Human Resource Management in the Recession

Bill RocheProfessor of Industrial Relations & Human Resources School of Business University College Dublin

Presentation to CIPD, VHI House, May 25th 2011

The Irish Recession and the Labour Market

Worst economic crisis in modern Irish history and Ireland worst case among advanced economies:

GDP (2007-2009): -10.9%

volume of retail sales (2007-2010(Q3): -16.7%

sharp rise in incidence of company insolvencies: +80% (2008-2010)

financial crisis – nationalization of the financial system & state capitalization (€70bn)

debt/GDP ratio (2008-2010): 44.4% 97.25% and may rise to c 120%

unemployment (2007-2010): 4.6% 14.6%

net emigration (2007-2010): - 67,3000 + 34,500

collapse of social partnership

pay: (2009-2010(Q3-Q3)): Average Hourly Earnings

Private sector: -0.2%

Public sector: -4.6% (excl 7% ‘pension levy’)

‘Human Resources in the Recession’

2011 Study by Roche/Teague/Coughlan and Fahy*

Survey of 444 employers

Focus groups involving 30 HR managers

Focus groups involving 17 trade union officials

Six case studies of good practice in responding to the recession

Irish Life and Permanent, Sherry FitzGerald, Dublin Airport Authority

Superquinn. Medtronic, Ericsson

* W.K. Roche, P.Teague, A.Coughlan and M. Fahy, Human Resources in the Recession: Managing and Representing People at Work in Ireland, 2011 forthcoming.

3 Views Evident in Commentary and the Literature

1. The recession as harbinger of HR cataclysm or a new ‘marketized’ employment model

2. The recession as a ‘shot in the arm’ for HR and a catalyst for high-commitment HR transformation

3. The recession as contributor to eclectic change in HR practice

How is the Recession Affecting Human Resource Management?

Research Issues

• How is the recession affecting human resource practices?

• How is the recession affecting the HR function?

• How is the recession affecting relations with unions?

• Will the recession transform work and employment arrangements?

HR Practices & Programmes

Balance Between Cost Reduction and Maintaining Motivation & Commitment

HR Practices

‘hard’ HR practices curbs on pay & bonuses

headcount reductions

cuts in working time

curbs on recruitment & promotion

productivity measures

‘soft’ HR practices communications

engagement & involvement

training, talent management & staff --redeployment

larger pay cuts for higher-paid

in-sourcing work

direct cost reduction

maintain motivation& commitment

• Multi-stranded HR retrenchment programmes combining a range of hard practices adopted in about 1 in 2 firms & similar incidence of mainly pay-freeze focused programmes

• But employers in general seeking to balance hard and soft .practices – controlling payroll costs & maintaining motivation & commitment:

7 out of 10 firms combine retrenchment programmes with a range of soft HR practices that include more emphasis on communications, employee engagement measures and the involvement of employees in developing response measures

3 out of 10 firms combine retrenchment programmes with heightened emphasis on communications

Firms’ HR Response Programmes

Most Effective HR Practices

• When asked to identify the most effective HR practices in managing ..the recession, most frequently identified were:

communication & information disclosure

efficiencies and cost control

engagement & consultation

• These practices also among those strongly associated in focus groups ..and case studies with ‘good human resource management’ in the ..recession

Role & Influence of HR Function

• HR functions ‘leaner’ but radical restructuring not prominent

• Influence of HR has increased significantly

• ‘Business partners and working the pumps’

%

fewer staff in HR department 32 (70% firms cut headcount)

less use of external HR consultants 43

costs of HR policies/processes reduced 17

HR department restructured 15 (64% firms restructured)

business role of HR has been strengthened 59

Relations with Trade Unions

• More than six out of ten firms stated that they had ..actively engaged with unions in developing HR ..options with which to respond to the recession

• The majority of firms appear to consider the ..participation and contribution of unions during the ..recession in a fairly positive way

• Almost six out of ten firms disagreed that the ..actions required to respond to the recession have ..been so urgent that there has been little time to ..consult or negotiate with trade unions

Influence of Trade Unions

• Unions do not appear to have been able to exert much leverage on managements’ favoured measures for responding to the recession:

only a very small number of firms (5 per cent) agree that unions persuaded the business to change measures initially decided on to address the recession (e.g. from redundancies to short-term working)

a similarly small number (6 per cent) stated that unions had secured agreement on financial ‘claw-backs’ for their members when business conditions improve

The position of trade unions is weakened by subdued and compliant employees, fearful for their jobs, pensions and livelihoods.

