Magazine article Workforce Management

Ready for a Crash?

Magazine article Workforce Management

Ready for a Crash?

Article excerpt

THE LAST WORD

Business strategies are purposely designed to flex whenever the economic environment shifts from expansion to contraction. Most HR departments, on the other hand, don't flex.

IS THE ECONOMIC SKY really falling? It's hard to say with certainty, but you would have to have been living on a desert island to miss the very real signs of economic turmoil occurring in the world today. If you are a business-sawy HR leader, then, today might be a good day to begin shifting your HR strategy to better fit these unsettled times.

Unfortunately, most HR departments find it difficult to be agile. There are many excuses that can be offered for that rigidity, and nearly all of them relate back to the fact that corporate HR strategies are overly focused on transactional HR and compliance. Business strategies are purposely designed to flex whenever the economic environment shifts from expansion to contraction. Most HR departments, on the other hand, don't flex. They simply find a way to do everything they were doing before the contraction-just with less money (something that leads many executives to wonder whether the original budget wasn't inflated to start with).

Unfortunately, there are signs everywhere of an upcoming downturn, including fluctuating oil prices of about $95 a barrel, layoffs in the auto, banking and pharmaceutical industries, and lingering fallout from the bursting of the credit bubble. The collapse of the subprime lending industry is rapidly triggering a broader credit crisis, as illustrated by the massive financial problems and CEO resignations at Merrill Lynch, Citigroup and Bear Stearns. (If the CEO must be changed, shouldn't the HR approach be changing also?) Regardless of your personal prediction of exactly when a downturn will come, it's important that you have a plan.

There are many elements of your HR strategy that should shift during a downturn. When economic conditions threaten growth plans, employees begin to shift their interest toward increased job security, resulting in less pressure on you to provide cost-of-living adjustments or to build outrageous compensation packages to attract and retain talent.

Now that the economy is cooling, with unemployment in December increasing to 5 percent, the relative supply of labor available to firms is increasing. This provides smart HR managers with an opportunity to cherry-pick from this expanded candidate pool, while simultaneously beginning a process for identifying and then releasing their own poor-performing employees. …

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