Human Resource Management

Research Paper

The impact of the global recession on HR practices in organizations

Submitted to:
Mr.Ali Raza

Submitted By:
Muhammad Yousuf Tafhim Muhammad Kalim (05-0160) (05-0103)

Table of Content

Abstract ...................................................................................................... 4 Introduction ............................................................................................... 5 Results ........................................................................................................ 7 Training & Development .......................................................................... 7 Compensation ........................................................................................... 7 Human Resource Function........................................................................ 7 Recruitment & Selection........................................................................... 8 Employee Relations .................................................................................. 8 Discussion .................................................................................................. 9 Conclusion ................................................................................................11 Limitations ................................................................................................12 References .................................................................................................13 Appendices ...............................................................................................15

Abstract
Global recession always have a negative impact on the economic growth of every country. The drastic reduction in the economy of any country not only affects the economy itself rather it changes the how the society, organizations and government work. As the organizations try to cut down cost to a minimum in order to survive in these difficult situations, simultaneously they utilize the present resources they have to maximize their productions. This leads to changes in procedures and policies of the organizations which eventually changes the way the whole organization works. Obviously, the Human Resource policies and practices also have to change to meet the needs. Our main concern, as our research title suggests, is how the HR policies and practices within the organizations changes and tries to adapt to the global recession. How the HR policies and practices will try to communicate with the employer and employees in these difficult times and how they would help to shape the procedures and policies of the organization itself. There are various activities and practices that come under the umbrella of Human Resource Management department in the organizations, but this research is mainly focused on Training and Development and Compensation as the major part of the HR practices whereas, HRM overall function, Recruitment and Selection and Employee Relations will be covered with less focus. The methodology implemented during the research to get the results to the problem stated is mainly done upon Primary and Secondary research. The details of these approaches used are discussed in the Methodology section. The industry that our research paper has focused on is the HR department of IT industry. We have taken questionnaires from three IT companies working in Pakistan. The results found did show that there have been changes in HR practices and policies during the recession period. Some results show the overall impact of the HR practices that are common through out the world, whereas some results show that there are different methods used in Pakistan to give response to global recession. The rest would be discussed in the remaining part of the paper with some conclusion regarding the practices adapted.

Introduction
According to Encarta dictionary, a recession is defined as decline in economic activity: a period, shorter than a depression, during which there is a decline in economic trade and prosperity. [1] The period of economic decline that is marked by two consecutive quarters or longer is then defined as a national recession. Recession is always marked by high unemployment, stagnant wages and fall in retail sales. [2] Whereas, a global recession is a period of economic slowdown. The IMF (International Monetary Fund) takes various other factors when defining a global recession, but it states that a global growth of 3 percent or less is a global recession. The IMF estimates that global recessions seem to occur over a cycle lasting between 8 and 10 years. During what the IMF terms the past three global recessions of the last three decades, global per capita output growth was zero or negative. [3] According to Gary Dessler, (Human Resource Management, 11th Edition) human resource management is defined as the policies and practices involved in carrying out the people or human resource aspects of a management position , including recruiting, screening, training, rewarding, and appraising. The goal of HRM is to maximize the productivity of the organization by effective use of employees while improving the work life and environment of the employees and treating them as valuable resources. [4] The practices of HR date back to china as early as 1000 and 2000 B.C. But the need to have an organized form of managing human resources started after the advent of the industrial revolution and that type of managing resources kept evolving slowly. But during the last two decades, several forces changed the nature of HRM and it started to cover new fields as well. The key forces were new technologies, new organizational structure and accelerating market organization. [5] Global recession during these two decades as indicated by IMF were: 1990-1993, 1998 and 2001-2002. [6] But the recession in this period (2008-2009) the worlds economy has hit harder than the previous ones. This situation has been compared with the last effective recession in the 1930s, where the HRM was itself not a concrete field. This explains why there has been no proper study done that would specify what HR practices would be best during recession. In order to filter out common practices within the HR department that arises due to the presence of recession, or what should be the best alternative/solution that would work best for the organization; a practical consensus must be taken to find out what practices are fruitful in these times of difficulty and what alternatives would suit a particular industry as well.

