasons for selecting the employees to be

fired.

The HRM Vision for the Recession can play a significant role in the success of

the HRM Function in the recession. The HRM Management Team has to set it

as a priority and the vision has to be transformed into actions quickly.

The recession changes the priorities of the organization. The change of the

organization´s priorities should be reflected in the HRM Function priorities and

HRM Strategy as well. The HRM Function cannot live alone; it has to follow the

general business strategy.

The HRM Priorities in the Recession can change quickly or they need to be

adjusted at least. The organization has no resources to add to the new

initiatives and the HRM Function can be asked to produce cost savings on

current programs.

43
The HRM Management has to make a quick scan of current procedures and

policies to be prepared for the cancellation or change, when asked to make an

urgent cost cut. The recession is about cost cuts and designing efficient, cheap

HR Processes.

The HR Priorities have to be assessed using a simple tool for selecting the

processes and policies to be discontinued. The best tool is to use the simple

matrix, which divides the processes and procedures according their costs and

impact on the organization.

Generally, the HRM Function should cancel the processes and procedures with

the highest costs and lowest impact on the organization. The HRM Function

has to be very careful as cancellation of some policies can be very sensitive for

employees. Those are the processes and procedures with the highest impact.

The recession changes HRM Priorities. The HRM Function has to make a quick

response to changed conditions by the cancellation of the least important

procedures and policies, but the HRM Function has to change the HR Strategy

to have a consistent approach during the whole recession period.

William K Roche

Human Resources in the Recession: Managing and Representing People

at Work in Ireland, 2013

44
Ireland is currently in the grip of the most serious economic recession in its

modern history which is having profound effects on the labour market and on

the management of human resources. Trade unions charged with defending

their members pay and employment security face challenges without precedent

in living memory. Other European countries affected by the financial, fiscal and

economic crisis face pressures similar to Ireland’s, but the Irish recession is

among the most acute of all developed economies. The effects of the Irish

recession on the manner in which people are managed at work and on how

they are represented by trade unions is the subject of this study.

The context for this investigation is set out in chapter two and examines how

human resource managers and unions (where they are found) have faced the

challenges. First of all, the impact of the international financial and economic

crisis on the Irish labour market is assessed. Then, the Irish economic crisis is

placed in a comparative European context to get a sense of the extent to which

the public policy response in Ireland has been similar to those pursued by other

EU member states. After this assessment a detailed literature review is

conducted on reviews and debates concerning the impact of recessions, past

and present, on the conduct of human resources in organizations. This is

followed by a detailed examination of the type of policies and practices that are

available to HR when making adjustments to difficult business conditions. The

penultimate section provides a snapshot, based on the data available, of the

type of policies that firms have been implementing in Ireland since the onset of

45
the financial crisis in 2007. The conclusions bring together the arguments of the

chapter.

Chapter three sets out the findings of a survey conducted of managers with

responsibility for human resources to assess their responses to the recession.

The survey firstly sought to examine the impact of the recession on firms in

terms of revenue and employment change, in order to establish the commercial

context for any recessionary measures adopted. The chapter then goes on to

examine the types and incidence of measures taken by firms, ranging from pay

and headcount adjustments, changes in HR systems and functions, to changes

in working time arrangements. The responses of the firms reflect the severe

effects and challenges experienced by the survey respondents. In addition to

examining the range of individual measures adopted by firms, the manner in

which firms combined these measures is also analysed. This is followed by an

investigation into the role of the HR function in the recession. The section

explores whether the operation of HR has changed as a result of the recession,

the function’s level of influence in terms of HR strategy formulation and

implementation, the business role of HR, the level of engagement with

employees, types of policies and practices that have received greater or lesser

attention and relationships with trade unions. Finally, the chapter investigates

the HR practices that survey respondents considered to be most effective in

helping them manage the recession. The findings of a series of focus groups

with HR managers and trade union officials, held in Dublin, Cork and Galway,

46
are outlined in chapters four, five and six, and help to cast a deeper light on the

nature of the challenges that arose and the responses adopted in the recession.

Lisa McQuerrey

Role of HR during a Recession Period, 2012

Human resource management is responsible for seeing that employees of an

organization are utilized in the most efficient and economical way possible.

