This document is a research paper by Merima Bejtagic-Makic on HR practices during an economic recession. It discusses how the recession has impacted businesses and forced HR managers to cut costs through layoffs, wage reductions, and increased workloads. However, the document emphasizes that the best HR managers avoid major layoffs and focus on retaining talented employees. It then examines several HR strategies used during recessions, such as wage adjustments, employment adjustments, reorganizing work hours, improving communication, and focusing on innovation. The conclusion stresses the important role of HR in driving performance through initiatives like talent management, performance reviews, and leadership development.

1. INTERNATIONAL BURCH UNIVERSITY
MBA PROGRAM
Global Comparative Management
Prof: Mustafa Kurt
Research Paper: „ HR in recession“
Name: Merima Bejtagic-Makic

2. Introduction
The world is currently in the middle of the most serious economic recession in its modern
history. This downturn has caused serious effects on the businesses and on the management of
human resources. As many companies rethink strategies and structure in response to the
shortterm demands of the global recession and its anticipated long-term impact on the
business landscape, their HR rationales must change as well.
Human Resource Managers play an important role during recession as they help their
companies attain both goals by quickly cutting unnecessary costs from the employee base
and forces them to think creatively what to do with the exisitng personnel.
Tough times call for tough measures - and today it is especially important for HR Managers
to reflect on how to retain and motivate their employees, while staying on the low budget at
the same time. Smart HR Managers know that good employees and motivated employees are
the driving force behind your business. To help their companies survive, chief human
resources officers must work to improve talent management and performance over the long
term, they should realign their function, policies, and services, as well as seize other
opportunities created by the economic downturn.
The impact of the recession on HR
Chartered Institute of Personnel and Development (CIPD) say that 1.3 million people were
made redundant during the recession. The business cut down employees which caused more
work to be done by fewer people in the companz. Productivity per employee increases, but
morale suffers as hours become longer, work becomes harder, wage increases are stopped and
fear of further layoffs persists. Managers and their employees usually come to an agreement
to keep the job but reduce their wage and benefits. (investopedia) . This can be shown
especially in the HR department, where some study suggesting that numbers working in HR
would be cut disproportionately compared with other support functions.
Most companies are decreasing their annual HR budget in areas such as training and
development, external training, the use of external consultants, recruitment and HR systems.
Other affects of recession in businesses are a slowdown in industrial production and
manufacturing and a slump in consumer spending, decrease in GDP.
A survey done by (ipsos Mori), states that the economic situation has led to 82% of
respondents making changes to their HR strategies. Of these, three in five (58%) expect such
changes to be long term rather than short term. Below we are going to look at some of the
new HR strategies that happen during recession.