Methodology
The methodology used for this research project is divided into two approaches. 1. Secondary Research Prior information was required to understand and predict the possible changes taking place during recession. This would also aid in getting knowledge about how the trends and strategies implemented in Pakistan that are similar or different to those in European and American countries. Therefore, our team did go through newspapers, online journals and online articles from internationally recognized websites to jot down the major trend changes. 2. Primary Research The knowledge gained through our secondary research, our team, with the help of a Likert scale questionnaire, did a survey. The target audience we chose was from the HRM departments of the IT industry and chose three companies from the respective field.

Results
After conducting the survey, the results are as follows.

Training & Development

i. ii. iii. iv. v. vi. vii. viii. Our survey shows that more than 90 percent of the HR departments are trying to identify key employees and keep them within the organization. More than 80 percent are planning to strengthen the key employees development programs as well. About 65 percent of the organizations still have not decreased their programs related to Training and Development. Furthermore, 75 percent believe that they must redesign Training and Development programs in order to minimize the cost during recession. The turnover rate after the recession is shocking, 60 percent. More than 85 percent of the organizations intend to promote motivation among their employees and utilize their skills to the best they can, This also leads to Job Rotation, where 55 percent of the employers do consider increasing it within their organization. Surprisingly, 40 percent of them also believe that flexible scheduling would maximize their production and cut-back on overhead costs.

Compensation
i. ii. iii. iv. v. As always with the consequence of the recession, about 85 percent of the HR departments are considering to cancel various benefit schemes. And they are very committed to provide the long term vision and benefits to the employees as 69 percent of the employers in the survey have stated. Similarly, 91 percent of them are reassessing the employee performance evaluations to determine the key people that they cannot afford to lose. About 93 percent are intending to offer Professional Development as an incentive to employees for performance and goals. Majority of the companies (57 percent) have no opinion about the increase of salary freeze by 13 percent, while the remaining companies specially providing consultancy services do accept the increase in salary freeze.

Human Resource Function

i. ii. iii. iv. Organization wide- restructuring has increased by 23 percent as our survey shows (88 percent). This also had an impact on the HR function that has also increased by 14 percent. (98 percent agree to it), which led to, a 14 percent increase in restructuring HR Function (91 percent agree to it) All of the organizations agree that their policies are up-to-date.

v.

While 77 percent do agree that HR must be more focused on transactional activities and operating efficiencies than on high level strategic people issues.

Recruitment & Selection

i. ii. iii. Reduction of seasonal workers has increased by 28 percent as the survey shows. Job descriptions have also changed as responsibilities have increased and modified. While 75 percent of the organizations agree that HRM Function should come up with a new recruitment strategy.

Employee Relations
i. ii. iii. 56 percent disagree that raising employee contribution to health care premiums has increased by 20 percent. Majority disagree to an increase in mandatory holiday shutdown by 13 percent. On the other hand, different organizations have different views regarding whether eliminating other employee programs have increased by 12 percent

