Topic: ‘Managing Organizations in the Downturn Phase’- A study of Effective

HR practices.

Abstract:

Indian companies have faced volleys of issues in handling people during the

slow down phase. The HR interventions taken the organisations served as an

opportunity to survive and face the slow down. This premise is studied in this

paper. Also, this paper elaborates the HR initiatives implemented by

organisations for solving people related issues. The paper also discusses how

structured HR interventions provide solutions to people related issues during

the downturn phase. Primary data has been collected using personal and

telephonic interviews with HR professionals and employees of the

organizations which were selected by using appropriate sampling process.

The secondary data was collected from the information published as the past

company reports, articles and papers published in journals. The

comprehensive view on the various HR interventions during the downturn

ensures a complete understanding of the HR strategies adopted by the

organizations to overcome the slow down phase. It is the intent that the

paper would be a base for all organizations to focus on HR interventions

during slow down phase. Strategies have been suggested to the companies

to overcome during the slow down phase.

Topic: ‘Managing Organizations in the Downturn Phase’- A study of Effective

HR practices.

1. Introduction:

When the world economy underwent a massive turmoil, yet India was one of

those nations which have withstood without facing much turbulence. In the

last quarter of 2008, Indian industries experienced the impact of global

financial meltdown. Indian companies did face a setback but did not collapse

like many in the rest of the world. As the unsettling scenario unfolded,

companies in both manufacturing and services sectors scrambled to take

urgent defensive action. Achal Raghavan, (2009) discussed the coping

strategies adopted by the Indian industry leaders and explained the role of

leaders in managing people during the downturn.

We have witnessed significant change in terms of competition, relationship

between companies, suppliers, customers and employees. HR plays a great

role in handling relations with employees. This in turn ensures stronger

relations with other stakeholders. Kuldeep Singh, (2003) has reported the

roots of personnel function in India since 1920’s and elaborated on how the

focus shifted to strategic HRM. Reports produced by Spencer Stuart, India

mentions that the Indian companies have realized that their people are the

key to their growth, and the one strategic resource that any enterprise truly

needs. This premise acts as a fundamental axiom of this paper to understand

how the Indian companies have focused on the people and also how people

have contributed to the survival of the organization. The HR interventions

during the downturn have been studied and discussed in detail hereafter.

2. Objectives of the study: The objectives of the study were three fold.

• To identify the issues faced by the companies during the downturn

phase

• To discuss the HR strategies and the HR interventions adopted by the

companies to overcome the challenges during the downturn phase

• To study the concern areas during the downturn phase

3. Methodology:

Coverage: The survey covers various companies from different sectors like

IT, Manufacturing, Retailing, Banking, Automobiles and Insurance.

Sampling Frame: The sample frame comprises of all Indian organizations that

has faced (directly or indirectly) the consequences of recession in foreign

market. The organizations which have faced the after effects of slow down in

the Indian market have also been considered.

Sampling Method: Stratified random sampling method has been used for

collecting information.
Sample Size: A total of 14 companies from sectors like IT, manufacturing,

retailing, banking, automobiles and insurance have been surveyed. Also data

was collected from 52 employees from different organisations.

Units of Observation: The organizations having separate HR department to

manage the HR issues of the companies.

Data Collection: Primary data has been collected using personal and

telephonic interviews of the HR professionals and the employees of the

organizations where the study was conducted. The secondary data was

collected from the information published in past company reports, articles

and papers published in journals. Information has been gathered on the HR

practices during the reign.

4. HR strategies of Indian Companies during the Downturn: We are

aware that impact of Global Financial Crises was not direct in India.

Notwithstanding the same there were ripple effects in India. Organisations

have indeed faced some impact after a time lag.

There were various HR issues faced by the organizations were:

∗ Reducing Costs

∗ Gaining the ‘Trust’ of Employee

∗ Performing in the Downturn

∗ Employer Branding in the cold age

∗ Managing Talents in the Downturn

The above mentioned issues were crucial for organisations in all sectors. The

focus of companies had shifted from growth to finding and implementing

measures to maintain their position. There were various HR interventions

adopted by different organizations:

a) Cost Reduction: The organisations have introduced cost reduction

strategies with the support of employees. Focus of every organization was on

the strategic cost control. Many manufacturing units laid emphasis on

strategically reducing the consumption of electricity. In few organizations,

canteen facilities were pruned for some specific duration. In one of the

organizations, employees themselves opted not to have uniform for the year.