During recessionary times, when budgets are tight, this vital human resources

role becomes even more important to keep a company on fiscal track. Human

resources must pair the staffing needs of the business with the necessity of

maintaining lean overhead and operating costs. Businesses may continue to

hire new staffers during recessionary times. However, it is important that human

resources recruits, screens and hires individuals who are highly qualified in their

field and can bring a significant amount of potential to the business. Human

resources is charged with interviewing candidates to ensure each new hire is

qualified for the position and is not likely to leave any time soon. Fast turnover

in employee ranks is costly to a small business that then has to reinvest in

recruitment and rehiring. Human resources must also select employees who

can quickly come up to speed to ensure a short learning curve. New employees

who take a significant amount of time to become acclimated to the work

environment have the potential to slow productivity and decrease earnings.

Layoffs and downsizing are often an inevitable part of business operations

during recessionary times. Human resources managers must evaluate current

47
staffers and their responsibilities and make decisions about which positions are

expendable and combinable. This can mean reallocating staff members and

financial resources to areas of the company that are indispensible to

operations. As part of this process, human resources managers may have to

determine severance packages, and in some cases, assist terminated

employees with job placement assistance and unemployment filing.

Human resources is often involved in conducting employee evaluations. During

a recessionary period, it is vital to ensure all employees are performing at

optimum levels. An evaluation process usually involves salary adjustments and

raises based on performance. This is something that must be carefully taken

under advisement based on the company’s available budget. Human resources

may need to discuss a freeze on raises as well as potentially renegotiate the

terms of some employee contracts to ensure the business remains financially

viable. Human resources managers should be involved in short and long-term

strategic planning when it comes to payroll expenditures, particularly as it

relates to looking for ways to decrease overhead operating expenses. Some

strategies can include reducing full-time positions to part-time positions to save

on health care and other benefits; moving some positions from salary or hourly

payroll jobs to independent consultant or freelance contracting positions; and

introducing job sharing or work-from-home telecommuting positions, which can

reduce some overhead and operating expenses.

Chandra Sekhar Patro

48
Human Resource Management: An Optimistic Approach at the time of

Recession, 2012

Human resource management is responsible for how people are treated in

organizations. It is responsible for bringing people into the organization, helping

them perform their work, compensating them for their labors, and solving

problems that arise. Recession presents a very difficult time for any existing

organization in today’s corporate world and no company is exempted from this

truth. The biggest challenge for companies and especially Human Resource in

this economy downturn is to survive and to remain competitive, companies

reorganized and reengineered to reduce waste. Recession poses unique

challenges to the HR department. Human resources professionals often

struggle to obtain the resources they need to effectively manage people in the

workplace, and the difficulties that they face are augmented when economic

conditions worsen. It is essential for every company to know how to implement

the right metric set for this very trying period. The present paper is conceptual in

nature and finds out the major issues and challenges of human resource

management at the time of recession. It provides the strategies and

recommendations for not only surviving the recession but ensuring that an

organization is ready to compete when expansion returns.

In today's arena the most common word we come across is recession.

Recession is a general slowdown in economic activity over a long period of

time. A recession normally takes place when consumers lose confidence in the

growth of the economy and spend less. This leads to a decreased demand for
49
goods and services, which in turn leads to a decrease in production, lay-offs

and rise in unemployment. Investors also show less interest which affects the

capital and financial flows, import - export and overall Gross Domestic Product

(GDP) of an economy. Managing HR during financial recession, which will

eventually affect most organizations, should focus on keeping everyone calm

and together through cost-effective strategies. Human resource management is

defined as a strategic and coherent approach to the management of an

organization’s most valued assets – the people working there who individually

and collectively contribute to the achievement of its objectives. Human

Resource Management is one of the most essential responsibilities of each and

every manager in an organization. It purely involves people for getting things

done through them in an organized manner. This comprises a list of activities

and one important factor among them would be placing right person for the right

job, recruiting and training them in their specialization and also assisting

employees for benefits, rewards and other policies. Human resource plays a

bigger role during tough times than during periods of prosperity and growth. In

co-operation with management and the leaders within the organization, the HR

department has to implement sound, consistent strategies to help everyone

through the recession lows. The first order of the organization would be to calm

down everyone and prevent from panicking as much as possible. Scrambling

and hurrying to slap some sort of message to the organization might be more

counterproductive than helpful.

