Yadavrao Tasgaonkar School Of Business Management,
Bhiwpuri Road, Chandai, Karjat
Everyone will be affected in some way by the current economic downturn, it is a brave person who thinks they can carry on business as usual. In this paper we identify the general principles for operating under the current conditions and highlight the contributions the HR function can make to provide a framework for survival and prosperity.
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 HRcontribute?
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!
HR Crunch: Now, human resources (HR) has a human problem. Amidst all this brouhaha over talent crunch, what misses the eye is real challenge before India Inc shortage of HR professionals. Industry estimates show that for every 50-75 people recruited, one HR job gets created. However, the way jobs are being created each year, the number of HR professionals seems minuscule. In 2007 alone, approximately 3,37,000 employees are expected to join the software and services sector, for which around 4,500 HR professionals will be required. However, there are only a handful of institutes that offer exclusive courses in HR, of which Tata Institute of Social Science (TISS), XLRI and SCMHRD are the most popular. These three institutions, put together, produce approximately 200 professionals each year. This supply-demand mismatch in the IT sector alone is just indicative of the larger picture. Experts say, India would require 28,000 HR professionals next year, but there seems to be little happening on the supply side. Industry attributes the shortage to mindset issue. Students prefer specialisations in finance and marketing over HR. Sunil Kumar Maheshwari, professor, personnel and industrial relations area, IIM Ahmedabad agrees. "Lack of recognition management trainees at the first level in HR get compared to their counterparts in finance and sales department, is a major reason for this," he says. Though HR is a strategic function today, and has moved from a transactional to a transformational role, what deters students from taking up the discipline is the fact that they don't see it as an important function early on. But of course the rate of growth in the number of total graduates has led to more people willing to take it up. RC Datta, professor and dean, school of management and labour studies, TISS, points that around 26 years back there used to be 26 out of 1,500 for HR, now it is 80 from 6,000 candidates.
According to KS Subramanian, director, SCMHRD, while the number of applicants for the course has been soaring, the challenge remains in getting the right kind of people in the discipline. "It's only in this course that we have competency mapping and then we allow candidates to take the subject accordingly. For example, to be a good HR professional your listening capability should be 10 times your speaking capability," he adds. Hema Ravichandar, a strategic HR advisor says that from the time she graduated from IIM Ahmedabad in 1983 to date, the number of HR professionals coming out of Tier-1 institutions like the IIMs & XLRI, has remained almost the same or marginally increased, woefully falling short of requirements. XLRI has more or less maintained its strength on 65 students over the last few years. While TISS has doubled its seat to 80 from last year onwards, owing to the demand coupled with more and more experienced candidates applying for the course, SCMHRD halved its seats to 40 now.
This shortage of HR professionals has affected employers in more ways than one from increase in the compensation to people from other disciplines joining the HR workforce. Currently, the average compensation for an entry level HR professional from one of the premier institutes is in the range of Rs 8-10 lakh, while five years back the maximum a person could get was Rs 6-7 lakh. Subramanian says that this figure can go upto Rs 14 lakh in some cases. Also the way companies, especially consulting firms, have increased their headcount, the lack of HR professionals is just getting worse. As a fallout of this, we increasingly see people movement from other disciplines into the function. This has raised concerns about their capability for the job. Sandeep Chaudhary, business leader, Hewitt India says that since HR function is 60:40, where 60% is core knowledge and 40% comes from other business functions, the trend doesn't pose a threat. Concurs Gautam Ghosh, a Hyderabad-based management consultant. "It doesn't dilute quality as now recruitment is like supply chain and sales function, HR information system requires more IT people and an Msc (Math) can work compensation benefits very well," he adds.
The deficit of professionals in HR can be attributed to the role institutions play in developing this talent. Unless the youth is motivated and infrastructural and faculty support is provided to the institutes , this issue shall persist. This might get more people from other disciplines to join HR and on the job training might begin to overshadow the domain knowledge one receives in a college.
