Human Resource Strategy During Recession - Coursework Example

Human Resource Strategy During Recession 2009 The global economic recession that began in 2007 with the sub-prime crisis in the United States, spread across countries, particularly in Europe as well as those in Asia and Latin America that are linked through global production processes, culminating in the stock market crash and bankruptcy of leading banks like the Lehman Brothers in end 2008. Since then, there have been significant job losses in the United States and elsewhere. Some even consider the unemployment situation, with employment falling 2.6percent in January 2008 from the peak level of January 2007, as the worst in 50 years (Reuters, 2009). As many as 5.1 million jobs have been lost in the United States since the recession began, of which men contributed to 80 percent of the jobs lost, bringing the unemployment rates to 8 percent (O’Connor, 2009). However, job losses are an extreme situation and are more prevalent in industries like construction, hotels and retail that are male-dominated and require less education. While in the earlier recessions in the 1990s and early 2000, job losses were higher among the white-collared employees, this time it is higher among the less educated than among the college educated. The exception perhaps is the well-paying jobs in the Wall Street that was induced by the stock market crash (Leonhardt, 2009). In this scenario of economic downturn and job losses, managers have more ways of negotiating human resource strategies in line with business strategies. HR departments are being called in to assess and manage manpower so that organizations can tide over the difficult times more effectively. In the uncertain times when employees are insecure, HR managers have the leeway to reorganize employee hierarchies, which had been difficult in the boom times when retaining employees was more of a challenge. Designing of training problems, earlier looked upon as one of the tasks of a HR department, is now becoming more critical to increase employee productivity. In this paper, I will discuss various ways in which managers are attempting to redefine the relationship with employees and which of these strategies are most closely linked with business strategies. HR professionals’, roles are defined as “functional experts”, “business partners”, “facilitators for change” and “productivity consultants” (Ulrich, 1988 quoted in Granell, 2000). Typically, the tasks of the human resource department includes 1) recruitments: selection of possible candidates, organize interviews and process the pre-recruitment and joining process, 2) induction of new employees: assign them job responsibilities, acclimatize them with the organization culture, training related to health and safety issues, 3) training and development: focused on the needs of the organization and enabling individual development of each employee also benefiting the organization, 4) appraisal: for the purpose of promotions, increments as well as identifying development needs of employees, 5) engage in disciplinary action on employees when and if necessary, 6) managing the payroll system in association with the separate payroll section, 7) engage on motivational work practices, 8) organize termination and retirement of employees as well as downsizing of employee force if needed (times100). Technical skills and IQ levels are essential for any managerial job but in all modern organizations, particularly for an overseas assignment, emotional intelligence (EI) is no less important (Jassawala et al, 2004). EI can be estimated by asking the managers questions on situations they are likely to face on their assignment. Other personality traits, like sense of humor, optimist attitude, adventurous nature and enthusiasm for interacting with different types of people are also essential for such assignments. In most modern organizations, psychometric tests, besides testing their domain knowledge, are done on candidates to judge whether they are suitable for the role. EI analysis becomes all the more critical for employees to function in the uncertain times of a recession. Most of the leading organizations now are global. In the era of globalization, when recession too has spread globally, the HR department has a particularly important role to play in organizations that function in different organizational and inter-personal cultures as well as with varied forms of governments and markets. As Stanek (2000) says, "Today's global organizations require international managers that understand and can respond to customers, governments and competitors alike". Wright et al (1999, cited in Granell, 2000) found from a survey of organizations that globalization was the most important pressure for change in organizational culture, followed by technology advances, skill shortages and competition. In all these areas, the HR department has a crucial role to play in organizing employees and motivating them to change. Particularly in knowledge-driven industries like information technology or investment banking, which has faced the brunt of the recession, employees are the most valuable resource or asset that adds value to the company. Yet, unlike physical assets that are measurable in terms of physical or monetary units, human assets are difficult to be valued and enhanced. Hence, human resources are usually under-valued, under-trained, under-utilized, poorly motivated and able to perform less than their capability, resulting in actual performance of the organization to be less than the expected performance. The basic responsibility of the human resource department is to identify and enhance the human capital asset that adds value to the organization. Such assets enhance value by creating, gathering and retaining knowledge through social relationships within the organization that enable employees to utilize knowledge and skill levels. The HR department should concentrate on improving the quality of the processes of knowledge management and utilization, relationship building and team work. For this, the HR department needs to understand the aspirations of the employees and their inspiration to improve their capabilities, competencies, performances and knowledge. It requires a detailed Training Needs Analysis that encompasses organizational analysis of objectives, resources and environment, operational analysis of expected performance, actual organizational and employee performance, and the trigger point that leaves the actual organizational performance (AOP) less than the expected organizational performance (EOP) resulting performance gap (Blanchard and Thacker, 2000). Skill development of employees depends on both the organization and the individuals. The organization, particularly the Human Resource department, needs to assess the skills and competencies of the employees on a regular basis. Layoffs, salary and perk cuts are the most difficult decisions that the HR managers have to take but there is usually more room for maneuver in times of recession. While these are often seen as inevitable, such decisions also affect the morale of the employees. Employees’ attitudes and behavior bear economic impact on the organizations. As a result, it is in the organizations’ self-interest that human resource decisions and policies are adopted in a manner that is seen as just so that morale of the employees are maintained and bring out the best in them. Employees typically consider justice-related issues like pay structures, rewards, etc., as the main source of conflict. Moorman (1991) identified organizational justice as a critical criterion for organizational citizen behavior. Byrne and Cropanzano (2001) give a historical overview of the research of organizational justice. The stream of research originates from Adams’ (1965) equity theory of cognitive dissonance that postulated that employees behaved in a dissonant fashion if the outcomes regarding pay and other organizational factors did not match with their perception. According to Adams (1965), individuals continuously compare their social positioning with a referent. In a social exchange situation like an organization, the outcomes compared are typically in terms of pay, rewards, authority and quality of assignments that are compared according to the referents like age, qualification, seniority, education, skill, social status, etc. Inequities in outcome may be perceived to be normal if these are acceptable according to the referent parameters but may result in grievance and anger if the perceived inputs are much higher than the actual outcomes (Ortiz, 1999). Distributive justice is the typical outcome that affects the employees in terms of hiring decisions, performance appraisals, promotions, downsizing and layoff decisions, etc. For example, at the time of performance appraisal, if an employee perceives the outcome regarding his increment vis-à-vis others as unfair in comparison his input in terms of hours worked, skills, etc., the decision may be considered as unfair. According to Organ (1988), “Debates about the criteria – such as status, seniority, productivity, effort and need – that should determine salary… have to do with distributive justice”. Although this study identifies equity, effort and need, most research on distributive justice emphasizes on equity. In particular, if the employee perceives his outcome/income ratio to be at par with the reference parameters, he would not have any grievance or anger towards the management. However, if the perceived outcome/input ratio differs from the reference, the employee demonstrates different types of behavior. Distributive justice is particularly critical when there issues regarding allocating resources, that is there are a specific number of jobs, promotions, assignments, money for bonus and incentives, etc. available that can be distributed among the employees. Workers typically compare their outcome/input ratio to that of others. They react to distributive justice measures in a number of ways. For example, if they perceive the ratio not in their favor, they may reduce inputs (that is work slowly or inefficiently) so that the ratio is equated; request for or demand a change in the outcome (that is ask for a raise); get others to work harder or their outcome reduced so that the ratio is again equated; choose a different set of reference parameter, for example, with people with similar qualifications outside the company; change one’s cognitive approach, for example, accept the outcome. However, in times of recession, the fear of job losses is so high that employees may not always ask for a change in the outcome of performance appraisal. Hence, HR managers can negotiate harder with employees on salary and perk cuts necessitated by lower organizational earnings. Employees perceive procedural justice as an indication of predicting future states on the basis of the current state. A fair procedural system in the organization allows the employee to feel that he would be valued and rewarded. Muchinsky (2000) defined a procedure just if it is enacted “without personal bias, with as much accurate information as possible, and with an outcome that could be modified”. Leventhal et al (1976) concluded that employees perceived procedures to be fair if "they are implemented (a) consistently, (b) without self- interest, (c) on the basis of accurate information, (d) with opportunities to correct the decision, (e) with the interests of all concerned parties represented, and (f) following moral and ethical standards" (quoted in Anderson et al 2003). Informational justice relates to issues free flow of information that might critically affect the employees’ well-being, for example downsizing, lay-offs, etc. This is the social method of achieving procedural justice so that the people affected by organizational decisions are provided with as much information that those who impart the decisions have. The four dimensions of organizational justice often interact and result in unique situations. Brockner and Wiesenfield (1996, cited in Anderson et al, 2003) postulated that the different dimensions of organizational justice interact "when two conditions are met: (a) the outcomes associated with the decision are considerably lower than imagined alternative outcomes and (b) the procedures that give rise to the outcomes are unfair, thereby rendering the outcomes unjustified". At the same time, it might be the case that employees are not given a clear picture of the decisions thereby resulting in informational injustice. If, over and above this, the decision-makers adopt an unfriendly attitude while finally communicating the decision, it also implies interpersonal injustice in the organization. As a result of the recession, organizations are forced to undertake measures to reduce costs, through job, salary and perk cuts. However, many of these measures result in loss of morale of the remaining employees. Besides, the uncertainty that the employees have to live in affect employees, thus affecting their productivity adversely. Hence, HR professionals need to think of other ways to improve employee productivity, skill development and realignment of employee roles so that organizations are able to deal with the recession more effectively. Particularly in knowledge-based industries, training of employees for the purpose of skill development needs to be undertaken in a structured manner so that the training needs are analyzed in the context of business imperatives and training can be provided in a targeted manner. Works Cited Reuters, SF Fed economist-Worst job-loss recession in 50 years, February 19, 2009, http://in.reuters.com/article/marketsNewsUS/idINCHB00057820090219 O’Connor, Sarah, Men Bear the Brunt of US Job Losses, Financial Times, April 19, 2009, http://www.ft.com/cms/s/0/d28c79d6-2d11-11de-8710-00144feabdc0.html Leonhardt, David, Job Losses show Breadth of Recession, New York Times, March 3, 2009, http://www.nytimes.com/2009/03/04/business/04leonhardt.html http://www.thetimes100.co.uk/theory/theory.php?tID=200 Granell. E, Culture and Globalisation: a Latin American challenge, Industrial and Commercial Training, Vol 32, No 3, 2000, pp 89-93 Jassawalla. A, Truglia. Ciara and Grarvey. 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