50
The recruitment freeze is the first challenge of HR department to be affected by

the recession. As the top management has to keep the cash flow under the

control, the recruitment freeze is the first logical decision. After the recruitment

freeze the organization has to clearly decide about its priorities as the

organization does not carry additional people on its payroll. The top

management has to decide about the new strategy and the management is

allowed to hire just the missing skills and competencies.

The training and development is another HR Process to be affected by the

recession. The focus of organizations must be on reducing costs and training

may be one of the functions where budgets may get impacted majorly. The

management has to decide about the cuts in the investments and Human

Resources have to find a way, how to keep the knowledge in the organization.

The company can survive without training and development for a limited period

of time. The cost savings can be huge and the organization feels no impact of

the lower training budget. But the period has to be really limited as the

organization does not lose the talents and the internal know how. During a

recession, a reduction in available resources can significantly affect a

company’s strategy for the design of jobs and working environment. When a

company cuts labor costs through either a workforce reduction or a

reorganization of its operating structure, there is a change in the tasks and

responsibilities associated with a number of positions.

Priyanka Sharma

51
HRM Innovation Strategies in Recession: A New Paradigm, 2010

Large format recession has been a growing international trend in corporate

sector over the last decade, with companies. HRM strategies & innovations

providing a wide selection of employees, employers, customers, suppliers etc.

in all ranges. This paper outlines the transformation of HRM strategies and

innovations in Asia. Beginning with its inception, the paper is progresses

towards its various HRM functions like recruitment and selection of employee,

training and development, compensation and benefits, growth of Human,

communication, HR front office and competitive HRM strategies to establish

and strengthen its presence in the whole Asia. This paper also highlights HRM

strategies to counter intensified competition and external conditions like global

economic recession, the resultant credit crunch and its impact on employee

performance. Further aim of this research is to find out measurement of

performance, challenging industrial and economic conditions, what are the

growth options to ensure future growth sustenance and profitability? Many

professionals and experts around the world believe that a true recession can

only be confirmed if GDP (Gross Domestic Product) growth is negative for a

period of two or more consecutive quarters. The agency that is officially in

charge of declaring a recession in the United States is known as the National

Bureau of Economic Research, or NBER. The NBER defines a recession as a

“significant decline in economic activity lasting more than a few months.” “The

recession is about the creative Human Resources Management. The HRM

Function is asked to bring new ideas, to change the HRM Processes and to

52
develop or change the procedures and this effort has to be cheap or it has to

cut the costs of the organization.”The HRM Innovation is easy in times of the

business growth, but the recession is not good for big innovative HRM

Initiatives. On the other hand, the top management understands the effort to

innovate the HRM Processes better. The top management is in the search for

the potential cost savings and they count every single penny brought by the line

management. The HRM Costs are usually a very significant cost to the

organization and the HRM Function has to be proactive. The HRM Function has

to focus on unpopular innovations during the recession as the role of Human

Resources during the recession is to save money to the organization. The top

management expects all the support functions to bring innovative solutions,

which will have to make the organization stronger, when the next growth era

comes The compensation strategy is a general document about the vision,

mission and strategy of compensation and benefits of the organization.

Generally, the recession has no impact on the compensation strategy, but the

organization has to make some adjustments. The compensation strategy is

always connected with the business strategy and the stage of the organizational

development. The fast growing organization needs a different compensation

strategy from the mature organization. The compensation strategy defines the

general position of the organization on the pay market and the compensation

strategy defines the proportion of the overall company costs allocated to the

human capital of the organization. The recession makes a huge pressure on the

overall costs of the organization and the compensation strategy can easily

53
change the position of the organization on the pay market. The HRM Function

has to monitor closely the development on the market and it has to watch for

the signals in the change of the overall business strategy as the compensation

strategy has to be adjusted as soon as possible. The compensation strategy is

quite costly document for many organizations and the HRM Function has to

react proactively too many external changes. It cannot be fixed in any

organization and also change as per the need of organization.