Suggestions were received from the employees regarding their benefits. This

helped the organization to have better acceptance of the cost reduction

strategies and their implementation. In service sector, organisations reduced

or removed the fringe benefits, incentives and perks for non-specific

duration.

b) Handling Temporary Employees: Many companies recognized the need

to hire temporary employees in different situations. The temporary

employees worked under a contract for a specific period. They were not

extended benefits that are allowable to regular employees. In many cases in

manufacturing sector the temporary employees i.e. casual labourers and

contract labourers have been the best solution for the problems faced during

special projects and global crises. Hiring of temporary employees was

comparatively less in service sector. Though in few banks and insurance

companies in India, the employees on the pay rolls of sister concerns were

paid severance pay and retired.

c) Handling Downsizing: Rising global unemployment in 2009 significantly

shows that staff reduction was widely used to cut costs. Hitzeman, (2009)

provided the details of how the ranks of jobless workers worldwide have

swelled by an estimated 40 million to 60 million people since the crisis

began. Yet, companies in India have taken this as an opportunity to let go of

the non-performers. Many public and private sector organizations attempted

to right-sized their organizations during this phase.

d) Talent Management: Watson Watts Global Strategic Rewards Report,

(2008- 09) finds that the integrated talent management is a significant

success factor in attracting and retaining key talent in critical roles. Down

turn in many cases acted in favour of the organsiations, where the Best

Talents were available at slightly lower price than earlier days. The retention

of talent has been easier during the slow down phase. Watson Wyatts HR

Assessment, (2007) had produced reports on the crucial role of HR in

organizations. The survey also identified the gaps of HR professionals during

the year of 2007. (As evident from Chart 1.) The business leaders could no

longer have the luxury of maintaining a ‘business as usual’ stance in the

period of downturn. A change was required to reduce the gaps and overcome

the issues faced by the companies.

Chart 1: Top 5 HR activities/ performance gaps

Activities with the largest gap in Importa Performa Gap

2007 nce nce

1 Talent Acquisition 97 % 11 % − 86 %
2 Workforce Planning 95 % 15 % − 80 %
3 Retention 93 % 15 % − 78 %
4 Succession Planning 85 % 13 % − 72 %
5 Designing Employee Compensation 96 % 25 % − 71 %

programs
Source: 2007, Watson Wyatts HR Assessment

e) Employer Branding: An employer brand is the emotional connection

between the employer and the employee - one that extends itself to the

other stakeholders, the community at large and more importantly, to the

potential employees. Some of the companies have built an image for

themselves and they are able to attract and retain at much lower cost than

their counterparts due to their brand image. Thus, these organisations have

become magnets of talent pool. Tata group of companies, Wipro, Infosys are

examples of employer brands as they have been the preferred abode for

talents even in the days of downturn.

f) Recruitment and selection: The acquisition of right talent through

recruitment process is an essential element in HR strategy of an

organization. Selection of right individual for the position is important and

significant milestone. In a selection process, an attempt is made to ensure

that no right person is left out of selection and conversely that a wrong

person is selected, causing distress to the organization. Owens, (2009)

mentions that in a faltering economy, campus recruiting takes a hit, but top
candidates are still in demand. Many organisations were able to select the

right set of human assets during the downturn phase since selection was

void and talent availability had increased. The sources of recruitment

differed during the downturn phase compared to the previous years (as

evident from chart 2.).

