Saved by people power

In the current economic climate senior managers could be forgiven forputting human resources strategy on the back burner. After all, ascompanies struggle, staff are made redundant. Surely then, there is littlescope for training and career development.

Yet there is evidence that companies with clear HR strategies are oftenbest placed to weather recessions. The argument is that an intelligentapproach to HR can drive profits by motivating staff, and that, in arecession, it can empower management to make informed cost cuts and handlethe redundancy process effectively.

According to research by HR consultancy PIMS, which is based on 30 yearsof work with nearly 20,000 companies, staff aren’t solely in their jobsfor the money. The PIMS report claims that 15% of profit performance isdriven by HR strategy, and that an open management style and culture canincrease profitability by 28%. Furthermore, it says management training ofat least five days per person per year can also have a significant impacton the bottom line.

“There’s a very clear relationship between training and profit,” says TonyHillier, managing director at PIMS. “Generally speaking those businesseswhich provide more than a minimum day’s training to managers and seniorstaff perform better.”

Research by Investors In People supports this view. Nine-out-of-ten of theemployers it interviewed agreed that effective training provisionincreased company productivity.

However, it isn’t enough just to send anyone on any course, says EmmanuelGobillot, consultant at Hay Group. “The employee relationship is like thecustomer relationship. The organisations that are doing well have beentalent managing for a while,” he says. “It’s about understanding people’sperformance and motivation.”

Both PIMS and Hay Group stress the importance of finding out what staffwant and what sort of culture they wish to work in, and then makingnecessary adjustments.

An intelligent HR strategy is particularly useful when it comes to costcutting. By training and monitoring staff, companies can clearly identifythe key staff they need to retain – and those they can afford to lose.

David Lomas is chief financial officer of E-Peopleserve, which handles HRfor parent companies BT and Accenture. He points out that, in the currentclimate, most FDs are, of course, looking at their cost base because theyneed all parts of the organisation to be giving value.

But he adds that they need to be aware that simply reducing headcountacross the board is a cop-out that is potentially damaging to thebusiness.

“When times get tough it’s even more important to distinguish good costsfrom bad costs,” says Hillier. “It may even be a good idea to enhance thehead counts in vital parts of the business and cut back quite hard inother areas.”

If redundancies are unavoidable, then for all concerned it is vital thatthey are handled delicately and in accordance with the relevant employmentlaws. Marks & Spencer learnt this the hard way when it announced staffcuts in its Paris stores without going through the proper channels. Thoseredundancies were nullified because, by French law, companies must consultwith staff and unions before cutting staff.

In the UK it is far easier to make staff redundant because, although bylaw they have the right to remuneration, they do not have the right tokeep their jobs. However, not all employees are taking this interpretationlying down, and it may be in a company’s interests to take measures toavoid potential lawsuits from ex-employees.

“There have been so many redundancies that many employees are bitingback,” says Jessica Learmont Criqui of law firm Altheimer and Gray. “It’snot a good climate out there to find work. Employees are making moreclaims and have greater awareness of their rights. At the senior andhigher earner levels they will sue.”

She argues that any company looking to make redundancies should takeproper legal advice and consider other mechanisms to deal with thesituation.

“Going through the proper procedure saves money in the long term,” shesays.

Some companies are now asking staff to take pay cuts as a way to avoidredundancies. Others are offering outplacement services to ex-employeessuch as training or assistance with CVs as a way of helping them find newwork. “It’s in an organisation’s interests to help people find alternativeemployment and handle redundancy in a responsible manner,” says Lomas.

After redundancies comes the problem of motivating staff that have watchedcolleagues clear their desks – and who fear the same fate. “We may have aZen garden and a ‘chill out’ area at work,” says a London employee of alarge American bank, “but every day we come in and find more peoplemissing from work. They’ve been laid off but no one tells you anythingabout it. They just disappear. It’s hard to stay motivated.”

The last thing senior management want is to watch key profit-driving staffthey have carefully spared from the axe leave the company of their ownvolition. “It’s when times are tough that you most need to harness yourstaff’s motivation quickly,” says Gobillot. “What’s going to make peoplegive more? In times of growth you could afford not to care too much butthat’s not the case in a recession.” This, he argues, is why identifyingthe training and motivational needs of retained staff in these difficulttimes could mean the difference between corporate success and failure.