Campaign - Mint - Mumbai

Tuesday, 14 Apr 2009

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SKILL STAKES

HR in a downturn: the six issues that top the list

Human resource managers are facing challenges they haven't tackled before. How efficiently they steer the course will decide the fate of their firms in these tough times
B Y RAJESHWARI S H A R M A rajeshwari.s@livemint.com

say HR c o n s u l t a n t s . Dr R e d d y ' s h a s b e e n w e e d i n g o u t u n d e r p e r f o r m e r s as p a r t of its p e r f o r m a n c e p h i l o s o p h y . "That will c o n t i n u e as always. We m a y r e d e p l o y talent t h o u g h , if r e q u i r e d , to a d d r e s s a n y c h a n g e s in b u s i n e s s pri orities," says Jha.

Focusing on costs
In t h e current scenario, costs have c o m e u n d e r the microscope a n d c o m p a n i e s are looking at getting m o r e out of less. Employers across sectors are cutting back on recruitment expenditure, p e o ple-related costs such as benefits a n d perks, business travel a n d entertain m e n t expenses. Like all major c o r p o r a t i o n s , H i n d u s t a n U n i l e v e r Ltd is n o w focusing o n cash flows ( r e p o r t e d in Mint o n 14 March). The compa ny h a s appointed global p r o c u r e m e n t officers to b u y r a w m a t e r i a l at the best rates from a n y p a r t ol t h e w o r l d to save cost. C o m p a n i e s as D r Reddy's, low c a r r i e r Spicejet

LG Electronics India Pvt. Ltd a n d P a n t a l o o n Retail ( I n d i a ) Ltd a r e looking at m a n a g i n g costs effectively. T h e p a r e n t c o m p a n y of Pantaloon Retail, Future Group, slashed executive salaries by 5% a n d lowered travel a n d stay entitlement limits for executives a b o u t four-five m o n t h s ago, according to Sanjay Jog, chief people officer, Fu ture G r o u p . Infosys Technologies Ltd h a s told employees they c a n opt for a year-long sabbatical to engage in phil anthropic activities while they d r a w 50% of their salary, according to a com p a n y spokesperson. "Firms a r e clearly a i m i n g at getting a p p r o p r i a t e r e t u r n s o n i n v e s t m e n t in people a n d establishing a cost-optiTURN TO PAGE 0>

o m p a n i e s face u n i q u e challeng es in m a n a g i n g h u m a n capital as t h e e c o n o m i c d o w n t u r n takes its toll o n businesses in India. It's not just layoffs a n d p a y cuts t h a t com p a n i e s are grappling with as they deal with t h e m o u n t i n g p r e s s u r e to maxi mize u s e of resources, lower costs a n d m e e t t h e n e e d s of a diverse stakeholder g r o u p . H u m a n r e s o u r c e issues such as skills u p g r a d a t i o n , p e r f o r m a n c e m a n a g e m e n t a n d c o m m u n i c a t i o n with e m ployees are gaining i m p o r t a n c e . "The reality is that c o m p a n i e s d o not have t h e luxury of ostrich-like behav iour a n d (have to) take issues h e a d o n to m a n a g e t h e current turbulence without e n d a n g e r i n g the long-term sustainability of a n organization," says Prabhir Jha, senior vice-president a n d global head, h u m a n resources, or HR, Dr Reddy's Laboratories Ltd. This n e w reality is forcing business leaders to turn increasingly to HR m a n agers, w h o are n o w expected to a d d val u e to their organizations in areas be y o n d their traditional brief. Boom-time HR m a n a g e r s have never experienced such a business environment, a n d it is testing their skills a n d capabilities. A c c o r d i n g to experts, t h e key will b e to d e v e l o p a n e w HR strategy t h a t s p a n s t h e e n t i r e value c h a i n a n d still aligns closely with t h e difficult chal lenges b e i n g faced by c o m p a n i e s . "HR m u s t r e c o g n i z e t h e n e w b u s i n e s s im peratives a n d p u t in p l a c e work struc t u r e s t h a t a r e agile a n d r e s p o n d with s p e e d , forge s t r o n g e r linkage b e t w e e n p e r f o r m a n c e a n d r e w a r d even a s y o u explore alternatives to lay off, m a n a g e e m p l o y e e e n g a g e m e n t w h e n staff m o rale is d o w n ( a n d ) h a v e consistent c o m m u n i c a t i o n a b o u t n e w expecta tions," says N.S. Rajan, p a r t n e r , h u m a n capital, b u s i n e s s advisory servic es, Ernst a n d Y o u n g India. Campaign identified s o m e of the t o p issues with t h e help of leading HR m a n agers a n d consultants:

nomic d o w n t u r n h a s created a n e w challengeone of c o m m u n i c a t i n g b a d news. A well-planned c o m m u n i c a t i o n strategy is essential. To m a i n t a i n e m p l o y e e m o r a l e a n d allay fears, b u s i n e s s l e a d e r s n e e d clear, unified, c o n s i s t e n t a n d c o n t i n u o u s c o m m u n i c a t i o n , a c c o r d i n g to Rakesh Malik, practice leader, c o r p o rate t r a n s a c t i o n s a n d transformation, India a n d M i d d l e East (West Asia), Hewitt Associates L i e , a global con sulting firm. Experts say a p l a n n e d a p p r o a c h , p r e p a r i n g e m p l o y e e s for b a d news, is i m p o r t a n t . P e o p l e are realis tic a n d a p p r e c i a t e t h e truth, t h e y say. "Flinging a surprise c a n h a v e negative i m p a c t , " says Malik. And w h e n it c o m e s to c o m m u n i c a t ing major c h a n g e s , t o p m a n a g e r s n e e d to take o n t h e role of m e s s e n g e r s . Dr Reddy's L a b o r a t o r i e s ' chief executive officer a n d v i c e - c h a i r m a n G.V. P r a s a d is k e e p i n g all e m p l o y e e s u p d a t e d o n t h e o r g a n i z a t i o n ' s r e s p o n s e to m a r k e t c h a n g e s . P r a s a d c o m m u n i c a t e s with his e m p l o y e e s t h r o u g h emails, q u a r terly m e e t i n g s , a blog called P e r s p e c tives accessible only to e m p l o y e e s , a n d by talking to t h e m . PepsiCo India Holdings Pvt. Ltd's executive director in charge of h u m a n resources, Pavan Bhatia, says, "We are ensuring that employees are informed about (the) business a n d macroecon o m i c scenario."

ported in Mint o n 27 January). Experts say if r e t r e n c h m e n t s are d o n e simply to reduce costs, it will h a v e minimal a n d s h o r t - t e r m i m p a c t o n t h e organization. "Rightsizing works w h e n it is part of a p l a n n e d r e - e n g i n e e r i n g of a c o m p a n y a n d pays attention to its business strategy, cost implications a n d h u m a n capital issues," says Rajan. "A well thought out plan could lead to i m p r o v e m e n t s in organizational p r o d u c tivity a n d effectiveness t h r o u g h r e d e sign of b u s i n e s s processes." For c o m p a n i e s t h a t u s e a fair p e r f o r m a n c e m a n a g e m e n t system, this is an a c c e p t a b l e w a y of e l i m i n a t i n g t h e b o t t o m 10% in t h e p e r f o r m a n c e scale,

Reviewing employee numbers

Many businesses are repositioning a n d reallocating h u m a n resources through rightsizing. This can m e a n re ducing n u m b e r s , adding people in cer tain functions or moving workforce to other businesses. The m o s t c o m m o n strategy is to re duce n u m b e r s to address short-term pressures. For instance, c o m p a nies such as the two Banga lore-based manufactur ersLarsen and Toubro Komatsu Ltd a n d Feder al-Mogul Goetze (India) Ltdfiled applications in the state labour depart ment, declaring their in tent to lay off 365 a n d 1,800 employees, respectively (re-

Communicating clearly
For companies, a d e c a d e of economic growth h a s seen a raft of good news about growth, profits, opportunities a n d expansion into n e w markets. T h e eco-

Clear, consistent, I continuous I communication is J required to allay I fears; employees must be prepared for bad news

