HR has to recognize this recession isn’t like the last one.
Though it may not seem like it, the last economic downturn wasn’t all that long ago. But due to the unprecedented amount of change that has beset the business world, for many organizations today’s recession bares little resemblance to the last one.
Sandro Iannicca, a consultant with William M. Mercer’s human capital practice, said there are four important factors which make this downturn different than those that came before.
First, many of today’s managers weren’t managers in earlier downturns. All they know is how to manage during a time of high growth. Second, Canadians were greatly effected by the events of Sept. 11 and feelings of malaise and uncertainty could well be with us for a while. “This adds another dimension of uncertainty which demands a quality of HR leadership that goes beyond what has been required in the past,” he said.
Third, in the past few years, organizations have become very lean. “If they reduce staff levels now, they will be cutting into muscle.” If they need to hire in the future, finding replacements will be difficult.
And finally: demographics. “In the next 15 years, the number of 35- to 44-year olds in the population will actually decline by more than 10 per cent,” he said. Organizations need to think about what a similar shift in their workforce profile would mean.
He added that 15 years might seem like a long-range projection but there is little doubt that even in the short term, many organizations simply won’t have the people to follow through on business plans.
A lot of people recognize these shortages are coming, but that reality has not yet changed the way companies are managing the downturn, said Iannicca. Layoffs should be a last resort. In fact, if possible, now would be a good time to hire since there are more high-potential people looking for work. Bringing them on board now will give them six or eight months to get used to the business and when things begin to improve, they will be ready to add value to the organization.
For some however, cutting head count is a matter of survival and there is no alternative. “Cutting across the board usually isn’t a great idea,” said Iannicca. “A superior performer will outperform an average worker by 50 to 500 per cent.” Organizations have to determine who the best performers are and take steps to hold on to them.
To minimize damage from the recession, HR departments will need to employ some innovative human capital policies, such as educational leaves or sabbaticals at reduced salaries. Salary reductions may be unpopular but necessary and better than the alternative, said Iannicca.
He cited U.S. brokerage Charles Schwab as an example of a firm that went out of its way to cut costs without resorting to layoffs. They closed the office on Fridays to lower electricity and water bills, reduced salaries for senior executives, banned first-class travel, cut back on entertainment expenses and imposed a hiring freeze. Eventually, they were forced into highly publicized layoffs, but the important point is that they did not jump the gun, said Iannicca.
Communications a priority
Like so many other high-tech companies, Compaq Canada was under a lot of pressure to cut costs in 2001, and inevitably they had to consider reducing head count.
“We did all kinds of things to avoid layoffs,” said John Cardella vice-president of HR. Employees were encouraged to take a week off in July, and hiring restrictions were introduced. “We did everything we could to contain costs.”
The reason? As quickly as the economy goes down, it could bounce back up again and having a reputation for treating workers well will be very important. What’s more if employees aren’t treated well and kept informed, they become disengaged and the company performance will suffer even more. Concerned about the adverse effects the tough times would have on employees, the executive team worked hard to keep morale up.
“The communications strategy is key really. It is the core of what truly makes a company great.”
People understand employers have to make some difficult decisions to cut costs. If the reasons for those decisions are explained employees will be more receptive and morale won’t be as negatively effected.
What’s more, Compaq continued to reward employees for the work they were doing.
Each quarter every manager in the company is given $25 per employee for group outings, golf, a trip to the pool hall and so on.
“We refused to cut recognition,” said Cardella. “We did not touch rewards and recognition in the least.” Everyone was working really hard and he said it was important to show employees that what they were doing was appreciated by the management team.
Apparently their efforts have paid off. In the last employee satisfaction survey, more than three-quarters of employees said they were very satisfied with the company, an improvement from the year before.
Sticking to the plan
Brian Mullen, director of HR at steel manufacturer at Hamilton-based Dofasco, said they have a great deal of reluctance to stray too far from their long-term plan.
