hrm
TRANSCRIPT
HR Practices During Recession
An Indian Perspective
Executive Summary
The study hereby undertaken tries to illustrate the problems and steps taken in the HR context
during recessionary times in India. Given the current economic environment of uncertainty with
a threatening Greek debt crisis and on the trail of a massive U.S. economic crisis, it was of
particular interest to us to dig deeper and explore about the practices and the rationale behind
each of them.
We begin with analyzing the situation of the labor market in India during 2008-09 recessions in
terms of the job losses, decrease salary and the related HR practices taken up by organizations.
After this initial finding from secondary sources, we move towards the findings of the practices
that were actually being done in industries which were substantially affected by recession. We
try our best to present the actual field details of several employers whose managers we
interviewed as part of the study. We then try to zero in the common threads of rationale that were
underlying in each of these practices across companies.
Given these practices, it was only logical to study the reaction of employees to these practices.
For this we arranged one on one interviews with employees of four companies and tried to
capture theirreactions and those of other employees across the company. From this along with
online interview reports we tried to gauge the reactions and the corresponding causes for the
same.
Moving on from the interactions with senior managers HR and general managers after going
through a lot of articles over the internet, we analyzed in the current situation the role of the HR
and the change from that of when economic conditions were stable.
Finally we would like to say that we have tried to collate all our findings and have tried to give to
the reader a coherent picture of the policies, the intentions and the reactions of employees to the
same so that she/he gets a base to start thinking upon the implications of any HR action on
employees and find the best way of managing company profitability with employee engagement.
1 | P a g e
Contents
Introduction.................................................................................................................................................4
Methodology...............................................................................................................................................4
Review of Literature....................................................................................................................................4
Labor Situation in India during Recession...................................................................................................6
HRM Practices across Industries: From the Experts Themselves................................................................6
a. Change in Recruitment Practices.......................................................................................................7
b. Changes in the HR/Recruitment staffing...........................................................................................8
c. Retrenchment/layoff..........................................................................................................................9
d. Training and Development..............................................................................................................10
e. Managing top performers/Appraisals..............................................................................................11
f. Changes in award of benefits...........................................................................................................12
g. Change in working hours.................................................................................................................14
h. Employee Engagement....................................................................................................................14
Employee Reaction to these measures.......................................................................................................14
General reactions amongst employees.....................................................................................................14
New roles of HR in this situation...............................................................................................................14
Limitations of the Study............................................................................................................................14
Conclusion.................................................................................................................................................14
Bibliography............................................................................................................................................14
Appendix...................................................................................................................................................14
Appendix 1...............................................................................................................................................14
Appendix 2...............................................................................................................................................14
2 | P a g e
IntroductionWith the memories of 2008-09 economic crisesfresh in our minds and an impending Greek debt
crisis leading to the possibility of a similar such situation, the motivation for taking up this study
is evident. Herein we try to look at various practices in the HR domain that have taken place
across organizations in India and try to compare them with those taken in other countries during
the same period. We then try to analyze the rationale behind all of these practices and try to
understand the implications of these practices on employees across industries. We also try and
gauge how these practices have helped to align with the organization’s strategy at that point and
how successful have they been in terms of the objectives they sought to achieve.
MethodologyThe method of data collection in our case involved first doing a review of existing literature that
touched upon various HR practices across countries and looked up for several Labor Ministry
and other reports and interviews on the internet. After some amount of collective brainstorming
bin our group, we prepared a structured set of 2 questionnaires; one for employers and the other
for employees and then contacted them over telephonic conversation for seeking an answer to the
issues and the underlying causes for the same.
Review of LiteratureDuring the 2008-09 recessions, companies in China focused on cutting down their workforce. A
survey of 195 firms found that 124 firms had already done or were planning to reduce their
workforce because of reduced overseas demand. 118 companies had put hiring on freeze but no
company had terminated labor contracts before their expiry. However, renewal of terminated
contracts wasn’t done. They employed a production based pay which made it easier for the
companies to schedule flexible hours and manage pay according to production. Outsourcing was
also used to reduce additional employment. In training and development, a talent retain strategy
was employed by most firms in which certain mid management employees were selected and
were provided continuous on the job training. The usual training practices which were based on
building organizational culture and included sightseeing were cut down. Performance appraisals
3 | P a g e
however were carried out in the same frequency as previously. It was ensured that the retained
employees had high spirits even during this period. (Shen, 2010)
Japan empathized on retaining top talent. During the Asian financial crisis, companies fixed the
upper age limit for occupying a post so that a high performing employee on achieving a fixed set
of goals and targets was promoted to the post. This helped in incentivizing top performers. In
order to create more promotion opportunities, workers were trained on a multitude of
capabilities. Workers were paid bonuses for learning skills that were in demand in the
market.Management also put a lot of emphasis on collective bargaining where they negotiated
with the unskilled laborers and fixed pay and promotion system after consultation with them.