Discussion
The role of HR department is very crucial to aid in guiding the utilization of resources that they have with maximum output being their main agenda. The survey conducted showed many positive results confirming to the practices that are being used throughout the world. While some are proving best for their own particular environment or nature of their business. Training and Development of employees still remains the top priority for the employers, even at this time. But budgets have been cut short and focus has been shifted to leadership of development. CIPD states Seven in 10 employers say learning and development remains a high priority regardless of the financial situation. [7] The result of the survey also confirms to this practice, where two in 3 employers are still continuing with the training and development programs. The issue of professional development at the time recession is very delicate and majority of the employers keep them under their check-list whenever the budgets go down. However, it is questionable to think whether discarding professional development and retraining of employees would keep the employees motivated to move forward or have the fear to stay stagnant of acquiring new set of skills, thus losing hope if the future. For short-term strategy neglecting this would seem reasonable but in the competitive market employee skills and knowledge is defined as an asset and after the recession is over the one with the most competitive, committed and motivated employees will boost forward. The most optimist option that any progressing company would take is to re-invest in their employees to be an edge forward than anybody else during and after the recession. Our survey does suggests that many of the employers (93 percent) do intend to re-invest in their employees by providing Professional development as an incentive, ensuring employee commitment to the employer plus achievement of organizations goals and objectives. The practice of Flexible Scheduling has also gain importance in the time of recession. This practice is proving to be effective for employees who have greater familial responsibilities and struggling to keep their families at bay. CIPD research also shows that part-time and flexible workers are happier, more engaged with their work, and therefore more likely to perform better and be more productive. This is exactly what hard pressed employers need in tougher times.[8] While employers are still skeptical about it and still see flexible scheduling as a business cost rather as a business opportunity. [9] This is also proven from our survey. (40 percent) Surprisingly, the employers in Karachi are promoting this practice as a positive approach to maximize their production. Yet still its not that much to predict that employers at other areas would be doing the same as well The possible remedy (if this practice is not prevalent in other fields and areas) would be to increase this practice bringing confidence to employers and managers that working mothers and fathers will be more productive and effective if they can work at flexible time and place. [10] Regarding the HR restructuring, which plays a vital role, the HR Departments have prioritize itself to a more employee engaged approach. Our survey shows that the HR in the organizations is reassessing the employee performance to identify, engage and retain key employees in the organization. Furthermore, our study also suggests that the employers are trying to keep their key

employees busy and motivated, and providing long term vision in these difficult times. The study by CIPD also suggests the same where 72 percent of the HR Departments have increased their emphasis on organizational performance. Jonathan Austin, chief executive of Best Companies, said: Those employees who feel involved and committed to their organization feel more confident about their organizations future in these uncertain times putting their companies in the best position to survive the recession. [11] HR has also increased its focus on job rotation of employees, not only to give exposure to the entire operation but in order to keep them more busy and committing to the organization. Even though the majority are considering increasing this practice, but we are not able to quantify as to how much this practice was prevalent before in the organization itself to determine that this practice has increased substantially within the organization or it is an extra step taken forward where employees can accept the level and be satisfied with the amount of job rotation taking place. Furthermore, the firing employees during the recession, which is predictable, has made the left out employees do more work resulting in new set of responsibilities for employees and managers as well. Recruitment and Selection is also an important part which comes under the umbrella of HRM. As with every other parts of HRM that have been affected by recession, the recruitment process has also taken a set back. This process has also changed to meet the needs and the process now demands strict screening of new recruits with more job responsibilities. Most employers have eliminated seasonal workers in order to cut down their overhead costs, making fewer chances for employment of new candidates coming to professional arena. Plus, the organizations are coming up with new recruitment strategies in order to hire professionals that would be more skillful, committed and be a key asset within their organization.

Conclusion
This study reports the changing practices of HR occurring in Pakistan after the global recession. It was found that many of the training and development practices in Pakistan are almost similar to the practices that are being adopted in the UK. This scenario gives a positive picture of how closely the global practices are glued together. It also assures that organizations are willing to bring about new changes to be more effective and competitive unlike in the past where change was not easily welcomed. This research will provide a stage to base new theories about the changes in HR practices in Pakistan and will provide new set of solutions and mechanistic practices useful in the period of recession.

Limitations
The results and conclusions made can only be applicable to IT industry, so to make a holistic judgment regarding the changes in HR practices in Pakistan would be futile. The number of samples taken from these companies is few to make the result as a sound result. In order to further confirm these results more samples have to be taken across different cities. Statistics related to the current recession were unavailable at the start of the project. But, at the starting week of April, new surveys did come up suggesting different trends and patterns. Our team got late responses from the company we contacted to conduct the survey. The people filling out the questionnaire had different perspectives of their meaning of strongly agree and agree. Same is the case with Strongly Disagree and Disagree Some of the articles were mainly focusing on not to repeat the old mistakes done during the last recession in 1930s rather than assessing the current position of the downturn.