Chart 2. The following chart shows the recruitment sources for permanent
employees;
TYPE 2007 -08 2008 -09 2009 -10
Internal search M M M
priority
Advertisements M L L
Campus L L L
placement
Employee H H H
referrals
Interested M M M
applicants
Employment H M M
agencies

g) Learning and Development opportunities for employees:

There were many challenges involved in training the employees during the

down turn. Non-availability of employees was a major issue. Appropriation of

money, ensuring effective training programs was a challenge due to cost

considerations, while the employees were imparted with multi skills during

the period to perform variegated tasks. The management of the

organisations had to allay the fears of the employees to participate in the

training modules by allaying the fears of loss of incentives which are paid

during production deployment and are not available when deputed for
training. Many employees had the training as an apparition and were afraid

of being put on bench indefinitely.

h) Transparent Communication: Uncertain times often have a tendency to

affect people negatively. Usually the workplace becomes a rumour-mill with

all types of negative messages floating around. A transparent

communication is what was required to handle the anxiety of employees in

the following areas as shown in the chart below. Regular meets with

employees were organized to let them know the about the progress and also

clarify the queries.

Table 1. Employee Fears during Downturn in India

i) Improving Workers Productivity: Enhancing the productivity of the

organisations is an imperative in the down turn phase. The important metrics

used in the area of

• Average emoluments of the employees

• Salaries of the employees as percentage of the total revenue

• Value added for employees

• Productivity for employee

Each of the areas was monitored by the managements. During the downturn

necessary mechanisms were put in place.

j) Trust Building: A significant portion of managements of the organisations

were taken by focusing on building the trust of employees anchored by

values. Organizations also made unparalleled attempts for investment in

careers of employees at all stages.

The interventions adopted were: Infosys offered sabbaticals to employees to

venture out either for education or for short term assignments with lean on

the job. Mahindra & Mahindra ltd. Tractor division was able to ensure

continuance of employees during the downturn i.e. Less work phase with

lowed compensation benefits. A report submitted by Delloite in 2010 states

that there is a global decrease in employee morale and trust in leadership;

companies have started focusing on ‘Employee Communication’. The report

also revealed that companies have analyzed and planned the workforce

evolution in order to support business strategy by taking into account market

predictions, employee turnover, skill gaps, (early) retirements, flex time,

sourcing possibilities, etc. Many organizations believed in managing and

encouraging workforce mobility. Employee engagement was initiated by

actively involving employees in workshops, employee feedback suggestion

schemes.
5. Conclusion:

In the changing global economy trends we have a need of transforming

employee into productive asset and that can be achieved by applying HR

interventions. In any turbulent times, HR will need to play a prominent role in organizational

design and in managing the effects of change. HR will also be tasked with communicating

changes in strategy to the rest of the organization. The role of HR is also to fostering innovation

that embraces risk yet where failure can be learned from and built on. HR must step up its efforts

in securing talent.

References:

• Deloitte, (2010), ‘Managing Talent in Turbulent Times’, Global Economic

Outlook Foreseen to remain tough for a while, S.A. Member of Deloitte

Touche Tohmatsu. pp- 1-15

• Dewan, D., (2010) ‘The LG- India Story’, People and Management, Vol 1,

No. 2. pp- 30-35.

• Gandossy, B., et al., (2008) Managing Leadership in Turbulent Times—

Why and How the Global Top Companies for Leaders Optimize Leadership

Talent in Emerging Markets, Hewitt Associates.

• Hitzeman, S., (2009) ‘Optimizing HR delivery in Turbulent Times’- 5

things HR should be doing in 2009.

 • Muralidharan, T., and Shenoy, K.N.R., (2006), Human Capital, ‘Employer

Branding On Campus’, available online: humancapitalonline.com, pp-

20- 27. [Accessed on 24th June, 2010]

• Owen, D., (2009), ‘College Recruiting in a Downturn’, Recruitment and

Selection Special Report, HR Magazine, pp 51-57

• Raghavan, A., (2009). The Economic Downturn: Coping Strategies and

the Way Forward, Vikalpa, Vol: 34, No 3, pp-67 – 71.

• Singh, K., (2203), ‘Strategic Orientation and firm performance in India’,

International Journal of Human resource Management, Routledge, Vol: 14,

No.4

• Spencer Stuart India, Succeeding in turbulent times, the role of hr

leadership, Round Table discussion, Available at:

www.spencerstuart.com pp - 1, 9. [Accessed on 25th June, 2010]

• Watson Wyatts HR Assessment, (2007) Available at:

http://www.watsonwyatt.com [Accessed on: 24th June, 2010]