This practice is called ‘Shunto’. Due to these practices, the unions lost their strong influence to
guarantee jobs and the workers were in more direct touch with the management. (Benson, 2004)
In the UK the role of HR changed from the short term focus on personnel management to that of
the strategic long term goal of human resource management. The involvement of HR in strategic
decisions changed to be a “conformist innovator” or an “architect”. The HR functions which till
that point of time related to managing growth thenbecame focused on downsizing the
organization. The HR department also was actively involved in internal consultancy and was
thus seen as a revenue generating center instead of a cost center. Among the various roles the HR
function the following four roles have been highlighted: a partner in strategy execution, an
administrative expert, an employee champion and a change agent. (Sahdev, 2011)
During the recession of 2008 it was predicted that the unemployment level in Russia would reach
a historic high of 15% but actual rates were 9%. In this period mutation of HR practices was
observed. Instead of layoffs the companies in Russia gave “partial employment”. Many Russian
employees voluntarily took unpaid holidays instead of facing the prospect of being laid off.
Further the recession resulted in companies going back to traditional Russian practice of
irregular work hours. New technologies like tele-working were also practiced. The employees
were however not very happy with these part time work arrangements as this resulted in
reduction in pay.However in Russia the degree of formalization of performance appraisal is very
low. This lead to arbitrary removals which not only hurt the employee morale but also resulted in
companies losing out on talent. However in an alternate survey in Russia which had higher MNC
participation it was found that most of them were able to place their laid off employees
4 | P a g e
elsewhere, had higher employee morale and were able to retain talent due to formal performance
appraisal system. (Gurkov, Zelenova, & Saidov, 2012)
Labor Situation in India during RecessionThe 2008 economic crisis was felt widely across several industries in India resulting in more
than 65500 job losses in the period of August-October 2008.Employment across both export and
non-export units went down by 1.01% especially affecting the manual workforce. The average
monthly earnings during this period went down by 3.45%.(Ministry of Labour, GoI, 2009)
The effect was equally felt amongst both contract and non-contract workers and across
industries. Also, the phase resulted in the underutilization of full capacity and many industries
where incentives and bonuses were linked to production also saw a halt in these practices.
Apart from them a variety of HR practices were undertaken which directly and indirectly
affected the workers in industries. Some of these were the freeze on hiring that took place,
layoffs/ reduction in work force, restrictions in the travel policy of companies, reduction in
training expenses, reducing the number of working days in a week and the cutting down of
various benefits amongst others.
The huge job losses, the reduction in salaries and benefits resulted in a feeling of insecurity
amongst employees as it had affected their daily life as well as their investment plans for the
future. Here it became imperative for the HR to get involved in a lot of discussions and
deliberations with employees and clarify with them the reasons for the measures being taken and
reaching to a common point of agreement.
HRM Practices across Industries: From the Experts ThemselvesAs part of this curriculum, we interviewed people across industries both in the government and
private sector. The people interviewed were either senior HR managers or general managers. The
industries that we touched upon were the steel industry (Vizag Steel Plant), the FMCG sector
(Bikanerwala Foods), insurance sector (ICICI Prudential Life), the oil and gas sector (ONGC)
and the IT industry (a software MNC that who obliged on conditions of anonymity).
5 | P a g e
From the interactions, it was observed that many practices though not limited to an industry
however depended whether the organization operated in the private or public sector. However,
several practices that were common across sectors on further probing revealed that the intention
behind them all was the same irrespective of them being in the private or public domain.
The mode of interaction with all of these executives was by telephonic interviews on a consistent
set framework of questions that are provided in the annexure to the document. Further probing
on the underlying causes behind these practices was also done and finally we have tried to collate
the responses of several industries as and when applicable under particular practices and have
drawn a common thread that was evident in each of them.
The firms that are working in the public sector domain are Vizag Steel Plant and ONGC. ICICI
Prudential, Bikanervala Foods and the software MNC operate in the private sector.
