Curently, the whole of the economic system is passing through a trembling stage, which is making the whole world shivering seeking peace of mind and stability as they have no tangible assurances in their hands except for the economic analysts expectations; which we are not even sure of.
In the world economic history, there have been two big recessions; in 1940’s post world war II, and 1980’s. Sadly, such an impact becomes the ruling power and we become the slaves for it; manipulating our companies procedures, expenditures and budgets around it. On the contrary, such recessions give the market the opportunity to reveal its real players; those who can stand still in the middle of the storm. As we are all aware, it is really easy to excel in a boom; during which the money runs as smoothly as champagne; however, after which the champagne will have to dry out once the economy system is busted!
To elaborate a bit, at such a phase, there are two sides of the coin; either the CEO will show their savvy skills and impress their boards and take their companies to the next level; OR, unfortunately, the company will start its ride down to hell. It is the CEO's opportunity to deliver real time solutions in such an era of change.
And as such, CEOs will have to reacquaint themselves with the basics of macroeconomics, and deliver micro-strategies to maintain their companies’ competitive edge. And they must do this within the parameters of good corporate governance, sticking to their mission and managing ethically. Therefore, executives should hold firmly during such a ride!!
During such a critical phase, as much as the Human Resources function is needed and due to the importance of keeping the human capital in a specific state of mind; by which eliminating the fear of losing their jobs; ironically, the tangible elements of such a function; i.e. salaries, raises and bonuses, training and development and social events are all firstly thought of when it comes to cutting down costs! And on an executive level, logically speaking, the large executive pay packages are being reconsidered and controlled.
During a recession, companies tend to implement conservative plans on all aspects; such as freezing recruitment. Furthermore, upon freezing hiring, there will be no need for relaying on recruitment agencies; such as executive search, junior search, screening candidates, interviewing them and then recommending them. This will be percieved as a total extra cost if not a complimentary one.
Certainly, at such a time the turnover rate will get lower, as any staff member who resigns or gets terminated, most probably, will not be replaced by any other. This is part of the conservative plans managements set and implement; however, on the contrary, the management does not actually consider the psychological effect this has on the rest of the staff members. Hence, the extra work load that will be assignd to the rest of the staff members due to the resignation of an employee which consequently will fire back on the management due to the frustration of the staff. Employees will become dissatisfied and demotivated.
Such a phase sometimes makes you think, is this the opportunity for some employers to make use of such a recession to cut down costs and increase revenues by manipulating their employees psychological statuses, and strictly specifying that there are no salary increases this year? Which by then, impressing the CEO’s board! Bang!! Another credit in the managers’ pockets!
As a matter of fact, focusing on the intangible aspects of the HR function for leveraging and motivating the employees; and for nourishing the psychological side of the employees is a crucial point for the management to consider; as "People" are the very important asset of any and every business. Without the human capital the business will not operate, decisions will not be made, tools will not be built, a culture will not be there, equipments will not be installed and constructed. Therefore, people are the driving agent of any island, sector, industry, company or business. So, you should hold on tight to them if they deemed deserving.
When it comes to cutting down costs during a recession, one of the things that a CEO thinks of is cutting down the costs of training & development. Although if we take a deep look into training, it is one of the most essential tools in polishing the staff’s skills, which consequently will be reflected on the productivity of the business and the job performance.
On another note, some companies are giving their staff the axe and making them choose, whether to lay you off or any of your colleagues, or not granting any salary increases this year. On the other hand, some companies think of it as a win-win situation, they are not laying off any one, but decreasing everyone's pay, and accordingly decreasing their costs. Which as a matter of fact opposes the labor law.
During the G20 summit, President Barack Obama defined a limit for the CEO’s bonus pay; which is a maximum of $5,000. However, they are hoping that payroll reductions in the second quarter of this year won't be as deep as the roughly 685,000 average monthly job losses in the January-March period. Let us keep our fingers' crossed!!
Basically, the ones who are being laid off are the ones who proved to be expendable and most costly!! As well as based on the following:
1) If people are in their probationary periods; less than 6 months, they were laid off!
2) The highest paid people in the departments were laid off
3) National employees are kept in
Mostly who is getting fired are only getting the 1 month severance pay; which is their indemnity for serving one year and their un-used holidays; so they are not taking anything more than what they are due for!! So no real compensation to such termination for a reason they have not contributed to.
Other companies are giving their employees two notes:
1) Resignation note without specifying the reason
2) Termination note also without specifying the reason
So employees are given the freedom of choice between the two. Where in reality both of them are considered firing; however the first note is only a friendly one.
Earlier on, it was taking people 2 months to search and get a new job if they were being laid off, however now, within such hard economical crisis, with no doubt people will need an eternity to find new jobs!
Further, with the recession, a lot of restructuring has taken place; downsizing departments as much as 60% across the board. And thus, the HR has a double standard role to play in such a case; the first is laying off people, and the second is rebuilding and restructuring the company. HR professionals are and should be a manipulative character!
Further, for multinational companies, and for the remotely dispersed organizations, where ever there are two people doing the same job or have the same position, at a time of a recession, one of those two has to be laid off! This to cut down the costs and therefore, will shift that department or that load of work to one person situated in one country. It is actually a logical solution to do, however, it might lead to a lower quality job. therefore, businesses have to equate their positions and organizational structures with the current economic environment in order to remain competitive in the absence of better times.
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