Just because the business climate changes the long-term plan should not, he said. Accommodations and adjustments might be in order but they should be made with the long-term plan in mind. This is why companies should resist layoffs, he said. At Dofasco, for example, they have done a lot of demographic analysis to figure out what their workforce needs will be in the future, even bringing in David Foote, author of Boom Bust and Echo.
When companies stop hiring or begin reducing head count without ensuring cuts won’t jeopardize the long-term plan, they are apt to find themselves facing even bigger problems two or three years from now, said Mullen.
That philosophy means Dofasco continues to be proactive in its search for “great people,” and to improve the skills of the workers they already have. This past September, the company launched a new partnership with Mohawk College in Hamilton to raise the skill level of employees. Students entering the one-year program combine a 14-week co-op work term with two school terms where they learn, for example, basic health and safety principles, electrical and programming skills even team work.
Inevitably some companies will have to let people go but that should be the last option, exercized only after having exploring all options to eliminate waste, said Mullen.
Less slack
Barry Barnes manager of HR with Oakville, Ont.-based elevator and escalator service company Otis Canada said they are being faced with some very difficult decisions but any time a company has a responsibility to shareholders, short-term decisions sometimes have to be made that clash with the long-term plan.
For example, they don’t have the luxury of retaining some slack in staffing levels which means they don’t hire as freely as they once did. Now, anytime a position comes open it is reviewed before being filled. It used to be that if somebody got promoted a replacement was hired without even thinking about the work or trying to leverage technologies to accomplish the same objectives a little differently. A couple of years ago, if they were on campus looking to fill three or four positions but found five or six good candidates they’d hire them all. “Now if, we say we are going to hire nine, we hire nine.”
And where once a lull between projects meant the company would hold onto workers and keep them busy with minor tasks, that is no longer the case, said Barnes. If a worker is not adding value they have to be let go and in a union environment where seniority rules, that sometimes means people with bright futures are let go. That’s just the unfortunate reality, said Barnes. “We can’t afford to have people paid if they are not productive.”
Last year, tighter control of staffing translated into about a seven per-cent reduction in head count.
Generally speaking when things were booming it was easier to spend money, he said, adding they made a decision to curtail travel to cut costs.
At a time when the economy was booming and businesses thriving, there was a tendency for people to jump on a plane to meet with clients and co-workers when a trip wasn’t really necessary. But as things slowed down organizations began to look more closely at expenses, he said.
Scrutinizing processes
In the last few months, Winnipeg-based Ceridian Canada has noticed the demand for its services drop off. As layoffs increase, there is less demand to pay people and less demand for a payroll provider. It’s likely that in the next few months things will slow down still further, said Sharon Hooper, director of HR. She too said they are doing everything they can to avoid letting people go but times like these compel organizations to look closely at how they have been doing things and see if they can’t do them better.
Undoubtedly, processes will be scrutinized and technology options explored and that could mean head count could be reduced, she said.
They are looking for way to standardize and consolidate operations, for example. Currently Ceridian has print distribution centres in a number of cities across the country. By standardizing cheque distribution, they may be able to eliminate some of those centres. Changes like that will likely lead to some staffing reductions but not before skills assessments will determine if employees can be re-deployed. If there is a skills gap, but it is determined to be a fixable gap, they will retrain, she said.
Ceridian is also in the midst of launching a new customer relationship management system and has found they have more time to study the people, processes and technology to focus on the rollout.
And not surprisingly for a company like Ceridian, one that sells outsourcing options to the HR community, Hooper believes companies need to adopt e-HR practices and consider outsourcing non-core functions to respond effectively to the pressures they are facing.
To do improve processes and realign people the organization needs an HR department that can minimize the time it spends on transactional activities.
It became almost axiomatic that in the past when it came time to do some belt-tightening training was first on the chopping block. But Hooper is determined to ensure that doesn’t happen at Ceridian. To ensure the commitment to training doesn’t lapse, she took control of training at head office so she could “protect” the training budget. “We know that when training competes with everything else, it is first to go.”
They won't be able to spend more on training this year, but Hooper still plans to increase the hours of training per employee from 61 in 2001 to 65 this year. They just have to be smarter about how they deliver training, she said. A greater focus on e-learning will enable them to reduce the travel costs that come with training in far-flung locales, for example.