The various HR practices that were taken up during that period were:
a. Change in Recruitment Practices
Vizag Steel Plant
During this period of recession the demand for steel underwent a huge dip amongst
increases in the price of raw materials which led to the steel plants functioning at lesser
than full capacity and thus decreased production. The need for new workers was then not
there in the industry and the recruitment of junior level executives was frozen. Any
additional requirement of unskilled labor was filled by the hiring of contractual workers
instead of permanent workers. The hiring of interns from engineering colleges was also
stopped during this period.
Software MNC
Hiring of completely was frozen. Campus recruitment was also stopped. If developers
were required, people were transferred from other teams. In case of extreme necessity
approval from top management was necessary. There were cases when replacements for
people who had resigned were rejected.
Bikanervala Foods Pvt. Ltd.
Here the hiring of mid managerial level employees was cut down but no significant
change happened in the hiring of unskilled workers. At the time of hiring, each post was
6 | P a g e
identified by the management as being a permanent or temporary post depending on the
level of involvement of the person occupying the post in the core activities of the
organization.
ONGC
The total strength of the employees in the organization was reduced from around 40,000
to 30,000 over the last decade. The reduction was carried out by not recruiting
proportionate numbers in comparison to the number of employees retiring or leaving the
firm. The shortfall, if any was fulfilled by increasing the intake of contract workers
especially in the low skills areas. Hence, recruitment of permanent staff (for example
class IV employees) was almost negligible.
Hiring for officers is mainly carried out at the entry level and there was no significant
effect on their hiring practices.
ICICI Prudential
The insurance sector had seen a rapid growth during 2000-2008 and the major players in
the sector had built up excess capacity in anticipation of rapid growth. High rates of
attrition had been observed in this sector changed during the recession.
ICICI which like other companies had built excess capacity engaged in “right sizing”.
The bottom 1% candidates during a six month appraisal period were retrenched.It was the
HR’s strategy to remove the bottom 20% of the employees. 16000 employees in ICICI
Prudential Life lost their jobs between 2007 and 2010. Thus employee strength fell from
30000 to 14000. At the same time there was a hiring freeze. ICICI bank on the other hand
did not retrench employees but did stop hiring.
As can be observed, all the firms witnessed very less recruitment in terms of permanent
staff, relying more on the contract workers. The reduction in permanent staff and
focusing on contract workers is a means to cut the excess cost on the firm. It can also be
observed that the overstaffed organizations like ONGC and ICICI insurance have reduced
their employee strength that had accumulated over the years. This was primarily done by
inadequate recruitment. This would ensure that the firm is maintaining the right number
7 | P a g e
of employees. The campus placement involves heavy hiring cost and can be avoided by
not opting for the particular measure as had been done by VSP.
b. Changes in the HR/Recruitment staffing
Bikanervala Foods Pvt. Ltd.
During this period the hiring was on freeze with no hiring of executive employees. Under
these circumstances, the recruitment head which was classified as a temporary position
was vacated as a measure of cost cutting. The HR manager said, “It was highly
uneconomical paying a salary of Rs. 30,000 to a person whose work itself hadbeen put on
hold.”
c. Retrenchment/layoff
Software MNC
Retrenchment was not done. The company had projects planned prior to recession period
and existing staff were allocated to these new projects.
Bikanervala Foods Pvt. Ltd.
This was identified as the primary cost cutting methodology in the firm. Employees were
assigned a set of goals to achieve in a period of 3 months with constant monitoring being
done at the end of each month. A target versus achievement matrix was formulated and
those people who were unable to meet their targets continuously for three months were
retrenched. Some of the mediocre performers were given a sabbatical for a period of 6
months after which they were reabsorbed. However, interestingly, retrenchment never
happened for permanent workers in the unskilled labor sector. The reason cited was that
the strong union had opposed the sacking of one of their leaders recently and had stopped
production for a week.
In the public sector undertakings of Vizag Steel Plant and ONGC, this was not followed
because of the strong regulatory government framework in which the both of them
operated.
ONGC
There was no retrenchment/layoff as it is against the government policies to retrench
employees in a public sector enterprise.
ICICI Prudential
8 | P a g e
Thousands of employees were retrenched during the recession. While company dubbed
the attrition as normal attrition, reports suggest that retrenched employees had
approached Labor ministry. The company maintains that under performing employees
were asked to leave but they were counseled about alternative career opportunities.