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m i z a t i o n p l a n as a l o n g - t e r m tool for b u i l d i n g b u s i n e s s e s , " says N a r e s h M a l h a n , m a n a g i n g director, Man p o w e r Services India Pvt. Ltd, part of global staffing c o m p a n y M a n p o w er Inc. "The key is to e l i m i n a t e costs t h a t d o n ' t a d d v a l u e . " Metals p r o d u c er V e d a n t a g r o u p , for i n s t a n c e , is looking at 30-40% cost savings from w a s t e e l i m i n a t i o n a n d p r o c e s s im p r o v e m e n t s . "Our target is to be t h e l o w e s t - c o s t p r o d u c e r globally," says A. T h i r u n a v u k k a r a s u , p r e s i d e n t , HR, of V e d a n t a g r o u p in India, p a r t of Ve d a n t a R e s o u r c e s Pic. "Even o u r shop-floor o p e r a t o r s k n o w a b o u t t h e cost of p r o d u c t i o n a n d t h e b e n c h m a r k levels of global c o m p e t i t o r s , " h e says. "In t h e c u r r e n t m a r k e t e n v i r o n m e n t w h e n b u s i n e s s c o n f i d e n c e is d o w n , c o n s u m e r s p e n d i n g is d e c l i n ing ( a n d ) profit m a r g i n s a r e u n d e r t r e m e n d o u s p r e s s u r e , t h e r e is a larg

er n e e d to take h a r d d e c i s i o n s to m a n a g e profitability, o p t i m i z e p r o ductivity a n d costs," a g r e e s Jha.

Measuring performance
Performance is being tracked m o r e keenly. "Organizations are tracking both ends of the performance spectrum a n d the spotlight is on creating an even stronger differentiated rewards struc ture," says Malik. It's time to m a k e a clear-cut distinc tion between strong and mediocre per formance and separate the m e n from the boys, says Shalini Kamath, m a n a g ing director, corporate c o m m u n i c a tions and h u m a n resources, Ambit Holdings Pvt. Ltd, a M u m b a i - b a s e d fi nancial services firm. "It's time for or ganizations to see if t h e high perform ers have been riding high on growth rather t h a n really being star perform ers," she says. For most companies, reviewing per formance and helping people improve is a round-the-year p r o g r a m m e . How ever, the performance b e n c h m a r k s are higher now. While t h e b o t t o m five or bottom 10 performers were labelled u n derperformers earlier, the b e n c h m a r k has now b e e n raised to include 10-15% of the workforce. To m a k e its perfor m a n c e m e a s u r e s relevant in the current market situation, Ambit Holdings has a d d e d a section to its balanced scorecard so that employees can list their achievements in addition to their core

business objectives. "The idea is to evaluate an employee fairly," says Kamath. "If an employee has not b e e n able to meet revenue targets but has done quite a lot of client e m p a n e l m e n t , then this should be accounted for dur ing appraisal," she says. Employees at V e d a n t a g r o u p n o w have their p e r f o r m a n c e tied to t h e ef fectiveness of e n a b l i n g functions such as finance, HR a n d c o r p o r a t e so cial responsibility, in a d d i t i o n to vol u m e a n d cost of p r o d u c t i o n . T h i r u n a v u k k a r a s u says t h e g r o u p is looking at its r e w a r d s p r a c t i c e aggressively. " P e r f o r m a n c e pay of m a n a g e r s h a s b e e n e n h a n c e d by 50% over t h e last year," says T h i r u n a v u k k a r a s u .

I ...there is a lot more 1 focus on a leader's I ability to manage... I overall costs, 1 productivity | and...the morale of | employees.
Mandeep Maitra
I HDFC Bank