Sandro Iannicca, a consultant with William M. Mercer’s human capital practice, said there are four important factors which make this downturn different than those that came before.
First, many of today’s managers weren’t managers in earlier downturns. All they know is how to manage during a time of high growth. Second, Canadians were greatly effected by the events of Sept. 11 and feelings of malaise and uncertainty could well be with us for a while. “This adds another dimension of uncertainty which demands a quality of HR leadership that goes beyond what has been required in the past,” he said.
Third, in the past few years, organizations have become very lean. “If they reduce staff levels now, they will be cutting into muscle.” If they need to hire in the future, finding replacements will be difficult.
And finally: demographics. “In the next 15 years, the number of 35- to 44-year olds in the population will actually decline by more than 10 per cent,” he said. Organizations need to think about what a similar shift in their workforce profile would mean.
He added that 15 years might seem like a long-range projection but there is little doubt that even in the short term, many organizations simply won’t have the people to follow through on business plans.
A lot of people recognize these shortages are coming, but that reality has not yet changed the way companies are managing the downturn, said Iannicca. Layoffs should be a last resort. In fact, if possible, now would be a good time to hire since there are more high-potential people looking for work. Bringing them on board now will give them six or eight months to get used to the business and when things begin to improve, they will be ready to add value to the organization.
For some however, cutting head count is a matter of survival and there is no alternative. “Cutting across the board usually isn’t a great idea,” said Iannicca. “A superior performer will outperform an average worker by 50 to 500 per cent.” Organizations have to determine who the best performers are and take steps to hold on to them.
To minimize damage from the recession, HR departments will need to employ some innovative human capital policies, such as educational leaves or sabbaticals at reduced salaries. Salary reductions may be unpopular but necessary and better than the alternative, said Iannicca.
He cited U.S. brokerage Charles Schwab as an example of a firm that went out of its way to cut costs without resorting to layoffs. They closed the office on Fridays to lower electricity and water bills, reduced salaries for senior executives, banned first-class travel, cut back on entertainment expenses and imposed a hiring freeze. Eventually, they were forced into highly publicized layoffs, but the important point is that they did not jump the gun, said Iannicca.
Communications a priority
Like so many other high-tech companies, Compaq Canada was under a lot of pressure to cut costs in 2001, and inevitably they had to consider reducing head count.
“We did all kinds of things to avoid layoffs,” said John Cardella vice-president of HR. Employees were encouraged to take a week off in July, and hiring restrictions were introduced. “We did everything we could to contain costs.”
The reason? As quickly as the economy goes down, it could bounce back up again and having a reputation for treating workers well will be very important. What’s more if employees aren’t treated well and kept informed, they become disengaged and the company performance will suffer even more. Concerned about the adverse effects the tough times would have on employees, the executive team worked hard to keep morale up.
“The communications strategy is key really. It is the core of what truly makes a company great.”
People understand employers have to make some difficult decisions to cut costs. If the reasons for those decisions are explained employees will be more receptive and morale won’t be as negatively effected.
What’s more, Compaq continued to reward employees for the work they were doing.
Each quarter every manager in the company is given $25 per employee for group outings, golf, a trip to the pool hall and so on.
“We refused to cut recognition,” said Cardella. “We did not touch rewards and recognition in the least.” Everyone was working really hard and he said it was important to show employees that what they were doing was appreciated by the management team.
Apparently their efforts have paid off. In the last employee satisfaction survey, more than three-quarters of employees said they were very satisfied with the company, an improvement from the year before.
Sticking to the plan
Brian Mullen, director of HR at steel manufacturer at Hamilton-based Dofasco, said they have a great deal of reluctance to stray too far from their long-term plan.
Just because the business climate changes the long-term plan should not, he said. Accommodations and adjustments might be in order but they should be made with the long-term plan in mind. This is why companies should resist layoffs, he said. At Dofasco, for example, they have done a lot of demographic analysis to figure out what their workforce needs will be in the future, even bringing in David Foote, author of Boom Bust and Echo.