It can be easily observed that in situations where there is a strict government regulatory
or in cases where the union is strong retrenchment was not a possible option (cases of
ONGC, Vizag steel plant and Bikanervala). However in private firms like ICICI
insurance retrenchment was done on a large scale as part of cost cutting measures. Even
in Bikanervala retrenchment was carried out heavily in the mid management. At the same
time it is interesting to observe that software MNC was not forced to retrench probably
due to impending projects
A performance assessment was carried out so as to identify non performers in performers
to ensure transparency in the system of retrenchment
d. Training and Development
Vizag Steel Plant
Training is a very continuous process in steel plants aiming at constant improvement. So,
the cost of doing away with training was more than giving training to employees.
However, some training programs that involved meetings in top notch hotels were cut
down and more stress was given to on the job training.
Software MNC
There was reduction in the budget allocated to trainings related to soft skills, like
presentation exercises and outbound team building exercises. Training in technical
subjects was not suspended and were generally done by an in house team. However other
service organizations with large workforce had cut down on number training classes
offered.
Bikanervala Foods Pvt. Ltd.
Very similar to Vizag steel plant, workers were mainly given on the job training.
Expensive arrangement of meetings with professionals from other industries was held
back and internal training was focused on. Given the reduced focus on costly formal
training methods, the training head which was a contractual post was retrenched.
ONGC
9 | P a g e
Training and Development is a thrust area for the organization as the job entails risky
endeavors. Hence, the training programs for the staff mainly deal with safety
precautionsand on the job training programs. In order to reduce the training and
development expenses, some training programs that aren’t directly related to the core job
(for example management development programs for mid level executives, training
programs in foreign locations are reduced to some extent)
ICICI Prudential
The company did not cut down on training per se but the training costs did go down as
there was a fee on entry level hiring. Earlier the company used to spend huge amounts of
money in training the new recruits by tie ups with various institutes. The stop on hiring
helped the company save on those costs.
In general during downturn firms continued with on job technical training. The intention
was to improve the productivity of the present employees. However as they were under
tremendous pressure to reduce costs all managerial and training programs that are not
directly related to the job were reduced. The logic behind differentiating hard skills and
soft skills development is the large cost disparity between the training involved in both.
An exception to this is the ICICI insurance which imposed a fee on entry level training as
a cost cutting measure.
e. Managing top performers/Appraisals
Vizag Steel Plant
The appraisal system comprises two components: first related to the amount of
production and the next to individual performance. The first part had to be cut down as
the overall production decreased. For the other part linked to personal performance,
employees were consulted and it was mutually agreed upon deferring it to the next year
with slightly higher values. Performance linked promotions were also deferred and
promotions that happen in a period of three to four years were delayed further by a year.
Software MNC
Appraisals and variable pay distribution was made more strict. The variable component
of compensation was linked to performance of the company as well as the individual.
Employees with high ratings were only given some amount of the variable pay. People
10 | P a g e
who were not able to meet the minimum required ratings were denied this pay. Under
normal circumstances, each employee received a minimum amount as annual variable
component. Promotions were also difficult. For the lower level developers, in whose case
promotions were done by duration, were not curtailed. For higher levels, a vacancy had to
exist and it had to be approved sometimes by the VP of the respective departments.
Compensation benchmarking with other companies was done more frequently.
Bikanervala Foods Pvt. Ltd.
As mentioned earlier, the target-achievement grid helped in identifying top performers
and not only were they retained but also given adequate bonuses and raises to reduce
their likelihood of switching to other firms.
ICICI Prudential
The company relied on its appraisal system to identify the bottom 1% of the performers.
These were the candidates for retrenchment but were given opportunities to improve. The
assessment was made on a continuous basis (every 6 months) to identify the under
performers. The top performers were differentiated by the appraisal process and they
were rewarded with a view to retain the top talent during the times of recession. In order
to retain top managerial talent around 3000 managers were moved to ICICI bank and 300
to ICICI securities and General Insurance divisions. Also a system of long term pay (an
incentive) was started which was given to high potential employees. This was done with
a view to retain top talent. Careful assessment was done to find why the employee was
rated higher in appraisal and on what parameters did he excel in order to determine who
the high potential employees were.
Organizations in general implemented changes in the performance appraisal system.
While in certain cases the performance based promotions were deferred with mutual
consent, in other cases appraisals and variable pay distribution was made stricter.
Very careful assessment was also done to identify the higher ratings while appraisal.
Promotions were also made rigid with approvals from the higher management. This
measure was implemented with the idea of identifying the best performers in the firm
Star performers at top managerial level leaving the firm during the periodwere rewarded
bonuses and incentives to stay in the firm for a longer run. Other trends observed were
11 | P a g e
regular benchmarking with competitors. Both these measures have the rationale of
retaining the best performers with the firm.
f. Changes in award of benefits
Vizag Steel Plant
Due to government regulations, PSEs could not decrease the amount allocated to
spending on fringe benefits. However, there was no increment to these benefits pertaining
to magazine allowance, canteen, education allowance, spending on health, township
among others in the period. Various measures like the limit on the number of free
minutes over the phone were also introduced.
