ROLE OF HUMAN RESOURCES’ (HR) MANAGERS DURING ECONOMIC CRISIS.

Economic meltdown is the contraction of the economy for two consecutive quarters while economic crisis is a state in which an economy witnesses slowdown of economic activities, increased level of unemployment, decreased consumer spending, low level investments, low level of trading activities and the loss of the value of assets by a segment of the financial institutions, which persists over a long period of time.

For the first time in several decades, the tough talking developed nations are at their wits’ end. Their citizens have been grappling with the harsh realities of increasing food and gas prices, increased foreclosures, massive retrenchment and massive job cuts signposting an economic meltdown. For instance, the United States alone witnessed one of her worst months in unemployment related matters as provided by the Bureau of Labour Statistics, US Department of labour in http://www.bls.gov/news.release/empsit.nr0.htm

“In September 2008, the number of long-term unemployed (those jobless for 27 weeks or more) rose by 167,000 to 2.0 million, an increase of 728,000 over the past 12 months. In the US housing sector alone, the foreclosures in 2007 stood at about 850,000 and by the 3rd quarter of 2008, financial institutions like Lehman Brothers, AIG; WaMU, Merrill Lynch, Morgan Stanley, JP Morgan-Chase, Fannie Mae, Freddie Mac and many others cracked under the meltdown.

As this was happening, the stock market all over the world tumbled under the yoke of the economic downturn to an all time low. By the last week of October 2008, it was a gloomy picture across the globe. Writing for Associated Press on October 24 2008, Kennedy said “the U.S. dollar sank to a 13-year low against the Japanese currency, falling below 95 yen. Japan’s Nikkei 225 stock average slid 9.6 percent to 7,649, its first close below 8,000 since May 2003…… South Korea’s stock market fell sharply for a second day as figures showed the economy there was slowing. The Kospi dropped 10.6 percent to 938.75, falling below the 1,000 mark for the first time in more than three years…”

The above is a frightening data from the world’s strongest economies. To stem the tide of further losses and rescue the collapsing institutions, governments hurriedly put bailout options in place. In the United States, $700 billion was adopted by the legislature, the British Government adopted a £500billion was also adopted. This will enable the government have direct investments in banks, guaranteeing their debts and insuring of all deposits.

In our own environment, we do know that getting data to back up current job losses is a Herculean task. However, it is common knowledge that the manufacturing sector started a gradual move towards a shut down few years ago and the world situation can only but aggravates the situation. The oil and gas sector is in turmoil and releasing workers on daily basis because of the activities of militants, vandalism of petroleum pipelines and reduced production activities. The resonating gloomy economic picture puts a lot of pressures on workers. This leads to apprehension, anxiety and distrust. I am sure that in 2009, the Unions will become more demanding, confrontational and combative.

If the global economic slide continues, the developing economies are likely to suffer the backlash because we are largely a consuming nation. As crude prices dips, the home offices of the multinationals would become stringent with spending and if this continues for too long, foreign aids and recall of capital may occur. Imagine what will happen to our economy if the multinationals decide to pull several billion of dollars from this economy with lower volume sales of oil.

As at today, most of the multinational oil companies have cut their cut production levels because of the Niger Delta crisis. For instance, SPDC that was producing about a million barrels per day about five years ago produces less than three hundred and fifty thousand barrels per day. Chevron intermittently shuts down operations as its facilities because of incessant attacks by militants. If these are aggregated, they will accentuate the economic crisis; then we are heading for real challenges.

During periods of economic crisis, workers put their future security and welfare over above doing their jobs as prescribed by the organization’s procedural handbooks. Therefore, managers of human resources (HR) should have it at the back of their minds that they are dealing with employees that are confronted with high emotions, low morale, curiosity, anxiety, uncertainty, thoughts of negativity, possible loss of life savings, losing their houses, apprehension and near state of hopelessness because of the fear of the unknown over the sustainability of their gratuities and pension. All these lead to increased rumour mongering, accentuated stressed levels, irritability, decreased productivity, disloyalty, cutting of corners and hidden health costs to the organization.

While these occur, it behoves on HR practitioners to start a realignment of thoughts, synergy and step up programmes that will give hope to workers. Only an inward looking HR management, which is strategically positioned, efficient and effective that will successfully swim through this ocean of uncertainties into a period of boom, which usually comes after a period of downturn.

