How to manage HR in the downturn

27 October 2009

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News that the recession will last longer than expected has come as a blow to many small businesses. But cutting back too far on staffing during the recession could leave businesses lagging behind when the upturn arrives.

During these difficult economic times, many businesses are looking at ways of saving money – and with employees often being the most expensive overhead, staff cutbacks may be inevitable.

Indeed, the evidence is that many firms are shrinking. A recent survey carried out by the CBI for the manufacturing sector showed that in the last quarter 47% of firms reduced their headcount, while just 6% increased their employee levels.

But employers need to be careful – cutting too deep could prove to be a false economy. Getting rid of too many members of staff, and in particular, key employees, could prove to hinder companies when the market improves, making growth difficult and slow.

If you slash your workforce too much, inevitably you'll have to invest more money in recruitment later when the upswing finally arrives.

Competitors who make fewer cuts during the recession will therefore develop a competitive advantage during the market upturn, since they will not experience the lag between recruitment and return on investment.

For companies that go too far, not only will extra recruitment costs dent their bottom lines but they should consider the extra time it will take for new employees to settle in and reach full productivity.

The winners when the market does become more buoyant will be those companies that are able to balance between making cuts that enable them to survive the downturn and maintain their talent pool at a level that will enable them to capitalise on the eventual upturn.

Top tips for managing employees effectively

Ensure that if you do need to lose people, you don't lose those who are best able to help you meet your business's long-term strategic goals.
Make sure the vision for your business is clear and well-communicated to employees, and they should be reassured about their part in contributing to this future.
Let employees know where they fit into the business, and at all times be sure that their own career development aspirations are recognised. Development training should not be overlooked, and incentives provided to make employees feel valued. On top of ensuring that key employees' heads are not turned by other jobs, this will breed loyalty and maintain productivity.
Plan for how you will recruit when the time comes to do so, so that you can make the most of the opportunities that will arise once the economy turns the corner.

This may sound simple, and finding candidates as the economy recovers will not be difficult, but the problem will be finding the right candidates for the job; sourcing the people that fit the organisation, share its values and will be at home in its culture.

Finding candidates who are best suited to a business is a laborious job. The candidate's CV and experience, personality and career aspirations all have to be considered. Fail to do this properly and you may well end up with an employee whose productivity is poor, undermines team morale, and soon seeks another job.

While conditions are difficult for all companies, by having a long-term vision, and planning cuts, future recruitment and staff development carefully, businesses can use this downturn as a springboard for capturing market share.

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About the author

Andrew Hardaker is managing director of ATA Selection, one of the UK's leading recruitment companies specialising in the manufacturing, engineering, rail, technical sales, energy and construction sectors.

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How to manage HR in the downturn

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