3. HRM practices in the recession
Regardless of all the negative impacts that the economic downturn had on the HR, it is
reassuring that the HR function is seen as having a crucial role to play in improving
organisational performance. Given the downward pressure on revenue and profits, many HR
Managers have been immediately and intently focused on rapidly reducing the number of
employees. But the best HR heads are avoiding this kind of major reductions of employees
that often destroy value and damage capabilities. Instead, they reduce jobs that are noncritical,
or that no longer fit with the strategic direction and structure of their companies. In addition to
reducing head count, HR's should be eliminating low value and low priority HR investments
and deferring major technology implementations, while making sure that essential long-term
investments, such as those aimed at building critical capabilities and key leader-ship
development initiatives, have the funding and support to continue uninterrupted.
The CIPD has advised HR professionals on how they should manage their workforces in the
recession. They are exhorted to ‘think long term’, maintain employee engagement, strengthen
line management capability, support employees’ health and well-being, develop a strategy for
redundancy, find ways to minimize redundancy , if staffing reductions are unavoidable,
consult with the workforce and their representatives, establish fair and objective selection
criteria for redundancy, provide advice and support for people losing their jobs, and plan for
the future, especially by reallocating jobs and responsibilities, provide training for new jobs,
and communicate with employees at all stages (CIPD 2008).
As the leader of a function that affects people and performance across the business, the HRs
responses to this recession will contribute to a company’s long-term success as well as its
short-term survival. Below are some of the policies and procedures that HR managers
undertake to help firm adjust to hard economic times.
Wage adjustment: companies may adjust wages to their employees in the form of freezes or
even cuts in pay and benefits. The measures ranged from reviewing remuneration policies to
ensure affordability, to implementing cost reductions in terms of wages, salaries, bonuses,
pensions and fringe benefits and redundancies. Lower wages for new employees and limiting
overtime bonuses.
Employment adjustment: this can be secured by reducing employee numbers or by increasing
working time flexibility or a combination of the two. An option open to an organisation
seeking to avoid job losses is to develop a workforce stabilization programme. A number of
specific policies fall within this category, such as a temporary layoff scheme for employees;
Firms can also re-organize working time to avoid making redundancies, curb overtime, or
introduce short-time working. When job losses are compulsory the main concern is the type
of criteria used to select people for redundancy. Traditionally, the seniority rule last-in/firstout
prevailed in redundancy situations, although this practise has been eroded somewhat in recent
times. Comprehensive objective criteria such as attendance, sickness and disciplinary
records, skills, competencies and qualifications, work experience as well as performance
appraisals are now commonly used to select redundancy pools (Doherty 2009). Of course, at
times, organizations have no alternative but to cut jobs. It is important in these situations that

4. HRM managers do not focus solely on maintaining the morale of employees not affected by
the redundancy decision. They must also endeavour wherever possible to devise a
comprehensive employability package for those losing their jobs (Incomes Data Services,
2009). Because job loss can have a devastating impact on individuals and their families,
organizations are encouraged to try and find alternatives to redundancies (Cascio 2002). For
example, to develop a workforce stabilization programme or temporary layoff scheme for
employees, employee redeployment and staff sabbaticals.
Re-organisation of working time: Firms may also respond to the recession by increasing
numerical flexibility: greater numbers of part-time and temporary workers are employed
instead of full time workers in an effort to match more closely company employment levels
with changes in demand for the company’s products or services.
voice and engagement: Keeping employees regularly and fully informed of the organisation’s
commercial position as well as management’s plans is considered important to maintaining
employee commitment and engagement.
Communication: Communications and information disclosure was listed and clearly ranked as
the most effective HR practice in helping firms manage the recession. Intensive
communications shows that management are seeking to develop policies which address the
interests of employees. The employees will therefore be involved in the formualtion and
implementation of new plans which will result in understanding and increase profitability in
the organization.
Process or product innovation: smart managers work with their employees during this
recessionary times to increase innovation activities which are designed to improve
organizational products or processes. On this view, it is important for firms not to lose focus
about what they are fundamentally about and become too concerned with reducing costs.
Instead, they should continue making planned improvements to organizational processes and
systems as well as to product or service quality. In other words, the search for long-term
improvements in competitive performance should not be derailed due to the onset of bad
economic times; if anything it should be intensified (Chubb et al 2010).
Building talent advantage in Recession And recovery
According to Booz and company, HR Managers can help prepare their companies to profit
during the recovery by turning their attention to opportunities to strengthen the talent base and
capabilities and to enhance the effectiveness of the HR function. There are four tasks that
support these goals:
1. Realigning HR with corporate objectives: The recession and the changes it has
caused have spawned many strategic and structural changes in companies. CHROs
need to reshape their HR strategies and operating models to align with the new
economic environment and the revised priorities of their companies. Toward end,
they should thoroughly understand the revised people priorities of corporate, business
unit, and functional leaders, and support them as they seek to effectively execute

