Extracts from an article first published in HR Appointment Magazine January 2020.
In challenging times comes opportunity - And this time I believe an opportunity exists for the role of HR.
Here’s how this could happen.
Despite recessions and economic slowdowns being facts of business life few organisations plan correctly for its devastating effects.
On the whole executive teams produce ‘contingency plans’ that generalise and focus on ‘cost cutting’ strategies.
These plans are often made in isolation away from HR advice and influence.
This present a major flaw with the majority of contingency plans.
Without HR's knowledge these plans fail to diagnose the major impact crisis has on an employee’s wellbeing, engagement and ability to maintain productivity.
A Harvard Business Review survey of global C-suite executives points out the weakness organisations have in correctly diagnosing their problems. The results found;
85% of C suite executives strongly agreed that their organizations were bad at problem diagnosis.
87% of C Suite executives strongly agreed that this flaw carried significant costs”.
One of those significant costs can be seen in the following graph below - It shows clearly organisations performance (before and after) the last major recession of 2008/09.
As shown, the organisations that failed to fully prepare significantly reduced their ability to respond when the economy took an upturn - Worse still, the companies that lost out, did so to like-for-like competitors that did plan fully.
But why should HR deal with this now?
At the peak of the last boom, the CEO of Caterpillar told his division heads to start developing similar plans for a recession.
The division heads thought he was – crazy! Their greatest challenge at the time was making more machines, demand was high, sales were limited by productive capacity and everyone was focused on increasing production.
Despite this each executive planned every detail of their recession plan and in less than 9 months the recession hit - Caterpillar executed its contingency plans. Immediately.
They didn’t need to form committees, assemble a task force or even call for departmental brainstorms.
After one of the industry’s longest hit recessions Caterpillar management discovered 2 major learning's;
1. The most important commodity you lose in times of recession and crisis isn’t sales or profit, its time.
2. Caterpillar maintained employee engagement, productivity and confidence by developing a people crisis strategy. This single defining plan created rapid growth against the competition.
It's almost as if management guru Peter Drucker's advice was ringing in the ears of the Caterpillar CEO when he stated;
“The guiding principles of an organisation is not the maximisation of profit it’s the avoidance of loss”
With that in mind another consequence of focusing on employee planning is the ability to mitigate 'legal' risk.
Legal implications associated with a recession or economic slowdown are immense but not always considered in executive contingency planning either.
A mistake when;
In the last recession Employment Tribunal (ET) hearings increased by 57%.
More alarming news for executives is that prosecuting legal teams have started to list executives in separate claims alongside the company claim – This raises serious concern around executives personal liability.
This executive agony continues when you consider costs associated with defending a claim, and the potential damage to the brand and likely outcome - All of which do not stack in favour of the employer.
Last year 9 out of 10 hearings were lost by Employers taken to ET .
Again, HR is uniquely positioned to assess, plan and protect against this - Or at the very least mitigate any reward made to the employee.
There's lots more to discuss but I'll summarise with the following;
We can all accept that difficult times lay ahead.
We agree employees play a vital role in the survival and recovery of organisations during and after difficult times.
Given these facts I believe organisations can significantly improve their contingency plans simply by focusing on dealing with how their employees wellbeing is affected during and after a crisis.
Working with the UK’s leading mental health, employee engagement consultants, risk assessment teams, HR consultants, legal executives and performance trainers we're creating a simple ‘Recession Ready - Employee Plan’.
We’re releasing this blueprint in 2020 but I'll be happy to share our developments with anyone who has an immediate interest.
That said, the purpose of this post stands to demonstrates the vital and pivotal role HR has in manageable and difficult times – Its a role perfectly placed, and skilled, to develop an effective employee strategy for the executive.
A strategy and employee plan that will diagnose and protect the wellbeing, engagement, productivity and success of the business when it needs it most.
Should this plan ever be needed, should the the whole fury and might of the recession be turned on us. Then in business recovery, departments may say of HR...
“This was their finest hour.”