Role of HR in these tough times

Dr.S.SUNDARARAJAN, Associate Professor , SIMS

For those who have spent over 30 years in HR fraternity, these financial downturns / industrial slowdowns are happening, probably the third time. First around 91-92, second around 97-98 and now again. So, the story looks all too familiar, because, friends, when people see the upturn, they forget the down turn and exactly does same mistakes of building huge costs and many non-value adding processes. Unfortunately, most of such cost build ups do not get done with the involvement of HR. For example, many companies, in their desire to grow faster, have filled more than the required number of trainees; to attract talent, offered higher and higher salaries, even though the value addition remained almost stagnant; built costs on entertainment / infrastructure of recurring nature and so on. But friends, honestly speaking how much of HR involvement was there while these decisions were being made? There would be a few cases but, at least my experience that rarely HR is being asked to give an opinion on cost build up like this; on the contrary, when any HR person points out the risks, they are considered as not business savvy.

Let us also look at another aspect. Except for Retail and IT industry, people cost as percentage of revenue is generally not that high; but it is here everyone focuses on to start with to cut; why? In some manner, As a HR professionals also joins the demand and do all that is required to restructure operations / people etc. So, they are not seeing anything being done differently in this down turn that was not done earlier.

Current crisis

The most painful period for an organization is telling its employees – either some of them is not needed or they can’t take home the same level of salaries or they cannot enjoy the same benefits any more. People have questions like, when the going was good; you never gave everything out to us and hence, when the going is bad, why I need to share it? So, in my experience, there is no better way but to be very transparent about the current and emerging scenario for a horizon of 2 – 3 years and also share what is available resource and what are the constraints going forward. Of course, the people would like to see what sacrifice the senior management team does before they believe in the story. I am sure most of you are bored as you all know it. But,  HR’s are in a position to do the entire thing as above dispassionately and credibly in front of its people? Do we have this freedom and latitude? If yes, those cases would be successful in handling this downturn.

The second important thing is — managing the morale. When some are being removed, you still have business to manage and may be, people have to work more (even take the load of their colleagues who leave) and probably get same or lesser pay and benefits. A tough job, tougher working condition, poor ambience (motivational level) and lower salary and benefits. So what more challenge HR professional needs to handle? Here the easiest situation to handle is in cases where “survival” of the company is at stake. If people are transparently told, things work dramatically better. However, the genuineness of the communication and commitment of the management team is to continue to get business will be seen, which unfortunately falls beyond the scope of HR. This requires HR to be part of the business acquisition team to know what is the reality in the market and then share it as it is with its people (not select, but with every one).

For future:

HR should be an absolute partner of Business Growth and Strategy, which means, when there is scenario planning and action, HR’s are also expected to plan and suggest a future-scope while ensuring that people productivity and cost per transaction levels are kept absolutely minimal (This would require HR managers to be also business managers and also strategic thinkers). In fact HR managers should be allowed and be able to challenge the growth projections based on solid information and analysis. Companies need to allow this latitude to HR as they allow Finance function to challenge the numbers.

Consistently, the single metric for companies to run, need to work on cost per unit revenue – which drives innovation, improvement, performance enhancement, process improvement, technological excellence and so on. As one of the promoters of a large group in India said, “If everyone were to die, he would be the last one to die”. So ensuring all fixed costs is minimized (with human face of course) and organization focus is kept on cost per unit revenue and its continuous improvement should be the focus of all HR managers.