‘ Concession Bargaining’ Dominates the Picture

Evidence of Transformation of Work and Employment?

‘new employment deal’ prevailing models high-commitment /market-driven model ? of work and ? model employment

• Much tumult, adaptation, improvisation and innovation evident in the actions of firms – but are firms moving in any clear direction?

• Abiding appeal of received principles of good HRM – ‘plus ca change’

• HR – ‘business partners’ but ‘working the pumps’ – strategically reconfiguring HR practices for recovery and beyond?

• Case studies reveal firms for the most part seeking to preserve existing models

Human Resource Management in the Recession:

Some Key Conclusions

• Employers commonly adopting multi-stranded HR ..response programmes geared to reducing payroll ..costs but also seeking to preserve motivation and ..commitment

• Leaner but more influential HR functions

• Unions mainly negotiating concessions & facing unprecedented challenges

• Few indications that the recession is breaking the mould of established patterns of work and employment

Supplementary Powerpoints

Headline Findings: Incidence of ‘Hard’ HR Practices

cuts in pay for all staff 40 19

cuts in pay for some staff 16 16

pay frozen for all staff 60 69

pay frozen for some staff 11 14

lower pay for new staff 23 17

compulsory redundancies 48 37

voluntary redundancies 30 39

changed pension arrangements 35 40

reduced overtime 63 60

Reduced part-time/contract working 21 26

performance managed more rigorously 47 50

tightened discipline, time-keeping, attendance 48 40

% Firms % Employees at work

Headline Findings: Incidence of ‘Soft’ HR Practices

% Firms % Employees at workstaff trained for new roles in business 40 53

undertook talent management measures 21 32

staff redeployed within firm 43 56

cut training & development budget 51 54

communications more important# 89

employee engagement measures undertaken# 52

active involvement of employees in developing options to respond to recession# 55

higher pay cuts for senior staff 25 17

Higher bonus cuts for senior staff 12 20

introduced in-sourcing 5 7 # Proportion of firms ‘agreeing’ or ‘strongly agreeing with item

Table 3.10: Combined use of HR response measures

Firms Adopting

General HR Retrenchment Programmes

FirmsAdopting Pay Freeze-Focused Retrenchment

Programmes

Predicted % of firms

Cluster Size 50.2 49.8

HR Measures Adopted:

Cut wages and salaries for some or all staff 87.5 8.6

Froze wages and salaries for some or all staff 56.0 89.6

Introduced lower pay/pay scales for new staff 28.9 14.3

Introduced voluntary and/or compulsory redundancy 77.1 45.8

Reduced overtime 75.1 54.2

Introduced short-time working 62.6 22.4

Reduced use of part-time and/or contract working 22.5 16.7

Changed pension arrangements for existing or new staff 37.9 18.8

Managed staff performance more rigorously and/or tightened discipline, time-keeping and attendance

66.0 59.7

Combinations of ‘Hard’ HR Practices

(Clusters identified through latent class modeling of unweighted data)

Table 3.10: Combined use of HR response measures

Combined ‘Hard’ and ‘Soft’ Response

Programmes

‘Hard’ Response Programmes Allied to

Communications

Predicted % of firms

Cluster Size 73.3 26.7

HR Measures Adopted:

General HR retrenchment programmes 45.7 56.6.

Employee engagement measures undertaken 69.0 22.0

Communications more important 95.3 71.5

Active involvement of employees in response measures 60.1 26.4

Talent management measures undertaken 28.8 3.9

Combinations of ‘Hard’ and ‘Soft’ HR Practices

(Clusters identified through latent class modeling of unweighted data)