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Managing Human Resources in a Global Downturn
14 April 2009:
Jobless rates in the Euro zone and the United States surpassed 7% at end-2008, and will approach double digits in 2009 as companies slash their payrolls.
Unemployment rates in the BRIC (Brazil, Russia, India and China) countries and other emerging markets are also rising, creating worker surpluses in what were recently tight labour markets.
The weakening of the global labour market affects a broad spectrum of industries and occupations.
Attention divertion
Under these circumstances, corporate managers have a strong temptation to divert attention from the global war for talent (driven by competition for skilled employees amid labour scarcity) to downsizing of the workforce (impelled by falling output and declining revenues).
HR management becomes a target of discretionary spending cuts as companies struggle to boost flagging earnings.
HR managers face a weaker imperative to retain talented employees, whose bargaining power and job mobility have diminished in the slack labour market.
Companies that yield to short-term disturbances in the global labour market risk losing their long-term competitiveness.
The structural factors underpinning the war for talent remain intact despite the economic downturn:
Globalisation heightens the importance of human capital as a competitive asset, particularly for companies based in high-income economies that rely on productivity gains to neutralise the labour cost advantages of emerging market competitors.
Demographic patterns clearly point to future labour shortages in North America, Europe and developed Asia, where fertility rates are low and aging workers are approaching retirement.
The increasing technological content of global services and manufacturing raises the premium on highly-talented employees, who enjoy high international mobility and multiple professional options.
Deficiencies in production of university-trained scientists and engineers in Western countries widen gaps between workforce capabilities and enterprise requirements, compelling many American and European companies to tap the labour-rich emerging markets for skilled workers.
The entry of growing numbers of Generation Y members into the global labour market in coming years raises new challenges for corporate managers, who must compete globally for talented young professionals bringing different values and expectations into the workforce.
Nothing in the current economic downturn indicates a diminution of these long-term drivers of the global labour market.
Accordingly, companies that sustain investments in human capital during the recession will enjoy a strong competitive advantage over companies that neglect HR management.
The traditional model of HR management focuses on administrative functions – application processing, benefits, compensation benchmarking, dispute resolution, employee grievances, performance review and rules compliance.
HR professionals typically spend the bulk of their time absorbed in these day-to-day tasks, disengaged from the organisation’s broader objectives.
The HR curricula of business schools reinforce this tendency, producing HR professionals well trained in administrative processes but lacking a firm grasp of the links between human capital and corporate strategy.
The HR profession is undergoing a migration from this tactical model to one that treats HR management as a core strategic activity.
Graduates of elite MBA programmes, who previously shunned unglamorous HR jobs to take positions in corporate finance or management consulting, are now pursuing HR careers.
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Source: Recruiting in China