When companies stop hiring or begin reducing head count without ensuring cuts won’t jeopardize the long-term plan, they are apt to find themselves facing even bigger problems two or three years from now, said Mullen.
That philosophy means Dofasco continues to be proactive in its search for “great people,” and to improve the skills of the workers they already have. This past September, the company launched a new partnership with Mohawk College in Hamilton to raise the skill level of employees. Students entering the one-year program combine a 14-week co-op work term with two school terms where they learn, for example, basic health and safety principles, electrical and programming skills even team work.
Inevitably some companies will have to let people go but that should be the last option, exercized only after having exploring all options to eliminate waste, said Mullen.
Less slack
Barry Barnes manager of HR with Oakville, Ont.-based elevator and escalator service company Otis Canada said they are being faced with some very difficult decisions but any time a company has a responsibility to shareholders, short-term decisions sometimes have to be made that clash with the long-term plan.
For example, they don’t have the luxury of retaining some slack in staffing levels which means they don’t hire as freely as they once did. Now, anytime a position comes open it is reviewed before being filled. It used to be that if somebody got promoted a replacement was hired without even thinking about the work or trying to leverage technologies to accomplish the same objectives a little differently. A couple of years ago, if they were on campus looking to fill three or four positions but found five or six good candidates they’d hire them all. “Now if, we say we are going to hire nine, we hire nine.”
And where once a lull between projects meant the company would hold onto workers and keep them busy with minor tasks, that is no longer the case, said Barnes. If a worker is not adding value they have to be let go and in a union environment where seniority rules, that sometimes means people with bright futures are let go. That’s just the unfortunate reality, said Barnes. “We can’t afford to have people paid if they are not productive.”
Last year, tighter control of staffing translated into about a seven per-cent reduction in head count.
Generally speaking when things were booming it was easier to spend money, he said, adding they made a decision to curtail travel to cut costs.
At a time when the economy was booming and businesses thriving, there was a tendency for people to jump on a plane to meet with clients and co-workers when a trip wasn’t really necessary. But as things slowed down organizations began to look more closely at expenses, he said.
Scrutinizing processes
In the last few months, Winnipeg-based Ceridian Canada has noticed the demand for its services drop off. As layoffs increase, there is less demand to pay people and less demand for a payroll provider. It’s likely that in the next few months things will slow down still further, said Sharon Hooper, director of HR. She too said they are doing everything they can to avoid letting people go but times like these compel organizations to look closely at how they have been doing things and see if they can’t do them better.
Undoubtedly, processes will be scrutinized and technology options explored and that could mean head count could be reduced, she said.
They are looking for way to standardize and consolidate operations, for example. Currently Ceridian has print distribution centres in a number of cities across the country. By standardizing cheque distribution, they may be able to eliminate some of those centres. Changes like that will likely lead to some staffing reductions but not before skills assessments will determine if employees can be re-deployed. If there is a skills gap, but it is determined to be a fixable gap, they will retrain, she said.
Ceridian is also in the midst of launching a new customer relationship management system and has found they have more time to study the people, processes and technology to focus on the rollout.
And not surprisingly for a company like Ceridian, one that sells outsourcing options to the HR community, Hooper believes companies need to adopt e-HR practices and consider outsourcing non-core functions to respond effectively to the pressures they are facing.
To do improve processes and realign people the organization needs an HR department that can minimize the time it spends on transactional activities.
It became almost axiomatic that in the past when it came time to do some belt-tightening training was first on the chopping block. But Hooper is determined to ensure that doesn’t happen at Ceridian. To ensure the commitment to training doesn’t lapse, she took control of training at head office so she could “protect” the training budget. “We know that when training competes with everything else, it is first to go.”
They won't be able to spend more on training this year, but Hooper still plans to increase the hours of training per employee from 61 in 2001 to 65 this year. They just have to be smarter about how they deliver training, she said. A greater focus on e-learning will enable them to reduce the travel costs that come with training in far-flung locales, for example.
