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Impact of Economic Recession On Human Resource Planning, Flexibility and Recruitment Strategy
Impact of Economic Recession On Human Resource Planning, Flexibility and Recruitment Strategy
Submitted By:
Tom Jacob
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Introduction
In the present day and age, most organizations consider their employees (human resource)
to be their most valuable assets. HRM can be defined as the management of people in such
a way that HR can in itself be a source of competitive advantage (Price 2007). A prominent
approach to HRM is the Harvard model, also known as the soft approach, which stresses the
“human element”. This school of thought argues that individuals, in right circumstances, can
be creative and proactive, values which can be used to the advantage of the firm (Anthony,
Perrewe & Kacmar 1996). Google, one of the biggest success stories of the present decade
can be viewed as a prime example of this approach. According to Google (2009) this means
“each employee is a hands-on contributor” to the success of the company.
Pinnington & Edwards (2000) argues that when organizations react (E.g.: Cutting Cost) to
changes in external environment, it will reflect in its’ HR policies. This can be new
employment patterns and/or a shift in employee-employer relationships (Sparrow &
Marchington 1998). This report tries to understand how an economic climate of recession
impacts an organization’s planning, flexibility and recruitment strategy.
As belts tighten and budgets get slashed, it is imperative that an organization gets it HR
strategy right so that it can retain its’ best and recruit the finest in the market. If played
right, recession can be advantage to an organization as far as its HR is concerned.
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just announced that it aims to achieve 2500 job losses through voluntary redundancies in UK
(BBC 2009).
Numerical flexibility
In the times of recession, numerical flexibility will give companies an alternative to expensive
redundancies. Temporary employees, especially, are easy to dispense off if not required. As
temporary and contract workers are used for peripheral jobs, it will not affect the core
business. Legal & General, the insurance company was able to lay off 260 part-time and
temporary workers without incurring serious redundancy costs. It is also noted that this
didn’t directly affect the company’s activities (Guardian 2009)
Functional Flexibility
It is critical that the core employees of a company are functionally flexible so that in a
recession, they can take over other jobs if and when the company lay-off its temporary and
contract workers. McDonalds is an excellent example as they train their staff on all kinds of
work which will arise in McDonalds at the Hamburger University (aboutmcdonalds 2009).
ASDA Superstores in UK is also a good example for functional flexibility through job rotation.
Companies should also strive for functional flexibility through job enrichment (vertical) and
enlargement (horizontal).
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Temporal Flexibility
If a company has a work force which is flexible in terms of time, it will be an advantage. This
will mean that the company can use its workforce to suit its production. Honda pays its
workforce a minimum wage if they are out of work (Swindon Advertiser 2009). This means
that the company retains the work force without a big overhead at difficult times.
Reward Flexibility
This type of flexibility will mean that the workforce will be rewarded for their excellent
performance which will lead to better profits for the company. Most financial institutions
offer its employees some sort of reward for excellent performance. Fujitsu have a long
history of using performance related pay (McKenna 2000)
Locational Flexibility
Locaional flexibility will lower the expenses for the company in the recession. Non core
activities can be relocated to call centres as done by the ‘3 Mobile UK’ who have switched
their customer service to India (Three 2009). Many companies now use technology to create
virtual conferences where the employees are at different parts of the world, but attend
meetings virtually. This can save the company on travel and organisational costs.
Recruitment Strategies
The recruitment strategy of a company will be one of the first things to change during a
recession. As recession can create a sudden abundance of technically proficient and
experienced candidates for every job, it is imperative that the top level management knows
the gaps in the current human recourses and recruit as necessary. The focus should be on
the recruitment white spots in the organization. It is also noted that the recruitment
marketing should be kept at the suitable level (hrmadvice 2009).
It would be beneficial for the company to look at medium to long term prospects and set the
recruitment strategy accordingly. Recruitment managers should be able to analyze trends
and predict demand in relation to the desired position the company looks to achieve when it
comes out of recession. This is evident in Microsoft’s recruitment strategy where they are
hiring highly skilled people for its’ online services (Wall Street Journal 2009). The same article
notes that Boeing is adding 106 employees to its defence arm.
Conclusion
Human Resource Planning, flexibility and recruitment strategies will respond to external
environment. In recession, cost considerations will dominate the HRM strategy. But Human
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Resource Planning and recruitment strategies should consider the long term prospects as
well. Right planning and recruitment strategies will take advantage of the recession and arm
the company with the best of the newly available talent. This will also be an opportunity to
shed the deadwoods in the company. This will enable the company to better position itself
when the economic climate becomes favourable again.
Reference
Price, A. (2007), Human Resource Management in a Business Context, London: EMEA
Bramham, J. (2000) Human Resource Planning, New York: Beekman Books Inc
Pinnington A. & Edwards T. (2000), Introduction to Human Resource Management, Oxford:
Oxford University Press
Sparrow P.R. & Marchington M. (1998), Human Resource Management: The New Agenda,
Pitman: London
Anthony W. P., Perrewe P. L. & Kacmar K. M. (1996), Strategic Human Resource Management,
Orlando: Harcourt College Brace Publishers
Dickens, P. (2004) Society & nature: changing our environment, changing ourselves, London:
Wiley-Blackwell
McKenna, F.E. (2000), Business psychology and organisational behaviour: a student's
handbook, New York: Psychology Press
http://www.google.co.uk/corporate/culture.html
http://hrmadvice.com/blog/2009/01/19/recruitment-strategy-recession/
http://www.telegraph.co.uk/finance/newsbysector/transport/2792902/General-Motors-
looks-at-more-redundancies.html
http://news.bbc.co.uk/1/hi/business/7850596.stm
http://www.three.co.uk/Home
http://online.wsj.com/article/SB124198904713604533.html
http://www.graphicrepro.co.za/asp/news_long.asp?nid=13409
http://www.guardian.co.uk/business/2009/may/12/legalandgeneralgroup-insurance
http://www.swindonadvertiser.co.uk/news/4363385.Honda_workers_set_for_pay_cuts/
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