Human Resource Management in the Recession
Bill Roche
Professor 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%
 unemployment (2007-2010): 4.6%
97.25% and may rise to c 120%
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.
How is the Recession Affecting Human Resource
Management?
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 highcommitment HR transformation
3. The recession as contributor to eclectic change in HR practice
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
‘soft’ HR practices
 curbs on pay & bonuses
 communications
 headcount reductions
 engagement & involvement
 cuts in working time
 training, talent management & staff
--redeployment
 curbs on recruitment & promotion
 larger pay cuts for higher-paid
 productivity measures
 in-sourcing work
direct cost
reduction
maintain motivation
& commitment
Firms’ HR Response Programmes
• 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
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
%
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
business role of HR has been strengthened
• Influence of HR has increased significantly
• ‘Business partners and working the pumps’
59
(64% firms restructured)
Relations with Trade Unions
• The majority of firms appear to consider the
..participation and contribution of unions during the
..recession in a fairly positive way
• 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
• 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
‘ Concession Bargaining’ Dominates the Picture
• 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.
Evidence of Transformation of Work and Employment?
‘new employment deal’
/market-driven model
?
prevailing models
of work and
employment
?
high-commitment
model
• 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
% Firms
cuts in pay for all staff
40
cuts in pay for some staff
16
pay frozen for all staff
60
pay frozen for some staff
11
lower pay for new staff
23
compulsory redundancies
48
voluntary redundancies
30
changed pension arrangements
35
reduced overtime
63
Reduced part-time/contract working
21
performance managed more rigorously
47
tightened discipline, time-keeping, attendance 48
% Employees at work
19
16
69
14
17
37
39
40
60
26
50
40
Headline Findings: Incidence of ‘Soft’ HR Practices
staff trained for new roles in business
% Firms
40
% Employees at work
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
5
7
introduced in-sourcing
# Proportion of firms ‘agreeing’ or ‘strongly agreeing with item
Combinations of ‘Hard’ HR Practices
Table 3.10: Combined use of HR response measures
Firms Adopting
General HR
Retrenchment
Programmes
Firms
Adopting Pay FreezeFocused Retrenchment
Programmes
Predicted % of firms
Cluster Size
50.2
49.8
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
HR Measures Adopted:
(Clusters identified through latent class modeling of unweighted data)
Combinations of ‘Hard’ and ‘Soft’ HR Practices
Table 3.10: Combined use of HR response measures
Combined ‘Hard’ and
‘Soft’ Response
Programmes
‘Hard’ Response
Programmes Allied to
Communications
Predicted % of firms
73.3
26.7
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
Cluster Size
HR Measures Adopted:
(Clusters identified through latent class modeling of unweighted data)