Credit Crunch – HR’s Opportunity

How will the credit crunch affect you?

Everyone will be affected in some way by the economic turndown.

• Falling sales are widespread, and quite drastic in some sectors, driving seemingly sound businesses to the wall in a matter of months.

• More and more of us are chasing smaller amounts of business, and in all areas discounting is taking place, some of it cut-throat

• Price cuts clearly have a knock-on effect within businesses - costs needs to be cut in many areas to accommodate them. 

• The biggest effects are uncertainty and anxiety.  Business leaders and employees are jointly fearing for their business, their jobs and income, and the future for themselves and any dependants. 

Many of us can take the pain for a while – but we cannot predict how bad the recession will be or how long it may last, and what further twists and turns might be around the corner.  Who would have predicted the downfall of major banks and the collapse of so many household names in such a short space of time? 

Thus it is a very brave person who thinks they can carry on business as usual.

Key operating principles to adopt

So, what are the general principles for operating under these conditions?  Some of us have seen something similar before, and therefore here are some suggestions.

• Stay focused, and avoid distraction and ‘good ideas’ which just aren’t priorities now.  There’s a temptation to do something new for its own sake, but ‘initiativitis’ is to be avoided.

• Make decisions.  Do not put off or prevaricate when something needs to be done or addressed but equally avoid knee jerk reaction.  Decisions should be made on facts – make logical not emotional decisions. Make sure you really understand the ‘opportunity costs’ i.e. the cost of doing something or not doing something, and the value to be generated.

• Clearly this is a time for extra effort. Ensure that all employees recognise the importance of the additional contribution – it’s in everyone’s interests, and going the extra 10% can make a real difference.  This relates to deadlines, customers, service and doing things which under normal circumstances you might put off.  Employees’ own ideas should be actively sought.

• Given that we are in uncertain times, organisations need to be flexible and capable of moving in a different direction at speed.  Anything that slows this down, be it a decision making process, unnecessary bureaucracy or prevarication should be avoided.

• Build confidence, and counteract fear, in order to recover. Recessions are heavily sentiment-driven, and your chances of prospering will only become real once your staff and thus customers and other stakeholders believe that you have an effective action plan in place.

How can HR contribute?

The HR function has a number of significant contributions to make to support these principles and provide a framework for survival and prosperity.  These include the following:

• Make sure that you conduct a fundamental review of performance in all parts of the organisations.  We know companies are supposed to do this anyway, but they often don’t. Now is the time for serious performance managing, and shifting on those people who are low contributors.  This is not a witch hunt, simply a time to get fit and recognise who is important. 

• Therefore, make sure that you have, say, the best 50 people in the most important 50 jobs.  In many businesses, sentiment gets in the way. At times of basic survival, it is critical that key performers, the money makers, and the high added value contributors stay in place.  A good retention strategy is essential to keep the best and keep them motivated.

• Most businesses operate at a level above minimal costs.  This is the time to take out all unnecessary spend.  In reality this is probably not marketing or learning & development but sponsorship, unnecessary entertainment and first or business class travel – such things are highly questionable in times of adversity.

• People must be kept informed in a timely and regular way, so that there is a ‘no surprise’ culture.  People need to know what is happening in the wider economy, what is happening in your business, and what they can do to make a contribution. Remember, the rumour mill and second-guessing will fill any information vacuum – not generally in a positive way.

• At the same time, adversity can be a motivator. In this context, good leaders and managers come to the fore and should be encouraged. In particular, they should be in regular contact with all their reports, especially the high potential ones.

• Moreover, involvement tends to lead to commitment. On the one hand, ensure that people understand that the best organisations survive, and those who are less good go under. On the other, enable people to feel part of the solution, so that they are positively challenged and energised. Two-way communication is important, supported by tools such as pulse surveys.

• Using contract staff or outsourcing are sensible steps to consider – but make sure these are not just short-termist cost-driven decisions that don’t add real value. You will need to manage internal attitudes, and that will be hard if the steps taken aren’t credible.

• There is still a need to praise good work and hard effort, and look for opportunities to celebrate success. Recognise people’s emotions, even if leaders must stay cool and calm.

• Critically, this is a time for the development and maintenance of teams. A crisis is an opportunity to pull people together around a task, and also to use project management disciplines to ensure delivery of key projects.  The principles and practices of good team development known to most HR professionals should be encouraged. 

• You might feel some of this is obvious. However, experience shows that organisations don’t necessarily find focusing on a few simple things is easy – the losers get trapped in the headlamps while the winners see the light. For the skilled and bold HR professional, this is a time to seize the moment and make a real contribution. 

• For those organisations that are especially brave and confident about their future, this is a great time to recruit good talent, especially intact teams.  Moreover, adversity offers opportunity – after every downturn there is an upturn, and none of us want to be left behind.  On an individual level, shining in times of adversity can be career enhancing!

Have your say

This piece is intended to stimulate comment and additional suggestions, based on your experience so send in your thoughts, and we may be able to share them through the website.