Software MNC
There were no changes in benefits like insurance, but distribution of goodies like shirts
and bags were stopped. Special gifts at time of festivals were reduced to distribution of
sweets. Money for team lunches and outdoor events was removed from team budgets.
Team based performance rewards were stopped and individuals with exceptional
performance were rewarded monetarily with spot awards.
Bikanervala Foods Pvt. Ltd.
Though the top performers were awarded bonuses, the mediocre performers did not have
any bonuses/raises. The usual gifts during Diwali were also compromised as signs of cost
cutting.
ONGC
There was no drastic cut in any of the benefits as the firm is a relatively cash rich firm.
However, during downturn, foreign trips/tours of employees were reduced to a minimum
possible extent. Conferences in lavish hotels were also reduced.
ICICI Prudential
There were cuts in incremental benefits. 2008 was a year of no bonus not only in ICICI
prudential but also other insurance companies. While promotions did happen the
increases in salary were not at the same rate as the pre recession period. Also promotions
were linked to time worked in the organization. Earlier if a promotion was given in one
year now it was given in two years. The HR says, “Earlier, if you did not promote people
in one year, they would have quit and gone. Today, jobs are not so easily available”. Thus
in some ways the recession is helping the company institute some changes that were not
12 | P a g e
possible earlier. Also as a part of cost cutting the mobile expenses of employees were cut.
There were also a freeze on paid International holidays but instead more holidays were
given for domestic vacations.
Cuts in incremental benefits and extra benefits depended on the financial position of the
firm. While extremely rich firms like ONGC could do away with retaining most of the
extra benefits, ICICI faced the cuts with a much bigger impact. The benefits denied
included gifts during special occasions, conferences in lavish hotels etc.
However high expenditure benefits like paid international holidays were frozen in all
organizations.As there was a dearth in job opportunities across the industry, the firms
could afford to cut on the extra benefits without the fear of employees leaving the firm
g. Change in working hours
Software MNC
Although the working times were not changed, the amount of work allocated was
increased. The company aimed to release new products when the recession was over and
so had engaged its workforce in the development of pre-planned new projects. Neither
were changes made in number of working days not were the employees asked to take
forced vacations.
Bikanervala Foods Pvt. Ltd.
With the retrenchment of a number of workers, the amount of work per employee went
up thereby leading to higher number of working hours per person. However, there was no
reduction in the number of working days in the company to save on administrative costs
such as production and electricity.
ICICI Prudential
There was no change in working hours but the remaining employees after retrenchment
were pressurized to put in more work. More responsibilities were entrusted to current
employees. The HR believed that people would put in more work as it was difficult for
employees to find work elsewhere.
The rationale behind was that instead of stressing for more working hours, the firms were
stressing on more productivity during those working hours. More responsibilities were
also entrusted to current employees.
13 | P a g e
In case of Bikanerwala as there were cases of retrenchment the working hours were
forced to be increased due to loss of labour so as to match the existing demand
h. Employee Engagement
Vizag Steel Plant
The involvement of the HR department was extensive with the executive as well as union
employees. They regularly sought the opinion of executive employees while introducing
new practices such as delay of benefits and leaves. The unionized employees were taken
into confidence and were apprised of all the events and were explained about the
measures being taken. A formal forum was formed in which the HR department became
the point of contact to address the grievances of the labor union and communicate it to
the top management. Also, the management led by example with the CEO refusing to
take salary for 2 months so as not to curb several welfare measures.
Software MNC
Emails with information related to company performance were sent out that had planned
and actual revenue figures. Meetings at project levels were organized where employees
were told of how their products had been contributing to the revenue.
Bikanervala Foods Pvt. Ltd.
Although no formal forum for interaction was established, the HR department was in
continuous touch with the employees. Those who were retrenched were informed by the
HR and the top performers were given confidence that they need not have job insecurity
fears. The HR people were always available for communication to assuage the fears of
employees and also served to address their grievances.
ONGC
No specific extra initiative was taken during downturn, but the HR actively engages with
the employees at all levels on a routine basis regarding the compensation and benefits,
performance of the company, performance related pay structure etc. All the employees
are kept in confidence on the decisions related to compensation and benefits by regular
engagement and detailed communication from both the HR department and the top
management.