While it is true that our economy is not a credit strewn system there is nothing in the horizon to categorically exclude us from what the end of this economic fatality will be. If the global economic slide continues, the developing economies are likely to suffer the backlash because we are largely a consuming nation. As crude prices dips, the home offices of the multinationals would become stringent with spending and if this continues for too long, reduction of foreign aids and recall of foreign capital may occur. Imagine what will happen to our economy if the multinationals decide to pull several billion of dollars from this economy with lower volume of oil sales. As at today, most of the multinational oil companies have cut their production quota because of the Niger Delta crisis. For instance, SPDC that was producing about a million barrels per day about five years ago produces less than five hundred and fifty thousand barrels per day. Chevron intermittently shuts down operations as its facilities because of incessant attacks by militants. If these are aggregated, they will accentuate the economic crisis; then we will be heading for real challenges.

Reasons for the Economic Meltdown.

• Negative impacts of borderless markets (globalization).
• Criminal borrowing.
• Incompetent practices.
• Weak regulations.
• Lack of transparency.
• Corruption.
• Unrestricted mortgage activities and lending to those with bad credit history.
• Decreased consumer spending as a result of massive job losses.
• Questionable greed.
• Break neck expansion craze.
• Stiff competition by corporate bodies.
• Lack of proactive strategy by the executive, legislature and the financial experts to deal with the symptoms at an earlier stage.
• Absolute freedom of the market economy.

Negative Impact (s).

• Closure of enterprises because of lack of access to borrowing from banks and high interest rates.
• Massive job losses and accentuated unemployment (In the aftermath of the South Asian crises in the 90s, job losses rose from 5,015 in 1996 to 38,217 in 1997).
• Erosion of the middle class.
• Decreased consumer spending.
• Decreased capacity utilization.
• Increased cost of available goods.
• Hyperinflation.
• Bad debts.
• Recession.
• Negative impact on our foreign reserve

It is vivid from the above that there is no hiding place for any of the world economies from the negative impacts of the economic meltdown.

Ref: Louis Brown Ogbeifun

Retrenchment shadow falls on HR personnel

With most companies either retrenching or freezing recruitment plans, human resources personnel across sectors are a worried lot.

Recruitment- related HR executives are being moved to other HR functions like training and development and other day-to-day HR functions, or being taken on contract. If things worsen, there could also be layoffs.

A Sudarsan, vice-president, sales and marketing, Expertus HR (a wholly-owned subsidiary of US based Expertus Inc), admits: "There will be layoffs in the near future, and companies will increase temporary staff. Meanwhile, I don't forsee any hikes for HR executives."

Moreover, the mix of contractual employees in the HR team across various sectors is expected to increase. Vodafone, for instance, has 25 per cent of its HR staff on a contract basis.
Companies like Wipro, Infosys, TCS] and iGate, too, have a mix of contractual employees in their HR team.

Nandita Gurjar, Senior vice-president and group head, HR, at Infosys Technologies, confirmed that the company has some employees in the HR teams who work on contract basis. She, however, declined to divulge the numbers. "Yes, we have some employees who are on contract, but about the numbers, I have no idea," she said. Infosys has about 300 people in their HR department.

Srinivas Kandula, global head, HR, iGate Corporation, said: "We have about 30 people in our HR team who are on contract basis, but they mostly search job portals and source resumes etc. Because there is not much of career growth for such activities, we prefer contractual employees."

EDS (bought over by HP) and MphasiS (now a subsidiary of EDS), too, have rationalised their HR department functions. Several real estate players like DLF and Unitech, too, have reduced their HR staff and stalled recruitment for the present. Some subsidiaries of ICICI Bank are also said to have cut their HR staff.

Rakesh Malik, practice leader for globalisation and business transformation practice at Hewitt Associates (HR consultancy) , concurs: "Companies might shrink the number of recruitment- related executives in future. But, so far, I haven't seen any layoffs with our clients.

In fact, in slowdown times when companies feel the compelling need to become more aggressive about quality, other functions of HR like performance management, planning and evaluation become more important. Learning and development programmes become significant. Compensation and retention activities become priority that requires more strategic services of HR."

Sampath Shetty, vice-president, TeamLease Services, explains: "When recruitment slows down, operations HR is the first area to bear the brunt. But strategic HR becomes more important. Operations people are getting into training for other strategic HR functions." Of them, temporary executives are the first to be hurt. "Contract renewal period has shrunk from 1 year to 3 months," adds Shetty.

In effect, the role of managed staff services (wherein the HR staff working for companies are on the payrolls of the placement agencies and not employees of the companies) and recruitment process outsourcing (RPO) is expected to gain traction.

Managed staff services will benefit the most as more companies will go for managed staffing, which gives companies staff at variable cost as and when required. "We have seen a 10 per cent increase in demand for temporary staff in the last one-and-a-half month. The demand is expected to double in the next one year," adds Sudarsan.

But managed staff companies are also experiencing the ripples of the slow down. "Companies are asking to reduce management fees (fees paid to managed staff companies on managed staff) by 50 per cent," Sudarsan informs. Most companies have started reducing management fees, others are forced as a result