Mori Lare

The impact of the economic recession on HR, 2011

This relative optimism over the longer term is shared by the general public in

the UK. The Ipsos MORI Political Monitor recently showed increasing numbers

of people believing the British economy will improve over the next year.

Generally, senior HR professionals who envisage an improvement in the short

term, both globally and in their country, are also positive about the long term

outlook, and they are more positive when it comes to financial prospects for

their own organization. Despite over a third of respondents feeling that this

would get worse in the short term, the majority (70%) predict a stable, or

positive, long term outlook. Even in the short term many respondents feel that

their own organization’s financial prospects will outperform the national outlook

of the country in which they are based. Of those who feel that the national

economy will get worse in the short term, nearly half (46%) feel the

performance of their organization will stay the same and a small proportion

54
even feel it will improve. Unsurprisingly, the survey reveals that HR is greatly

affected by the current economic situation. Three in five respondents feel the

current capital markets directly impact on their organization, with three quarters

also feeling they have a direct impact on HR. Similarly, the vast majority of

organizations (95%) are freezing, or decreasing, their annual HR budget, in

areas such as training and development, external training, the use of external

consultants, recruitment and HR systems. Evidence suggests this is likely to be

the case regardless of what the predicted financial performance is for their

organization. Against this backdrop of economic uncertainty and budget cuts,

and despite having a slightly biased sample, it is reassuring that the HR

function is seen as having a crucial role to play in improving organizational

performance, with 88% believing that senior management in other functions feel

that HR has some, or a big, influence on performance. There is no direct link

between this and the annual HR budget available. Further feedback indicates

that many organizations appear to be carrying out efficiency reviews on their

work practices. As a result, performance management and leadership

development are understandable priorities since strong, visible leadership will

be critical as companies feel the strain caused by the recession. Moreover, it is

argued that, since recession forces organizations to examine performance in

sharper detail, under-performance will increasingly be dealt with in a more

direct and proactive manner. Respondents were also asked to identify those

areas that are their lowest priorities.

Wetley Samme

55
The HRM Function and Its Role in Recessionary Times, 2012

In these recessionary times, it is tempting for the companies to cut the budgets

of the HRM function and focus on cost control and trimming as a means of

profitability. Further, with the squeeze on hiring by many companies, one of the

key activities of the HRM function, which is the hiring, and on boarding activity

remains frozen. Therefore, there is more the case for pruning the HR budgets.

However, companies need to realize that there is a strong correlation between

people management and economic performance that has been conclusively

proved in recent research by the consulting firm, Boston Consulting Group or

BCG. The research that focused on how companies that do well on talent

management, leadership development, and performance management have

been shown to have significantly higher economic performance. What adds to

this research is the anecdotal evidence from many multinationals that seems to

prove the hypothesis that excellent HR policies makes for a well-motivated

workforce that can ramp up their performance to match the increased

expectations of companies during recessions. The implications are that in case

organizations want to do more at the same cost, they must focus on Processual

cost cutting instead of on HR budgets alone. The second aspect of the HRM

function during recessionary times is that it is often the case that the HRM staff

are asked to handle the involuntary separations. These exits that are otherwise

known colloquially as “pink slips” have to be handled with grace and respect for

the employee instead of condescension and arrogance. The point here is that

when employees are asked to leave, the HR managers and the HR staff have

56
the unenviable task of making sure that the message is communicated to those

employees who are being asked to leave and to handle their exits in a

structured manner. With the pressure on the HR staff growing with the

increased incidence of layoffs, it is not easy for the HR managers not to get

affected and take things personally. However, the key aspect here is that the

HR managers have to perform well under pressure and ensure that the

outgoing employees are offered assistance with their job hunts for alternative

jobs by giving them the use of the office space and the facilities for a week or so

after their last day at work. The point here is that gestures like these go a long

