HR Lessons to be learned in Recession
Recession is a sour fruit for the global economies. The overall economy undergoes through a
gradual meltdown which seems evident from the low sales proceeds and buying behaviour of
the consumers. Recessions are times when we make changes in the way we do things —
consciously or not. Although it would be smart to do it consciously, probably some of the
most significant changes have just, well, happened. The consumers get very edgy while
spending on any commodities and thus it casts a negative effect on the business economies.
The main motive of every business organisation is to earn profit. This statement implies
Finance department is the most important in a business organisation. They handle all the
transactions and ultimately the company banks on their efforts to earn handsome profit. Thus
formation of finance department in a business organisation warrants for intelligent and
consistent folks. These people are recruited by none other but the Human Resource team. HR
plays a vital role in the functioning of an organisation.
In time of the recession, the Human Resource Management Role is to make cost cuts and the
Human Resource Management 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 Human Resource Management 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 Human Resource Management Function needs to provide the tools to
managers to inform their key employees about the security, the company wants to offer to
The recession period opens up ample opportunities for the Human Resource Management
function. The recession is about the creative Human Resources Management. The Human
Resource Management Function is asked to bring new ideas, to change the Human Resource
Management Processes and to develop or change the procedures. The Human Resource
Management function needs to redefine the business vision & take strategic measures. It
needs to cut down costs which are usually done by retaining the talent, downsizing of
employees and by freezing the recruitment. The Human Resource Management Vision for
the Recession is needed for the employees of the Human Resource Management 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
HR should continue to ruthlessly improve its own processes to make them more efficient and
effective. It will need to devote all of its resources and growing capabilities to the addressing
the pressures and paradoxes of the near‐uniquely difficult set of economic conditions now
prevailing, which look set to continue for at least 12 months and possibly/ probably much
The HR 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.
HR needs to also define some HR initiatives in the times of recession. These initiatives will
help organization to be focuses on the analysis of the current situation and the unlocking the
potential for the future growth. Human Resources has to quickly react in the recession and
HR has to bring several initiatives to save the organization from the bankruptcy.
The HR Recession Initiatives are not just about the cost cutting, the recession initiatives have
to be focused in more areas:
• To optimize the manpower strength.
• To take strategic initiatives to increase the productivity and efficiency of the entire
• To work on compensation benefits.
• Redesign training and development programs.
• Ensure your organization’s policies and handbooks are up to date. Remember that an
annual review of your employee handbook for compliance by an experienced
professional is highly recommended. Also, each employee having a copy of the
employee handbook is not enough. They have to be able to read and understand the
content. Be sure that you provide employees a handbook in a language they can read
• Layoffs are never easy. Ensure you are familiar with your legal responsibilities in a
lay off to minimize your organization's risk. Be sure that you have properly defined
the criteria you are using to determine who will be let go.
• Alternative Workweek Schedules and Flexible Scheduling can maximize production
and cut-back on overhead costs for organizations. Be sure you follow all of the DLSE
rules when deciding if an Alternative Workweek Schedule or Flexible Scheduling is
right for your organization.
• Cutting Pay may be an option to consider to save on today’s costs. Is this really an
option for your organization? How are your pay scales as related to the market? Are
you willing to risk losing key employees whose talents may be needed by other
organizations, because you chose to reduce their pay at this time? Remember, you
should not cut pay without a recovering strategy of how you will re-adjust when the
economy has turned.
• Downsizing does require internal document maintenance for your organization. As
jobs are modified and responsibilities are increased changes also must be made to
your job descriptions.
On the other hand the HR Management has to find some innovative solutions during the
1. To identify the real key employees and to intact them in the organization
2. To identify the real top potentials and to strengthen their development program
The employees are told to be the best capital of the organization and the HR Recession
Initiatives cannot be focused on the full destroy of the human capital of the organization. The
employees to be fired have to be selected carefully and the rest of employees have to sure
about the future of the organization. The organization has to guarantee the future for the most
important employees – the key employees, high potentials and the managers.