ICICI Prudential
14 | P a g e
The HR communicate to the employees that the bottom performers are likely to lose their
jobs. The criteria were also clearly defined. However counseling was provided to
employees who were asked to leave so that they could seek alternative careers. HR also
called upon employees for more commitment to help the company tide over difficult
time. The policies were a clear signal that top performers will be rewarded and more
work would be expected of them while the bottom ones will be asked to leave.
The role of HR was different in different firms. While in majority of the cases like ICICI
and the software MNC, they tried to take the employees into confidence and alleviate
their job fears while maintaining high degrees of transparency about the position as well
as the employee.
In other cases they played the role of a mediatory between the firm on one hand and
unions, employees on the other ensuring an amicable process regarding retrenchment,
cutting extra benefits etc.
Employee Reaction to these measuresIn light of all the aforementioned activities that were taken by the organization, the reaction of
employees as expected was not positive and feelings of job insecurity creeps in to the minds of
those people who have not been subjected to punitive action. The main reasons stated for
uncertainty were that the decision making during these times was not seen as transparent and
interactions between peer groups about actions being taken in different companies added to the
fear.
Interviews with employees of some private companies (H.P, Wipro and C.T.S) and in the public
sector as well (NTPC Ltd.) showed the common trend of negative mindset amongst the
employees although they varied in their degrees of discontent.
The main activities that these people observed and were most dissatisfied with were layoffs,
reduction in pays and the halt in promotions. The marked reduction in the benefits being offered
such as free cab service, unlimited telephone charges reimbursement, facilities of free
gymnasiums with instructors, lack of increment in house rent and travel allowance and free food
coupons were also not taken in positive light.
15 | P a g e
General reactions amongst employeesEmployees were concerned because of the effect of these activities on their current as well as
their future investment and saving plans. Also, the policy in some companies of not encashing
the remaining leaves also affected the planned cash flows of employees and thus led to
dissatisfaction amongst them.
Some of the most general trends that came out of the interviews with employees were:
Given some measures of reducing administrative costs, H.P implemented the reduced
workday policy wherein employees had to work for 10 hours for 4 days instead of 8
hours in 5 days. This resulted in increased levels of stress amongst employees. Also,
accompanied this was a 5% cut in pay which did not give a fulfilling experience to
employees.
The general perception of the management in the organization changed towards not being
transparent. Employees in CTS felt that making them sit on benches for a period of 2-3
months would next lead to them being laid off. This led to a number of employees
looking for different opportunities in other companies.
Some new joinees joining dates in Wipro were delayed by more than a year and they
were given the option of joining either the call center arm of the organization or wait for
a year. According to the employee, only 20% of the people joined in the call center arm
of the organization as they saw it as a loss of their reputation.
Though insecurity in terms of jobs was not evident in PSEs, employees were concerned
about the deferred promotion and allowances that were mandated by the management
A common observed trend was the increased work load amongst high performers who
had to undergo a lot of stress which put them more at risk of voluntary turnover. A
number of high performers also switched during this phase across industries, for e.g.
many employees from Wipro, an IT services company, moved to companies like Cisco,
Motorola, Huawei and others during recession.
The person interviewed at NTPC reported that freshmen after completing MBA joined in
larger numbers during recession but at the wake of opening up of the economy quit the
organization to move towards greener private pastures.
16 | P a g e
There was however a marked difference in the attitudes of midlevel executives who had
been part of the organization for a lot of time now. They were more engaged in the
activities of the organization and were supportive in the actions taken in the face of the
situation. They were encouraged at being included in the decision making process and
being part of the consultations while taking major organizational level decisions.
There was marked polarization that took place at that time. When there was a growing
trend of engaging employees, there was a growing core of actively disengaged
employees.
A takeaway from all the interviews conducted was that employees looked at the involvement
of HR in communication of the practices being undertaken during this time in positive light.
In organizations such as H.P, employees said that the availability of persons from the HR
department and their willingness to discuss out problems with employees was reassuring.
The formation of formal forums in NTPC gave employees a chance to address their
grievances to the top management during these times and addresses by top management
directly to executives were seen in positive light as well.
Thus, it becomes clear that the HR department must play an instrumental role in engaging
with employees by formal and informal means of communication and assuaging their
grievances and concerns, a role that is new to the already existing multitude of
responsibilities of the HR department.