way in convincing the other employees that the company is not an opportunistic

employer who is a fair-weather friend to them. Talking about the impact of

layoffs on the employees who have remained in the organization, the HR staff

also has the challenging task of keeping these employees motivated and not

making them look over their shoulders periodically to check whether they are

next in line to be laid off. Indeed, this is a delicate and often-diplomatic

exercises that must be carried out with finesse in the same manner exits are

handled. The other aspect of the recessionary times is that more often than not,

companies do not hand out pay hikes and bonuses and hence, there tends to

be a slack in morale among the employees. This is another of those tasks that

the HRM function has to manage in recessionary times. Given the fact that

many companies are struggling to stay afloat and which leads to resignations

from key employees who do not see a future for themselves in the companies, it

is important to remember that the HRM function must be bolstered rather than

57
cut down to handle these unpleasant tasks. Finally, the HRM function also has

to cooperate with the organizational imperatives on the need to reduce costs

and hence, must play its role and part in ensuring that the organization

practices what it preaches and does not merely indulge in cost cutting, layoffs,

and freezing of pay hikes and bonuses.

Lisa K. Tesvich

HR’s Challenge: Engaging Employees Post-Recession

Employee trust has been fading over the last several years and the recent

downturn has further weakened it. In fact, the 2010 Global Workforce study

done by Towers Watson found that when asked what attributes employees

most want in their senior leaders, being trustworthy was number one for 79% of

respondents; only 47%, however, perceived their senior leaders as actually

trustworthy. And trust relates to not only character of the person but also to their

competence. In fact, the results of a survey conducted by Lee Hecht Harrison at

the 2009 Society for Human Resources Management Annual Conference and

Exhibition suggest that employees have significant concerns about leadership

capability. The majority of respondents (61%) felt strongly that their company's

leadership is not well prepared for an economic recovery. This finding is

consistent with the Towers Watsons 2010 Global Workforce study finding that

confidence in leaders and managers is disturbingly low. This sizeable gap is a

concern given that employee trust has been found to influence turnover,

productivity, and profitability. Indeed, trust is the cornerstone of employee

58
engagement and must be addressed to maintain a healthy organization. Many

organizations have had to shift their focus and change business strategy during

the recession. But in most cases, not enough emphasis has been placed on

ensuring that employees have heard, understood, and embraced these

changes and their implications. To truly engage and trust the organization,

employees need to believe the company is on the road to success. High

performers, especially, need to understand the big picture and see exactly

where the leadership is going. Help your leaders provide employees with an

understanding of plans to reposition the company in next 12-18 months.

Employees must believe that the company that they are a part of is a winner or

a potential winner in the marketplace. At a minimum people will be well

informed. At an ultimate, they will be energized, excited, and mobilized to

positive action for the company. Organizations must develop leaders that can

excel in these times. But any development that occurs right now must be

focused and cost-effective and get measureable results. A good example is

highly targeted coaching of middle management by a seasoned executive either

from the inside or outside. This coaching is not theoretical but rather it’s hands-

on and more about having an immediate impact on performance. HR plays a

role in accountability by identifying potential coaches, determining the standards

that the coaches will be held to and measuring coaching results.

Charlynne Pullen

Leading and managing in recession: same or different skills? 2011

59
Many leadership and management skills needs are not new, because good

leadership and management looks similar in most economic circumstances. But

there is a difference in emphasis both within types of skills and across types of

skills. The diagram below shows how specific skills needs may heighten during

recession, according to four major domains of skill: strategic thinking, personal

effectiveness, working with others and delivering performance. During the

challenging circumstances brought about by a recession, it may be necessary

for leaders and managers to adopt a style of leadership that blends elements

from different models, including both short- and longer-term techniques and

strategies. Managing a range of complex and ambiguous relationships using

skills of influence, negotiation and persuasion rather than direct authority will be

important for all managers and leaders. Recession brings with it practical

pressures in the form of time and resource shortages that affect how managers

and leaders learn. This means that they are likely to seek more action learning,

‘bite-sized’ learning on key topics, facilitation of internships and secondments to

other providers, shared problem-solving approaches, and more mixed modes of

delivery within a longer course. LSIS is pursuing peer learning opportunities

through its ‘resource utilization’ funding program for providers to bid for grants

to support the sharing of effective practice. Bespoke provision is highly valued

by learners during critical transitions because of its customization to learner

needs, making it cost-effective overall although requiring relatively high levels of

investment. Time pressures mean that senior staff has limited time to navigate

through learning options, so simplifying ranges of provision is helpful. There is

60
an appetite for development of modularized provision where units can be taken

individually or combined into a longer program.

