The biggest challenge before companies at this point in time is managing business and people in an inclusive manner,” says Laurence G. O’Neil, president and chief executive officer of Society for Human Resource Management, or SHRM, a non-profit association of 245,000 human resource (HR) professionals in 130 countries.
O’Neil should know. It was during his stint as head of Bank of America Corp.’s HR functions for Asia in 1985 that the bank went through a rough patch. The bank was downsizing and had to close its Asia division in Japan. “We had one of the best talent pools and we had to do something about it,” he says.
Facing the challenge: Employee engagement is far more critical during a downturn, says O’Neil. Ramesh Pathania / Mint
His team contacted other companies to place the affected employees. “Thankfully, we were going through tough times during a growth period and many of the laid-off employees, therefore, could find employment with other financial services firms,” he says.
O’Neil was in India in December to meet senior HR professionals. In an interview, he spoke on a range of people issues, including the challenges of managing people in a slowing economy. Edited excerpts:
What are the HR challenges facing companies in India and abroad?
The current economic downturn is systemically global as opposed to being cyclical and literally every segment is affected by the same economic situation. At present, the biggest concern for any organization anywhere in the world is about managing business, and especially people, in a slowing economy.
The challenge lies in executing the right way of managing people, putting in place strategies that are in support of people who are the backbone of any organization. In this respect, some of the organizations are clearly doing the right things, using this downturn as an opportunity to invest more time in training and developing employees, investing in programmes in a sustained way. I must add here that India is showing us the way.
While there are short-term business pressures that cannot be ignored, the CEO can’t afford to lose sight of the long term. The CEO, along with the HR manager, needs to ensure that companies do the right thing because wrong action can sometimes do unfathomable damage. A case in point is the way the US-based consumer electronics retailer Circuit City Stores, Inc. carried out layoffs in 2007, where it openly targeted better-paid workers and even offered to rehire them at a lower wage. It was seen as an extremely cold measure because it implied that wages were subject to discounts, just like the products sold at the retailer.
It’s in the bad times that the values of an organization are tested. Companies invest a lot to build a brand and one wrong action can undo that. Employees are no longer unaware. So, keeping employees at the forefront of all business decisions is not just the right action but the right business action.
Most companies, however, are not behaving right and they will have to pay a price for this. In fact, a part of SHRM’s role is to share the best people practices and act as a facilitator in disseminating knowledge to the world.
What are the common HR mistakes made by organizations during a downturn?
The most common one is undertaking cost-cutting rather than (going for) prudent management of resources. These are organizational mistakes rather than HR mistakes. The other common one is taking the easy way out—to think short term as opposed to long term.
Employee engagement is far more critical during a downturn. Employees need to know that they are working for the right people and many organizations fail in heightening engagement levels during a crisis. Failure to communicate is another common mistake. Communicating nothing but the truth is the key to good communication. A good way to do this is to give the most confidential information top priority. Also, communication has little effect unless it’s the truth coming from the leadership team—the CEO or HR head.
These are times when companies come down to cultures and persons. So, it is important to treat employees with respect, fostering a sense of inclusion.
Also, many organizations don’t focus on innovating to deal with challenges. Redeploying employees or moving them to pockets where there are jobs could be one of the ways to deal with job cuts. For instance, US automotive workers who have lost their jobs could be moved to other parts of the world where companies are hiring. In a globalized world, there are no borders between companies and the way you treat people.
The other common problem is that most often HR managers are not equipped with the right answers because there is little sharing of (the) knowledge of best practices or use of data and research to raise the bar.
In a downturn, people costs are often the first thing to be pruned. What are your thoughts?
If the CEO says that the company needs to cut headcount and that’s the first thing that comes to his mind to reduce expenses, then the question is—is that the right CEO? The question that a right CEO will ask is, how can expenses be reduced and where to set goals?
Also, if you are building right and if that (decision to reduce headcount) comes from the CEO’s office, then you have not built effectively. It’s important to focus on the basics: Put people first, know your people, know your business and then execute a plan to stay solvent.
The job of the chief human resources officer is to ensure that the right people are in the right jobs. There may be companies that have never retrenched staff but if they are systemically in the wrong business, they might have to. But then too, it should be the last resort. A lot depends on how firms execute layoffs. Companies should remember that treating displaced employees with respect and helping them with outplacement processes and offering support is not a cost but an investment.
What role does an HR manager have to play during troubled times?
HR managers have a critical role to play. They are the keepers of cultures and organizations. The HR head has got to be at the forefront of any crisis situation. They need to be a part of the vision and strategy and work with the CEO in aligning people with recalibrated plans. These are times when some of the good practices get perfected and HR managers need to lead the way in this respect.
This is the time to take on the leadership role, innovate and know where to seek knowledge to be able to deal with crises better because good management weathers good times as well as difficult times. Business plans may change but the need for people does not. Companies have to stay the course.