Testing leadership
An e c o n o m i c d o w n t u r n requires l e a d e r s to go b e y o n d their defined roles. Their t o p - m o s t c h a l l e n g e is e m p l o y e e d i s e n g a g e m e n t a n d low m o r a l e . O r g a n i z a t i o n s n e e d to c o a c h l e a d e r s to m a n a g e productivity, per f o r m a n c e a n d g r o w t h . "Earlier, o u r business leaders were assessed on t e c h n i c a l skills a n d their perfor m a n c e targets," says M a n d e e p Maitra, c o u n t r y h e a d , h u m a n r e s o u r c e s a n d c o r p o r a t e services, HDFC Bank Ltd. "Today, t h e r e is a lot m o r e focus on a l e a d e r ' s ability to m a n a g e costt o - i n c o m e ratio a n d overall costs, productivity a n d , m o s t i m p o r t a n t l y , t h e m o r a l e of e m p l o y e e s . " HR m a n a g e r s say low m o r a l e i m p e d e s p e r f o r m a n c e at a t i m e w h e n c o m p a n i e s n e e d it m o s t . K a m a t h says l e a d e r s a r e p e o p l e w h o c a n identify o p p o r t u n i t i e s , k e e p p e o p l e m o t i v a t e d , h a n d l e anxieties, i n n o vate in t h e face of adversity a n d w i n t h e s u p p o r t of e m p l o y e e s , s h a r e h o l d ers a n d c u s t o m e r s . Also, t h e n e e d of t h e h o u r for c o m p a n i e s is to adjust r a p i d l y to t h e changed market dynamics. "What's really r e q u i r e d of firms is to adjust internally in r e s p o n s e to external p r e s s u r e s a n d find w a y s to facilitate s t r u c t u r a l a n d l e a d e r s h i p agility," says Maitra. T h e key is to a d d r e s s s h o r t - t e r m n e e d s w i t h o u t losing sight of l o n g - t e r m objectives. At HDFC Bank, t h e o n c e - a - q u a r t e r t o w n hall m e e t i n g s a r e n o w f o c u s e d o n r e aligning p r i o r i t i e s a n d d i s c u s s i n g ways to i m p r o v e p r o d u c t i v i t y .

Training programmes
It's not just the information technology sector that will feel the n e e d to have its employees learn new skills, which m e a n s learning n e w languages, acquir ing knowledge o n new platforms a n d keeping themselves u p d a t e d with n e w technologies. Other sectors, too, will see organizations investing time a n d re sources in equipping employees with new skills or upgrading their skill sets, says Malhan. W h e n e m p l o y e e s are taking o n m o r e w o r k a n d d o u b l i n g roles, u p g r a d i n g skills b e c o m e s i m p e r a t i v e . HR m a n a g e r s say cutting b a c k o n training is c o u n t e r p r o d u c t i v e b e c a u s e it's t h e skills a c q u i r e d in r e s p o n s e to c h a n g e d d e m a n d s that will h e l p c o m p a n i e s t h r o u g h t o u g h t i m e s . "What is, however, r e q u i r e d is allocating re sources p r u d e n t l y with t h e u s e of lowcost o p t i o n s such as work s h a d o w i n g , developing i n - h o u s e c o a c h i n g a n d mentoring programmes, and doing away with p r o g r a m m e s t h a t h a v e lim ited p u r p o s e , " says Maitra. A n u m b e r of c o m p a n i e s , i n c l u d i n g Ambit Holdings, Dabur India Ltd a n d Cognizant Technology Solutions Corp., have t r i m m e d training b u d g ets, b u t n o t t h e focus o n t r a i n i n g a n d d e v e l o p m e n t . "We are looking at opti m i z a t i o n of training p r o g r a m m e s a n d d e p e n d i n g less o n external t r a i n e r s , " says K a m a t h . In February, Ambit Holdings sent one of its employees to Singapore to at t e n d a workshop on deal negotiation. The employee t h e n trained others. "We are also giving half a day's training in, say, a certain Sebi (Securities a n d Ex c h a n g e Board of India) regulation or (a) case study of an interesting merger a n d acquisition deal to equip our people better," says Kamath. O r g a n i z a t i o n s a r e clearly b e i n g forced to seek w a y s to realign their p e o p l e a n d s t r a t e g i e s to d e a l with t h e c h a n g e d b u s i n e s s s c e n a r i o . Ad h o c a r r a n g e m e n t s (in m a n y c a s e s ) a r e giving way to i m p r o v e d p r o c e s s e s a n d p r a c t i c e s . To t h a t extent, t h e d o w n t u r n is an o p p o r t u n i t y to i n t r o duce best practices.

We are ensuring 1 that employees are informed about I (the) business and I macroeconomic I scenario.
1 Pavan Bhatia
PepsiCo India