Pulleu Haden

Global recession and emerging challenges for human resources

management in india, 2012

A recession is a decline in a country's Gross Domestic Product (GDP) growth

for two or more consecutive quarters of a year. A recession is also preceded by

several quarters of slowing down. An economy, which grows over of period of

time, tends to slow down the growth as a part of the normal economic cycle. An

economy typically expands for 6-10 years and tends to go into a recession for

about six months to 2 years. A recession normally takes place when consumers

lose confidence in the growth of the economy and spend less. These leads to a

decreased demand for goods and services, which in turn leads to a decrease in

production, lay-offs and a sharp rise in unemployment. Investors spend less; as

they fear stocks values will fall and thus stock markets fall on negative

sentiment. Risk aversion, deleveraging and frozen money markets and reduced

investor interest adversely affect t capital and financial flows, import - export

and overall GDP of an economy. This is what exactly what happened in US and

as a result of contagion effect spread all over the world due to high integration

in the global economy.

According to the International Monetary Fund (IMF)'s latest Global Financial

Stability report (GFSR) widening and deepening fallout from the US subprime
61
mortgage crisis have profound financial system and macro-economic

implications.

While the US remains at the ‘epicenter', the backwash effect of the American

financial institution in other countries ‘reflecting the same overly benign global

financial conditions, an inattention to appropriate risk management systems and

lapses in prudential supervision'.

The global slowdown has its implications on the domestic economy. During the

last three years Indian Economy grew at an average annual rate of 8.6 per cent.

For the first time the economy has shown signs of deceleration and grew at 7.8

per cent in the first half year of 2008-09 (April-September). The service sector,

which contributes more than 50% share in the GDP and is the prime growth

engine, reported to be slowing down, mainly in the transport, communication,

trade, and hotels & restaurants sub-sectors. The industrial growth has

decelerated sharply during April-November, 2008 encompassing all the

constituent sectors. In manufacturing sector, the growth has come down to 4.0

per cent in April-November, 2008 as compared to 9.8 percent in the

corresponding period of last year. The slowdown occurred in the all the use-

based categories, except consumer goods where it has accelerated.

Humans are an organization's greatest assets; without them, everyday business

functions such as managing cash flow, making business transactions,

communicating through all forms of media, and dealing with customers could

not be completed. Humans and the potential they possess drive an

62
organization. Today's organizations are continuously changing. Organizational

change impacts not only the business but also its employees. In order to

maximize organizational effectiveness, human potential—individuals'

capabilities, time, and talents—must be managed. Human resource

management works to ensure that employees are able to meet the

organization's goals.

Human resource management is responsible for how people are treated in

organizations. It is responsible for bringing people into the organization, helping

them perform their work, compensating them for their labors, and solving

problems that arise. There are seven management functions of a human

resources (HR) department that will be specifically addressed: staffing,

performance appraisals, compensation and benefits, training and development,

employee and labor relations, safety and health, and human resource research.

First things first, the base idea is not to wait and find ways to weather the storm

but to take proactive measures to tide the wave. The world is changing very

quickly to combat recession and it's about time we translate our thinking into

action or else we will be late. The main reason being the companies who are

hiring have recently made drastic cuts in their recruiting budget and are in the

process of streamlining their side of the story.

Companies (clients) have to demand greater accountability from recruitment

agencies and focus on improving their recruitment ROI. Recruitment agencies /

staffing companies who are agile in their operation and can quickly adapt to the

63
changing environment will emerge victorious at the end of this recessionary

period

Abhishek Shukla

New Dimension of HR Role in the Global recession, 2012

This paper suggested the new dimensions of HR Role in global recession in the

organization through surveys and case studies. Last year the Global economy

was grappled with the most severe Financial Shock. Indicative the magnitude of

the shock, Equity market volatility is at or unprecedented, corporate Bonds yield

are extremely high related to U.S. treasury yield, stocks and equity Prices have

plummeted. With the Global Financial System deleveraging and the U.S.

