Magazine article Workforce

Brace for Change

Magazine article Workforce

Brace for Change

Article excerpt

Whether your organization operates globally or simply exports products to foreign markets, it's time to implement a workforce strategy that will help your company withstand the impact of the global economic crisis.

t was July 1997 when the first seismic shift occurred. At the epicenter Thailand devalued its currency, creating surface ruptures throughout the economies of Southeast Asia. The ground began to quake all around-Indonesia, Malaysia, Hong Kong. Next, teetering financial towers in Japan began to topple, generating a tsunami that would eventually drench the United States. Suddenly, Americans who didn't know a rupiah from a rupee were awakening to international financial news as the lead story of the day.

Even before the dust cleared in August 1998, Russia responded to mounting pressures by defaulting on its debts, sending shock waves through global capital markets and fissures up Wall Street. More psychologically damaging than fiscally harmful to most U.S. industries, the event nonetheless terrified all who watched. What would happen next? How far would it spread?

As the Asian turmoil spread to Eastern Europe and ricocheted to Latin America, it was bound to jostle the United States as well. Reeling from multiple jolts, the U.S. stock market plummeted. And although it recovered, aftershocks of the crisis were apparent. At press time, corporate earnings are volatile, exports are down, job creation has slowed and organizations are searching for the best ways to respond. Moreover, the financial tremors have created a credit crunch in the United States, so companies are facing greater difficulty obtaining money to finance expansion and new purchases. Economists see this as the greatest threat. It might create a more widespread slowdown and eventual recession. Every industry is affected differently. You have the task of assessing multiple scenarios and evaluating each one's impact on your organization. You must create workforce strategies that are flexible enough to handle contingencies brewing in vastly different countries that will affect all aspects of the business: corporate culture, staff-mg, retention and compensation.

Trace the rumbles to the United States. According to Merrill Lynch senior economist Gerald D. Cohen, US. job growth slowed from an average of 282,000 new jobs per month in 1997 to 218,000 in 1998. October 1998 had 116,000. "We expect the U.S. economy to slow to about 1.5 percent and the unemployment rate to rise to a little over 5 percent," he says. "The unemployment rise will come from less hiring, not necessarily more firing." Furthermore, as corporate earnings slow, companies are less apt to raise wages. (This depends on the industry because a labor shortage still exists in many fields.)

"When you look at what's happening around the U.S. economy, you find very different responses from companies and even different responses from divisions within the same large company. It depends on what they do, where they sell and what they use in their production," says Martin Regalia, chief economist for the U.S. Chamber of Commerce. "The impact is very ... uneven."

For example, when foreign currencies fall, U.S. goods become more expensive and consumers overseas purchase fewer of them. The manufacturing sector slows, producing shift cancellations, overtime reduction and actual job layoffs at some workplaces. With approximately 30 percent of U.S. manufacturing happening overseas, when Asian and Latin American purchasers don't have money to buy U.S. goods, the effect is noticeable. Companies such as Goodyear Tire & Rubber Co., RJR (in Russia) and Royal Dutch Shell Oil announced falling demand. The Gillette Co. and Coca Cola Co. continued to gain market share, but because of currency weakness around the world, their actual dollar revenues have dropped over the short-term.

Likewise, many of the financial-services organizations with heavy investments in Asia and Russia experienced huge losses. …

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