HRM Priorities and Recession
Recession also changes the priorities of an organization. Thus this in turn changes HR
priorities too. One must keep in mind that HR priorities must be alignment with business
goals and objectives. In short The HRM Function cannot live alone; it has to follow the
general business strategy. In order to decide the HR priorities, organization need to do quick
scanning of current policies, procedures, and processes carried out in HR. The recession is
about cost cuts and designing efficient, cheap HR Processes.
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.
On the other hand HRM Function should continue with the processes and procedures with the
lowest costs and highest impact on the organization. These processes and procedures acts as
an advantage or opportunity for an organisation to survive in recession. By continuing some
of these processes and procedures even employees may feel some security and consistency
and that they can trust the organization and its success in the war with the recession.
Recession impact on employees
Mr.Narayan Murthy, CEO of Infosys Technologies once remarked, “Our assets walk out of
the door each evening. We have to make sure that they come back the next morning.”
Yes, the employees are the most important assets of the organization. In times of the
recession, the employees have to be secure about their future and the organization should
announce a clear plan to them. Again one must keep in mind that the recession has a
devastating effect on employees. So during such times of turbulence, management need to
have effective HR communication system. Recession brings out the fear of insecurity among
the existing employees of an organisation. The recession brings a panic to the organization.
The rumors about the recession and the layoffs spread quickly around the organization and
the HRM Function has to monitor the emotions in the employee population. The rumors are
the most important danger for the successful survival of the recession. When the employees
start to speak about the recession, the key employees and top talents can leave the
organization within several weeks, as they feel no future in the organization. Therefore, here
HR has to prepare a plan with the management to overcome the fears to keep and increase the
performance and productivity of employees.
The productivity is a key success factor in the recession. The organizations fight for less
business opportunities and the organizations have to offer smaller margins as the customers
are extremely price sensitive.
The management has to understand the recession as the opportunity to improve and fix the
corporate culture and the corporate values by changing its behavior. The employees need to
know the situation of the organization and the management can put a lot of energy among the
employees in the recession as the employees feel the situation, which is dangerous for the
future of the company.
The employees look for the security in the recession and they feel the trust in the trustful
management. The enthusiastic and confident management, which can present a clear plan for
the fight with the recession, has a great opportunity to build a new super-organization of the
HRM Communication in Recession
The HRM Function is always responsible for the mass communication to employees in the
recession. The HRM Function should be responsible for the consistency, transparency and
fairness of the crisis communication to employees. The recession is usually not about the
good news, but the HRM Function has to be the employee advocate and the messages should
provide the employees with the clear outlook of the future.
The crisis and recession communication have to be targeted, as not all the employees should
receive the same amount of the information. The Sales employees should have completely
different details from the Operations guys.
The HRM Communication in the Recession is about defined and agreed target groups. The
organization cannot publish the details about its business position to all the employees, but
some groups of employees have to know more to feel comfortable and more secure.
The HRM Communication is one of the strongest tools for the retention of key groups of
employees. The talents and key employees have to receive more information from the
organization to keep their own security and their value for the organization.
The organization needs to raise the level of the motivation and the honest communication is
one of the best tools for motivation. But the HRM Function has to act as the consultant to
make sure, the employees are not de-motivated and frustrated by the amount of messages and
the details provided.
The HRM Function has to provide the advice on the communication channels used as not all
the messages should be sent via email. The HRM Function is the only function in the
organization to have a general picture of the target groups and it can provide useful
consultancy in the description of the target communication groups.
The HRM Communication in Recession is about a clear description of the organization´s
position on the market, the economic outlook for the next period and about the strategic
products and services, which will be the leading the growth in the era after the recession. The
employees should know about these topics as they can prepare themselves.
Recruitment during Recession
The recruitment process is the first HR Process to be affected by the recession. Employers
today are facing problems in getting the best people and retaining them. The job vacancies
are cancelled and the HRM Function should come with a new recruitment strategy.
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. Companies are now resorting to options like
Contractual or Project based Hiring, Outplacement, and Reallocation of Work etc.
