HR as a driver of recovery from Recession

Introduction

As the representative of the industry which has been impacted most by the recession, I am here to share some bad as well as good news. The good thing is that I have more good ones.

 

Before I start, let us understand that recession and recovery are not one-off events.  We will see more recessions and recoveries in future.  But, what we have to understand is that we can learn some valuable lessons during this recession which we can apply effectively in the future.

 

I would like to share our company’s experiences in dealing with recession. We all know that IT industry has been affected due to reduced technology spending by companies in US, mainly.  This threw up very interesting challenges for us, in terms of

 

• Business continuity
• Client relationship
• Employee relationship
• Financial Management

 

All these had some effect on the HR practises being followed in our company, and we’ve learnt some lessons which will be very helpful when we recover this this recession.

 

Business continuity

 

As far as business continuity was concerned, we had to ensure that we continued to stay in business – profitably or atleast break even. We had to take a hit on margins with some clients to make sure that they continue with us without migrating to other service providers.

 

The main challenge here was that other service providers also were under-cutting just to stay in business.  Even the bigger players were into under-cutting business.

 

We had to take a serious re-look at our expansion plans. We decided to postpone some plans which we hope to bring to life again next year.  We had to focus on sustaining the current operations first and then move forward when the time was ripe.

 

 

Client Relationship

 

Client relationship threw up some interesting challenges.  Our clients were facing the brunt of recession and were reducing IT spending to a large extent.  We had to empathize with them and we had to voluntarily take some cuts in margins.  Some clients were more demanding.  We had to accommodate their concerns because we foresaw a much better and profitable relationship once the recession was over.  We saw the reductions as a business development investment.

 

Employee Relationship

 

During recession, the bad news seem to spread like an epidemic.  The employees were hearing about their friends being retrenched; companies closing down; bench strength being reduced.  The challenge here is that the employees tend to generalize these news items and apply to the companies that they work in.  Ofcourse, their concerns are justified because nobody wants to face the barrel of retrenchment.  In my mind, managing employee relationship was the most challenging in the days of recession.

 

We strongly believe that the employees that we take care of during the times of difficulties will take care of the company in the long run.  Of course, the cost pressure did force us to lay-off some employees.  But, we made sure that the employees who were let go were the ones who were lower in the performance ladder.

 

Our management team was very clear about one thing – to keep the employees INFORMED.  Even it if it was bad news for them we wanted to share with them because we did not think about giving them surprises.  Whatever it was, we wanted to keep the employees in the loop and we did see that the employees appreciated the effort to keep them in the loop.

 

 

Financial Management

 

This was one important lesson that we learnt during the recession.  Having great HR practises will come to naught if we don’t have the money to pay them.  The recession threw up cash-flow issues because clients wanted longer credit periods, there were payments that were written off. Our financial management had to be spot on in order to ensure that available funds were used very diligently.  We always knew we can make more when times were better.  We had to be prudent while spending money on our employees.  We had to minimize the fringe benefits like free food, frequent parties… all those which are great motivators when the times were good.  We did communicate to the employees that these practises will come back once the time was better.  We are happy that our employees pro-actively reduced some of these expenses, which showed the effectiveness of our open-communication policy.

Conclusion

 

Overall, there are huge lessons to be learnt from this recession which will hold good for all recessions to follow. HR will certainly lead the way to get a headstart once we start recovering from recession, not just for this recession but for the ones to follow.