STRATEGIC HRM IN ECONOMIC RECESSION

Abstract

In this assignment is presented briefly the world economic recession, the definition of strategic management and is analyzed the role of Strategic Human Resource Management as well as the HRM Policies during the economic crisis. Finally, are proposed some solutions of reducing HRM costs, following the minimizing cost strategy of the companies and presented the potential contribution to the long-term success of a company after the end of the recession.

Introduction

Every business adopts strategies of acting. The business strategy the that a company adapts and applies is directly linked with its day-by-day changing commercial, economic, technical, ethical and social environment. (Georgopoulos,2006)

Until now, businesses were taking in account the factors of a continuously augmenting globalization of the markets and the non-stop pushing from the international competition (Scroggins W., Benson Ph., 2010), the poor ability of the company to protect itself from the increasing menaces from the external environment and technological and administrative opportunities are spread between the society and the business. (Georgopoulos, 2006)

World Economic Recession

In these factors that bring uncertainty to the company is added the economic recession that burst about two / three years ago. Recession is a phase of business cycle in which there is a significant reduction in economic activity, which is obvious in income, employment, industrial production and sales. As consequence a lot of companies are trying to survive, focused mostly in cost leadership strategy, a strategy that its goal is the minimizing of the costs of production.

Strategic Management

Strategic Management refers to the most difficult challenge that an organization confronts, on how through the competition for survival and prevalence in the market in the present, will put foundation for a success in the future.(Georgopoulos, 2006)

Maximizing Performance is the main goal of all managers, which means the level that the organizations reach their organizational goals with efficiency and effectiveness. This will result the company’s success in the long run. (Georgopoulos, 2006)

Strategic Human Resource Management and its Role in Present Recession

SHRM is a strategic approach of managing one of the most important elements of an organization, its working force. The need of SHRM is more intense in present days, as economies are under recession, businesses have losses and a vast number of people lose their jobs all around the world (Harness T., 2009).

The administration of every firm has a cost reduction strategy, searching for potential cost savings and thinking twice of spending its income. The HRM costs are usually significant costs and are usually the first that are reduced in an economic crisis.

In situations like this, the HRM has to react quickly, supporting the organization in protecting incoming cash and reducing its operational costs. This is pressing for HRM, as it has to change its focus rapidly, from the pleasant strategies of the economic growth, taken for granted by the employees, to unpopular cost cutting strategies.

In this way, HRM contributes to the survival of the business, maximizing its performance if it is possible and to its success after the exit of the recession, having already recruited the most talented employees with the less possible cost, leading the organization to the competitive advantage in the future market (FergusonK., 2009).

Unfortunately, for achieving this, HRM adopts unpopular innovations; policies and procedures may be cancelled or postponed; but also this could be helpful for HRM to introduce modern policies of high standard, making the organizations healthier after the recession.

Until now, has been observed a trend of the businesses where the majority of companies has fired employees directly after the burst of the crisis and replaced low-performing employees with high performing. Also a big amount of them hire only temporary personnel and augment the size of IT applications. As a result, some of the HRM processes can be strongly affected and some other not to be affected at all.

SHRM of Recession and HRM Policies

There are policies of HRM that are heavily affected by the recession in the strategy of minimizing the costs, such as planning of workforce, recruitment, training, benefits already given to employees, performance management and appraisal, which have to be minimized immediately. Other practices are less affected, such as job analysis, recruitment, testing, selection, interviewing and development, in which the costs can be more easily reduced .

Job Analysis, Planning and Recruitment during the recession

In these activities of HRM, the one that has to be almost eliminated is the recruitment. Most of the businesses stop recruitment completely or they reduce it to minimum. This affects the activities of job analysis and planning, as there are no incoming employees. The HR department is really careful of identifying the needs in personnel of the company and designs work positions that cover a larger field of duties and have less specialization. Additionally, they can build a “brand name” this period, creating job campaigns that will attract talents with the minimum cost. They reschedule simultaneously the planning of the working force of the company and its organizational structure, redirecting the employees in other departments. In this way the costs in money and time from recruitment are almost eliminated instantly (Richbell S., 2010).

Testing, Interviewing and Selection during the recession

These three activities are not affected so much, as long as there is at least some recruitment, as there are ways to make their costs disappear, mostly through technological tools (Polychroniou P., 2009) that give the opportunity to the companies to test and interview with no cost of transportation, residence of the interviewers, materials etc. On the other hand, always businesses wish to have talented employees, thinking of their performance and success after the end of the recession. In this case, the crisis enables companies of mapping and targetting the really talented employees that maybe they are working for the competitors or are victims of the recession. And all these will cost to the company less than in a growth period (Emerald Group Publishing Limited, 2010).

Training and Development during the recession

Training will follow the pace of the recruitment as it is costly to train the new employees, as long as they exist. It has huge costs in time and money, so the companies prefer already experienced employees, victims of the recession, to avoid these costs. On the contrary, development is really significant during the recession time. This is the HR practice less affected by recession, as can be done with low cost, using IT solutions, and prepares the business for the exit of the economic crisis, maximizing the performance and contributing in the long-term success. The development can be diminished to the key personnel, identify the top performers and concentrate to the really capable of achieving good performance (Malik F., 2009).

Performance management, Benefits and Appraisal during recession

A company has after the check of performance of its employees to make a quick classification between good and average employees. This will make also the average or bad employees to be pressed to perform. Also, employees with average performance in a department can be redirected to another one, which will give them additional skills as well. Finally, for maximizing their performance the HR department has to listen to the employees, to keep them motivated and be sincere with them about the difficulties of the period, so that they will trust the administration, they will help it to face the appraising problems by feedback and will augment their willingness for higher performance. Additionally, creating a vision and making them part of it, will increase the level of commitment of the employees (Pate J., 2010).

From what the business can save a huge amount of money are the bonuses that can be significantly reduced, without touching the base salaries of its employees, as they are really sensitive in this (Armstrong M., 2011). In the same manner, in the appraisal process, the promotions can be re-evaluated and can be done only the needed ones, trying to minimize the salary augmentation and strengthen their development programs(Armstrong M., 2011).

SHRM Solutions for Companies during recession

In bad economic periods, companies neglect investing in HRM, as they think of these periods suitable for cutting benefits and firing employees. In the contrary, companies should take advantage of these periods, to prepare themselves for the next period of strong economic growth.

Innovation leads to competitive advantage

Innovation results out of change, which demands an organizational culture willing to accept it. The contribution of HRM in organizational culture, makes it a really important function of the business nowadays.

The innovations that HRM can implement in organizational culture of the company are (Benevene P., 2010): collaborate with ecological ways of communication reducing costs; increase the satisfaction of employees making them feeling important, sharing with them the vision of company; introduce the flexible working transforming it from an employee benefit to a cost controlling strategy (Atkinson C., 2011); increase the employee engagement to the performance of the company; attract and keep talented employees(Pate J., 2010).

In this way, HRM, through innovative strategies contribute to the exit of a company from the recession, lowering the costs and maximizing business performance. Being focused on organizational culture, through its processes and the help of technology, HRM can offer real benefit to the company.

Conclusion

In this period of world economic recession, the HRM has to react in a fast and efficient way, as the longer an introducing solution needs, the less is appropriate. A company with HR department reporting, controlling and innovating all its processes, can be leaded in a huge competitive advantage after the crisis comparing to its competitors, improving or maximize the performance of its employees and as a consequence the performance of the organization and thus, considered to have achieved success in the long run (Kats M., 2010).