Economy in the midst of a severe Recession. The biggest challenge for

companies and especially Human Resource in this economy downturn is to

survive and to remain competitive, companies reorganized and reengineered to

reduce waste. Recession poses the unique challenges to the HR department.

Investments in human capital are not likely to be a high priority for companies

whose very survival is threatened by the global downturn. Organizations have

been buffeted about like leaves in a storm by many trends; recently the

recession is one of the major results of it. Each Recession, as it unfolds, create

the need for HR Practitioners to take a fresh look on there traditional model.

Traditional Model of human resource management focuses on administrative

functions: application processing, benefits, compensation benchmarking,

dispute resolution, employee grievances, performance review, and rules

64
compliance. It is the time to step back, understand the actual needs of the

employees and the employers, strike a balance, redesign and innovate the New

Roles of HR policies as per the need of company objective and market

Environment. The recession has affected many HR Processes and they need to

be adapted to the new situation and they have to be ready for the new reality.

The impact of the recession is not the same in different Industry. The HR

Processes are different according to the Industry. The recession is an

opportunity for HR professionals to step and contribute strategically. In the

classical strategy paradigm, we establish which strategic factors HR influences

directly through case studies. The recruitment process is the first HR Process to

be affected by the recession. The recruitment freeze is usually the first top

management decision, when the sales numbers goes down. As the top

management wants to keep the cash-flow under the control, the recruitment

freeze is the first logical decision. The recruitment after the recruitment freeze is

more selective and the company has to clearly decide about its priorities as the

organization does not carry additional people on its payroll. The top

management decides about the new strategy and the management is allowed

to hire just the missing skills and competencies. The training and development

is the second HR Process to be affected by the recession. The management

decides about the cuts in the investments and Human Resources have to find a

way, how to keep the knowledge in the organization. The company can survive

without training and development for a limited period of time. The cost savings

can be huge and the organization feels no impact of the lower training budget.

65
But the period has to be really limited as the organization does not lose the

talents and the internal know how. The compensation and benefits is the HR

Process, which is heavily affected by the recession. The bonuses are not paid

and the base salaries are under a huge pressure. The compensation and

benefits specialists are under the pressure as they have to identify the areas in

the organization to realize the redundancies. The recession is a good

opportunity for Human Resources to introduce the changes to the organization.

But the reaction of HR has to be quick as the internal opposition has no chance

to form their forces.

66
 RESEARCH OBJECTIVE

 To identify the role of HR in employee management during recession

 To analyze the effectiveness of strategies used by HR for employee

management during recession

 To explore the challenges faced by HR in employee management during

recession

67
 RESEARCH METHODOLOGY

As far as the topic of this research work is concerned, it is hard to find out any

information through primary research. In order to achieve the research

objective, the only way to collect the information is secondary research. The

secondary research of the thesis work will be based on available literature,

journals, websites, news papers, and article related to the recession and

recruitment.

Primary Data:

Primary data will be collected by structured interviews. HR will be interviewed

with the help of questionnaire. Primary data will be presented with the help of

bar graphs and charts.

Secondary Data:

The secondary data in this research will be collected through news articles,

journals, magazine, peer reviews and published databases on online travel

business. A comprehensive of the collected data will be presented with the help

of tables, charts and graphs.

Sample Size:

