It is over four years since the Lehman Brother’s collapse kicked off the global financial crisis, with its variants including credit crunch, double-dip recession, fiscal cliff and Eurozone crisis. HR’s strategic response to the changed labour market has parallels to how a marketing director might react to a slump in the market for the company’s products.
Faced with declining consumer spend, a major marketing decision is whether to keep the selling price high, and accept a lower volume of sales, or to reduce the price to defend volume of sales and market share. The most urgent task at the beginning of the recession was to reduce costs, including labour costs. Some organisations took the option chosen in previous recessions of making some employees redundant. That is the equivalent of the “defend the margin, but lose market share” option. A distinct trend in this recession is that many companies have opted for spreading the agony wide and thin, and tried to find ways of retaining skills. That might have been by requiring full-time staff to accept part-time contracts to avoid redundancy and freezing the pay of all staff.
Bearing in mind how the power in the recruitment market has swung from jobseekers to employers in this recession, many organisations are finding ways of hiring lower cost labour. The growth of internships, either low-paid or unpaid, is an effect of the continuing recession. “Modern apprenticeships” offer 18 year old entrants an hourly rate that is half of the National Minimum Wage. A distinct “prospects cliff” has emerged between those who entered the labour market before September 2008 and their younger brothers and sisters. With almost a million 16-24 year olds unemployed in the UK, advertising an unpaid internship attracts a big response of over-qualified candidates desperate for work experience.
It is not a straightforward choice to exploit market conditions to obtain cheaper labour. As with a marketing director being mindful of the company’s reputation in the long term, the HR director needs to consider the impact on other stakeholders. The introduction of internships and apprenticeships into a workforce might be seen as a positive contribution in tackling youth unemployment or as exploitation of the young as cheap labour. What decides the issue is how the permanent workforce is being treated. If they feel relatively secure, they are more likely to see it as a positive move. If they are not secure, they will see it as a threat of being replaced by someone cheaper. There are limits to what internal PR can achieve here – you employ intelligent people, and they know when they are being shafted.
In the UK, whilst recorded unemployment is high employment numbers are also high. The headline figure showing high employment levels hide a large element of underemployment. Individuals are employed, but often working fewer hours than they would like to.
John Philpott, director of thejobseconomist consultancy and an expert on unemployment, said that of the 212,000 jobs created in the latest quarter, one in three were mini-jobs of fewer than 15 hours work a week and more than half (54%) provided fewer than 30 hours (The Guardian, 18/10/2012)
In a similar vein, let me give you some good news, and some bad news.
“Britain is heading for a fifth year of falling living standards, with official figures showing a decline in average earnings growth last year from 1.7% to 1.4%.
Unemployment fell and the number of people in work reached a record level in the three months to last November, but employers kept a lid on pay rises.”
They were adjacent paragraphs in the same article - www.guardian.co.uk/business/2013/jan/23/unemployment-rate-fell
This phenomenon is a combination of organisations opting to spread the agony wide and thin, and individuals desperately trying to keep employed, even if underemployed. Ironically, the villain of the story, the finance sector, is taking the other approach – dump some, but still pay big money to the survivors!
Inevitably, coping with the continuing recession has forced many employers to take tough decisions with painful consequences. Using marketing as a model for HR can generate strategies for changing the workforce to meet new and difficult market circumstances. For many HR practitioners, they do not want to initiate changes that might adversely affect the current workforce. It is easier to say that the bad news was caused by “a line management decision” or “a senior management decision” rather than an idea generated in HR. Despite all the talk of HR being strategic and deserving a seat on the Board, that cannot be achieved by shrinking away from the business decision. If you want to be strategic, take the lead in the hard stuff, not just the easy stuff.
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