New roles of HR in this situationAs observed from the above reaction of employees in the context of these HR practices, the role
of HR is very important. To some extent, the concerns of employees could be assuaged when
they were properly apprised of the activities to make them believe in the transparency in the
process. This and many other activities of HR assumed a lot of importance during this period
which hitherto had not been given adequate importance. We next critically analyze these
changing roles of HR in the subsequent section.
a. Communication to employees by HR about the policies
17 | P a g e
During a downturn, it is the responsibility of the HR managers to represent employee
interests and advise management and employees on the available contingency plans. As part
of the crisis communication preparation, HRM staff needs to know the emergency benefits
and assistance available, device some plans if the situation so demands and ensure that they
reach the employees and their families quickly.
Asdiscussed earlier in the case of Vizag Steel Plant and ONGC, the HR actively engaged
with the employees of the organizations at all levels and there were clear and detailed
communications about the existing policies and changes, if any. This helped in keeping the
employees in confidence regarding the practices followed by the firm and allayed undue
fears amongst the employees. This also helped in building a positive feeling amongst the
employees that the organization would take care of them in every possible manner.
b. Leadership role of HR and active involvement in decision making
Most of the functions of HR until now have largely been reactive rather than proactive.
However, in trying times like the downturn, the need is for the HR department to become
more assertive. HR professionals have to be more involved in the strategic decision making
of the organization and behave more as integrated players or “business partners” in the core
business.“Knowledge and skills in economics, business, crisis management, leadership,
consulting, and communications have become necessary pre-requisites for successful
managing of the increasingly complex HR function in today’s challenging times.”
HR professionals also need to be more open, consultative and receptive to the business needs.
They also need to follow through with the implementation of policies so as to make sure that
the policies have the desired impact.
c. Involvement with labor unions and collective bargaining
Most HR managers have to walk a tight rope and do a balancing act: protect the company's
interests, represent management while simultaneously effectively engaging and negotiating
with the labor union representatives to ultimately arrive at a collective bargaining agreement
that's acceptable to both the management and the labor workforce. This role becomes all the
more crucial during downturn as the organizations are often forced to take certain tough
18 | P a g e
measures like layoffs/ reduction in work force, cutting down of various benefits, reducing the
number of working days in a week as has been discussed earlier.
As discussed earlier, a formal redressal forum was formed in Vizag Steel Plant with HR
department as the point of contact. Similarly, in ONGC, HR actively engages with the labor
unions and their consent is sought in decisions relating to salary revisions, welfare benefits
and other local issues relating to food, rest timings etc. pertaining specially to the on-site
work.
Hence, keeping the labor unions apprised of the measures taken and keeping them into
confidence, is essential to avoid conflicts, strikes and other such unproductive outbursts. HR
has emerged as the vanguard in managing labor relations and collective bargaining in the
recent times.
d. Using formal and informal networks to interact with employees
Several formal and informal networks/forums are formed to interact with employees. As has
been highlighted earlier, a formal forum was formed in Vizag Steel Plant with HR
department as the point of contact to redress the grievances of the labor union and
communicate it to the top management. Similarly, various informal initiatives are taken up to
interact with employees on a regular basis.
e. Advising and mentoring line managers on the HR impact of their decisions
The success of the human resource policies and practices depend largely on the effectiveness
of the implementation by the line managers. The HR professionals should thus play an
enabling role by providing information about, interpretation of the various measures taken by
the organization so that the line managers can both be in synchronization with the stance
taken by the top management and can also effectively communicate the same to their
respective teams and employees working under them.
Thus we can make out that the roleof HR during growth periods is generally more of a
supportive kind wherein it helps the organization to cope with business expansion. During
periods of growth, the role of the HR is to ensure that robust recruitment policies are in place and
also to ensure that top talent in the company is retained. However, rapid changes in economic
19 | P a g e
climate during downturns make it imperative for HR professionals to adapt quickly to the ever
changing circumstances making their job even more challenging and enriching.
Limitations of the StudyAlthough a lot of effort was put in trying to get as much primary data some limitations in terms
of time and space held back some steps we would have liked to take up. One was the absence of
face to face interaction with employers in their organizations themselves which could have also
got us to talk with their employees. Also, it was not possible to get employee responses from the
company from which we got the employer responses. To mitigate this however, we tried to probe
the employee on the HR practices that were undertaken in her/his organization by referring
tangentially to the questionnaire prepared for employers.
ConclusionFrom the study undertaken, we understood that some measures that look pretty straightforward
and direct had a lot of implications for employees. We also noticed how many proposed steps
were not taken up on the advice of HR persons citing the negative impact of the decision no the
employee as well as the organization reputation. It is evident how the role of an HR professional
becomes highly challenging in these times and how flexible the professional has to be in
combating these challenges.