5. their restructuring plans. HR Managers must also ensure that HR’s structure,
capabilities, and services are aligned conduct contingency planning in order to be
prepared for potential future adjustments to their companies’ business and staffing
priorities.
2. Realigning HR with corporate objectives: HR Managers need to reshape their HR
strategies to align them with the new economic environment and the revised priorities
of their companies. Toward this end, they should thoroughly understand the revised
people priorities of corporate, business unit, and functional leaders, and support them
as they seek to effectively execute their restructuring plans. They must also ensure that
HR’s structure, capabilities, and services are aligned with new business imperatives
and conduct contingency planning in order to be prepared for potential future
adjustments to their companies’ business and staffing priorities.
3. Reappraising talent and performance management: Once HR is realigned with the
company, the HR can continue to reduce costs and prepare the company for recovery
by conducting a rigorous talent review aimed at creating an enterprise-wide talent
portrait. This review should identify the company’s most critical talent segments and
optimize their contribution to strategic success, as well as pinpoint and close critical
capability gaps in high-priority areas. A rigorous talent review serves as the
foundation for maximizing the productivity and performance of the workforce: Low-
performing employees can be identified and aggressively addressed, and leadership
capabilities and bench strength improved.
4. Reenergizing the workforce: Now is also the time to reenergize and reengage the
surviving workforce. Employee trust, productivity, and commitment levels typically
decline dramatically in uncertain times. Top performers, who are always in demand,
are tempted to leave. And the limitations on cash and stock awards in many companies
create a greater need for a more strategic focus on enhanced employee value
propositions. This is particularly important given the multigenerational and
multicultural nature of today’s global workforce. Employees have very different
expectations and motivators; a one-size-fits-all employee value proposition is no
longer an option. Finally, HR Managers should also encourage senior leaders to be
visible and ensure that internal communications about the business are frequent,
transparent, and honest.
If they haven’t already, HR Managers need to invest in building better leadership capability
and effectiveness (a key driver of employee engagement and performance. The current
downturn has created many human capital challenges, but it also harbors opportunities.
Successful HR Managers can position their companies to emerge from the recession with a
higher-performing workforce, differentiated capabilities, and a deep leadership bench. Just as
important, they can align the HR organization and talent programs to better deliver the kind of
strategic impact that enhances business performance in good times and bad.
Reinforcing leadership development efforts: For companies to prosper and grow during
recovery, performance management efforts must be tightly intertwined with continued and

6. reinforced leadership development efforts. Managing and maximising performance: Good
performance management is critical to organisational success. It is defined by the chartered
Institute for personnel and development „ performance management has a siginifcant role to
play in enhancing organizational performance, by ensuring all individuals understand their
expected contribution to business objectives and are equipped with the skills and support to
achieve this. The process drives engagement by ensuring effective communication throughout
the organisation and the linking of objectives, as well as enhancing the individual/ line
manager relationship by encouraging line managers to build positive relationships with
individuals based on trust and empowerment.“
Conclusion
The research highlights the difficulties facing HR in the current environment. Most corporate
HR departments are freezing or decreasing their annual budgets and there is an enhanced need
for HR leaders to focus on the urgent business critical initiatives. However the survey also
reveals the key role HR has to play in driving organisational performance. Now more than
ever before, HR needs to show itself to be about more than making redundancies by helping
the organisation to reduce costs and improve efficiency and performance. Organisations that
intelligently manage talent and communicate with employees honestly, accurately and at the
right time will ride the current turbulence and be successful in the future. What's more
important is that they need to improve performance management and put in place intervention
that promote effective performance management takes time.

7. References
http://www.booz.com/media/uploads/Building_Talent_Advantage.pdf
http://www.ipsos-
mori.com/Assets/Docs/Loyalty%20Talent2%20HR%20Directors%20Report%20FINAL.pdf
http://www.investopedia.com/articles/economics/08/recession-affecting-
business.asp#ixzz1w93eGaI8
http://www.nationmultimedia.com/2010/01/22/business/business_30120882.php
http://www.lrc.ie/documents/symposium11/Exec-Summary-Human-Resources-in-the-Recession.pdf