To conduct this research work the researcher has taken 70 interviews

68
 DATA ANALYSIS AND INTERPRETATION

Q1. Employee retaining strategies was very effective at the time of

recession

27% respondents were strongly agreed however 14% respondents were

disagreed with the above statement

69
Q2. HR always listen the employees views during recession time

23% respondents were strongly agreed however 18% respondents were

disagreed with the above statement

70
Q3. Employee motivation strategies were very effective at the time of

recession

29% respondents were strongly agreed however 16% respondents were

disagreed with the above statement

71
Q4. Performance management system was very effective at the time of

recession

30% respondents were strongly agreed however 14% respondents were

disagreed with the above statement

72
Q5. Talent development was very effective at the time of recession

32% respondents were strongly agreed however 15% respondents were

disagreed with the above statement

73
Q6. HR managers were performing well under pressure

31% respondents were strongly agreed however 12% respondents were

disagreed with the above statement

74
Q7.  The outgoing employees are offered assistance with their job hunts

for alternative jobs

28% respondents were strongly agreed however 14% respondents were

disagreed with the above statement

75
Q8. The HR staff also has the challenging task of keeping these

employees motivated

27% respondents were strongly agreed however 18% respondents were

disagreed with the above statement

76
Q9. The company has stopped recruitment during recession time

22% respondents were strongly agreed however 17% respondents were

disagreed with the above statement

77
Q10. The company has decreased the salary level

29% respondents were strongly agreed however 12% respondents were

disagreed with the above statement

78
Q11. The company has reduced the level of incentives and perks

25% respondents were strongly agreed however 12% respondents were

disagreed with the above statement

79
Q12. Employee growth opportunities were not available in your company

during recession time

20% respondents were strongly agreed however 20% respondents were

disagreed with the above statement

80
 CONCLUSION

Managing Human Resources (HR) in a difficult economic environment is even

more demanding than working in times of rapid growth. As we saw from the

above survey that restructuring is the only solution HR have in today’s era. But

there would be different innovative ideas can be implemented. Therefore the

Human resource with Innovative idea and new dimension of HR will give a

solution to fight with these economic crises and make HR one of the key factors

of Organizational growth.

81
 RECOMMENDATION

 Top management should know the contingency plan.

 Increase Brainstorming sessions with top management and contribute in

their strategic planning.

 A complete or partial job freeze, but be open when communicate to the

workforce that the company may recruit key individuals even in difficult

times

 Review the employee performance evaluations to determine the key

people that company cannot afford to lose.

 Flow of Communicate should be from top to down that will help in making

conducive atmosphere within the organization

 Make prepare yourself for individual and group concerns therefore there

should be a proper counseling session.

 To maintain a calm atmosphere.

 Review all HR policies, processes and procedures to ensure that they

are purposeful and contribute directly to the success of the company with

minimum cost.

82
 Suppose the company has to lay-off staffs ensure that, the company

having other opportunities for them in other functions or divisions of the

organization.

 Advise managers to deal the process of managing changes.

83
 REFERENCES

1. HR forum .2009.Stratgic Role of HR in Recession. February 08:02

2. Outlook India. 2009. 1.3 Million Job Losses Likely in 2009-10. UNCTAD.

June 12:06

3. Articles base.2009. Managing Hr in Recession. January 20.01

4. CXO.2009. Workforce management during a recession. April 05:04

5. Economic Times.2009.HR working in Recession. September 09.09

6. Ahmed, Arif.2009.Creating opportunity from crisis: taking a strategic and

learning focused perspective. Development and Learning in Organization,

23(5):4-6

7. HRM guide.2009.compensation strategy in recession. August 13:08

8. Times Online.2009. HR professionals must expect changes after the

recession. July 22:07

9. People Management.2008. HR should do more in recession. August 28:08

10. William J, Rothwell, Robert K, Prescott, Maria W, Taylor.2005. Strategic

Human Resource Leader Issues. New Delhi: Jaico Publication House.

11. ICMR.2009 .Employee downsizing. Center for management and research,

23(2):4-5.

84
 COPY OF THE QUESTIONNAIRE

Q1. Employee retaining strategies was very effective at the time of recession

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

Q2. HR always listen the employees views during recession time

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

Q3. Employee motivation strategies were very effective at the time of recession

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

85
Q4. Performance management system was very effective at the time of

recession

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

Q5. Talent development was very effective at the time of recession

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

Q6. HR managers were performing well under pressure

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

86
Q7.  The outgoing employees are offered assistance with their job hunts for

alternative jobs

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

Q8. The HR staff also has the challenging task of keeping these employees

motivated

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

Q9. The company has stopped recruitment during recession time

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

87
Q10. The company has decreased the salary level

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

Q11. The company has reduced the level of incentives and perks

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

Q12. Employee growth opportunities were not available in your company during

recession time

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

88