The HR professional has to deal with the dual role of looking at the organization’s profitability
as well as leverage relationships with executive employees and also the usually conflicting labor
employees. A delicate thread has to be treadedupon by the HR professionals trying to balance
financials with consideration for emotions.
The evolving role from being a supportive department to that of a critical department in
formulation of strategies for organizations poses several challenges in the already competitive
environment. We would like to conclude saying that under such circumstances leaving the HR
department to function as a standalone entity without support from the top management and
employees can only be as good as not implementing the function at all.
20 | P a g e
Bibliography
ASYALI, E. (2010). THE IMPACT OF GLOBAL ECONOMIC CRISIS ON HUMAN RESOURCE MANAGEMENT IN THE MARITIME INDUSTRY. DENİZCİLİK FAKÜLTESİ DERGİSİ.
Benson, J. (2004). The Changing Nature of Japanese Human Resource Management: The Impact of the Recession. International Studies of Management & Organization.
Gurkov, I., Zelenova, O., & Saidov, Z. (2012). Mutation of HRM practices in Russia:an application of CRANET methodology. International Journal of Human Resource Managment, 1289-1302.
Ministry of Labour, GoI. (2009). Effect of Economic Slowdown on Employment in India.
Sahdev, K. (2011). Downsizing and the role of HR. The International Journal of Human Resource Management.
Shen, J. (2010). Impact of the 2007–09 global economic. Asia Pacific Business Review.
21 | P a g e
Appendix
Appendix 1Set of questions for telephonic interviewwith employers
1. In the previous recession period were there any changes in any of these activities?
Activity Already changed
it by then
Made changes
after recession
Restrictions in
company’s travel
policy
Hiring freeze
Layoffs/ reduction in
work force
Company holiday
policy
Hiring of seasonal
workers
Training expenses
Salary freeze
Communication to
employees about
22 | P a g e
changes salary and
benefits
Early retirement
window
Reduced workweek
2. As a form of cost cutting, were any deals entered into with recruitment agencies for
discounts? Were any alternate agencies offering free recruitment services identified?
3. Again focusing on cost cutting for recruitments, were internet services like video
conferencing (e.g. Skype) used for recruitment?
4. Were there any reductions in employee training programs? Was any free training
alternative looked into?
5. Given the trend that employees are investing their savings into market securities to suit
them after retirement, does your company provide any sort of mentoring/education to
employees about their investment options? (E.g. P&G)
6. Were any restrictions placed on salary increments and bonuses? Were there any pay cuts?
7. Given the above, were any special schemes arranged for top performers?
8. Were any services such as payment of health insurance premiums made available for
retrenched employees?
9. If there were any layoffs, what steps were taken for appraisal of the employees who were
laid off?
10. Were there any changes in the promotional policies such as fixing the maximum age for
occupation of a post?
11. Were employees trained on multiple skills to help them adapt to change in work if
needed?
12. Were employees involved in forming unions so as to increase their bargaining power
given the imposed measures?
23 | P a g e
13. Given the doubts in the minds of employees during these times, what steps were taken by
the HR team to assuage these concerns? Was the HR dept. available to address
employees’ concerns?
14. How were communication about salary cuts and layoffs made to employees?
Appendix 2Set of questions asked to employees in organizations
1. Was there any change in your pay structure? If yes, did it happen on a large scale?
2. Were there any changes in the working hours?
3. Were you asked not to come to office for some days?
4. Did your manager interact with you more frequently in the recessional times?
5. Did the top management interact with you (personally, in an assembly or group meeting)
regarding position of the company?
6. Was there any change in your job profile (nature of work,responsibilities)?
7. Does your company, reimburse fees for 3rd party professional certifications? If yes, did
the policy change in the recessionary times?
8. Was there any change in bonus paid for employee referral?
9. Were you denied an opportunity to travel abroad / customer site citing reasons of cost
cutting?
10. Were your performance goals changed?
11. If there was compensation hike, in your opinion was it at par with levels set the in earlier
years?
12. In case of workplaces with unions, what was the opinion of the Union leaders? Did the
management talk to them regularly? Was there any change in the view of union leaders?
13. Were you or any of your colleagues asked to quit the job? If yes, did the company take
any steps to get you employed in another company?
24 | P a g e
To fresh college graduates,
14. Was your joining delayed? If yes by what time?
15. Were you offered a different role than what was promised earlier?
25 | P a g e