References
1. http://encarta.msn.com/encnet/features/dictionary/DictionaryResults.aspx?refid=1861699686 2. http://www.businessdictionary.com/definition/recession.html 3. http://en.wikipedia.org/wiki/Global_recession 4. Mote, Dave & Heil Karl , Human Resource Management, [Internet] Available at: http://www.referenceforbusiness.com/encyclopedia/Gov-Inc/Human-ResourceManagement-HRM.html [Accessed 29 April 2009] 5. Mote, Dave & Heil Karl , Human Resource Management, [Internet] Available at:http://www.referenceforbusiness.com/encyclopedia/Gov-Inc/Human-ResourceManagement-HRM.html [Accessed 29 April 2009] 6. www.bloomberg.com, 28 January 2008 "Global Recession Risk Grows as U.S. `Damage' spreads. Jan 2008", [Internet] Available at: http://www.bloomberg.com/apps/news?pid=20601087&sid=arlKrFbn3pfY&refer=home [Accessed 29 April 2009] 7. CIPD, 23 March 2009, Employers prioritise management and leadership training to survive recession [Internet] Available at: http://www.cipd.co.uk/pressoffice/_articles/LDSkills230309.htm [Accessed 29 April 2009] 8. CIPD, 20 October 2008, Delays in flexible working legislation send out completely the wrong message, and will do more harm than good [Internet] Available at: http://www.cipd.co.uk/pressoffice/_articles/Responsetodelaysinflexworkinglegislation.htm?I sSrchRes=1 [Accessed 29 April 2009] 9. Equality and Human Rights Commission, 21 October 2008, Flexible working is vital in economic downturn [Internet] Available at: http://www.equalityhumanrights.com/en/newsandcomment/Pages/Flexibleworkingisvitalinec onomicdownturn.aspx [Accessed 30 April 2009]

10. Equality and Human Rights Commission, 21 October 2008, Flexible working is vital in economic downturn [Internet] Available at: http://www.equalityhumanrights.com/en/newsandcomment/Pages/Flexibleworkingisvitalinec onomicdownturn.aspx [Accessed 30 April 2009]

11. Lucy Phillips, 27 January 2009, HR priorities shift towards engagement, PM Online, CIPD [Internet] Available at: http://www.peoplemanagement.co.uk/pm/articles/2009/01/hr-priorities-shifttowards-engagement.htm [Accessed 29 April 2009]

Appendices
See next page

Changing trends in HRM after the Global Recession

Survey

: This survey is done under the course of HRM from FAST (NUCES)

Guidelines

: Please fill the form below and Select one option of each survey question

Name Department Company Name

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Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

1. Downgrading/canceling holiday party has increased by 35%.(percent) 2. Increasing benefits communication has increased by 32%.(percent) 3. Eliminating/reducing seasonal workers has increased by 28%.(percent) 4. Organization-wide restructuring has increased by 23%.(percent) 5. Raising employee contribution to healthcare premiums has increased by 20%.(percent) 6. Increasing pay communication has increased by 16%.(percent) 7. Restructuring HR function has increased by 14%.(percent) 8. Implementing a salary freeze has increased by 13%.(percent) 9. Having a mandatory holiday shutdown has increased by 13%.(percent) 10.Reducing/eliminating other employee programs has increased by 12%.(percent) 11. HR should be more focused on transactional activities and HR operating efficiencies than on high level strategic people issues. 12. HR must identify the real key employees and to intact them in the organization. 13. Increase Job Rotation among employees.

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

14. Keep the employees motivated and busy. 15. Show the employees the long term vision within the company. 16. HR must redesign training and development Programs. 17. Ensure that organizations policies are up-to-date. 18. Flexible Scheduling can maximize production and cut-back on overhead costs for organizations. 19. Changes must also be made to the job descriptions as responsibilities are increased and modified. 20. HR must identify the real top potentials and strengthen their development program. 21. The turnover has increased after the recession. 22. HR must review the employee performance evaluations to determine the key people that company cannot afford to lose. 23. HR should offer Professional Development as a reward or incentive to employees for performance and hitting goals. 24. Training and Development programs have decreased. 25. HR should cancel various benefit schemes. 26. HRM Function should come with a new recruitment strategy.