HR Outsourcing services is an age old concept, earlier and even today most companies
outsource their manpower sourcing to recruitment agencies and staffing & manpower
consultants. Gradually the move has diversified from sourcing non-core processes like
payroll processing, fit gap analysis, reference checks and to a certain extent on-boarding. HR
Outsourcing majorly deals with outsourcing full or part (non-core) processes to a specialist
vendor. In current market scenario Recruitment process outsourcing is catching the attention
of all on as large companies strive to improve their bottom lines and at the same time
maintaining the quality.
Training Needs and Recession
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 has to find a
way, how to keep the knowledge in the organization.
During such times of turbulence, the organisation must impart minimum training to its
employees and that also if necessary. The company can survive without training and
development for a limited period of time. In fact organization can conduct training programs
about strategies on how to cope up with the recession. Gone will be days when few days of
training meant a nice vacation in a hill station or a swanky hotel. The training function also
needs to look at this aspect seriously and assist the organization to reduce costs significantly
wherever possible by cutting down on the frills associated with training.
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.
Benefits and Retention Strategies in a Recession
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.
According to Mercer's 2008 Report on Human Capital Management for Slow Growth Times,
1. Be looking for new ways to generate sustainable reductions in benefit costs using
innovative strategies that do not adversely affect perceived value.
2. Implement creative, highly-targeted strategies to recruit and retain the optimal
workforce for long-term success, and
3. Communicate often and honestly to employees to bolster flagging engagement and
The compensation strategy can be under a huge pressure in the recession. The top
management sees a great opportunity to realize significant cost savings resulting from lower
base salaries offered to the new employees.
The compensation strategy should not be that flexible as it can breach the internal equity and
the external equity can quickly change too. The internal equity is always a good goal for
compensation and benefits and it is a real long term goal. The recession should not break
such a goal and the organization has to identify other areas for cost cutting, not the
compensation strategy and the compensation policy.
The compensation strategy is very expensive and the quick change in the middle of the
implementation can cost huge money. The organization can realize short term cost savings,
but the costs in the future is enormous. The HR invests money into bringing the internal
equity and the simple solution can break the whole effort.
The compensation strategy cannot be changed easily and the recession is not a good decision
moment. The recession can show, if the compensation strategy works, it is not a good
moment to cancel the current compensation policy.
Talent Management and Recession
The talent management is about the selection of the group of key employees with the high
potential to develop, learn and grow in the organization. When the recession comes, this
group of employees can generate, design and develop the ideas, which can help the
organization to survive the recession successfully.
The top management has to empower the talents to change the organization. The top
management has to support their effort in pushing new ways of business through the
organization. The talents need a support from the top management.
The top management has a very important role in the recession for the organization. Their
communication is essential and their trust to the talents is also very important. The
organizations do not hire new employees, but the recognized talents are always welcome.
The organizations, which empower their talents, have a better chance to go through the
recession successfully with the new evolving leaders. The talents know about their
qualities and when they feel a possibility to develop their skills and competencies, they
will look for the opportunity to show their potential in other organization. This is a task
for Human Resources to support the role of the talent management and to show the
connection of the talent management and successful fight with the recession.
The talents are usually known in the industry and the recession can make them to be more
sensitive to the job offers from the competitors. When the organization has a clear plan
for the fight with the recession.
The talents from the job market do increase the personnel expenses of the organization, but
they can bring new sources of the revenue and they hugely increase the trust of the
The role of the HRM Function is in the quick reaction to the recession, making the proposal
to the top management and having a good contact with the recruitment agencies to start
the hiring process as soon as possible.
The HRM Function has to co-operate closely with the top management, as the talents from
the job market need to know the clear plan and clear expectations from them. The HRM
Function cannot communicate the clear expectations itself, but it can co-operate with the
middle management of the job positions, which can be created for the top talents from
the job market.
The HRM Function has to monitor the personnel expenses added to the payroll of the
organization as the company does not exceed the agreed rules and the HRM Function has
to co-operate closely with the recruitment agencies to get the best class employees from
the job market. The recession is a tough time and the top talents from the job market will
definitely help to win the battle on the market.
Eventually we find out that recession is a double edged sword. HRM should learn to take it as
an opportunity to improve the goodwill of the firm. HR must consider recession as a
challenging situation to handle.