HR in the Downturn: Lessons from History Emeritus Professor Shaun Tyson March 2009 SM
The current recession has put a sharp emphasis on people and people management. Now this has happened before and we have had a recession in almost every decade since the Second World War, so to give an historical perspective and to draw some lessons from the past that we can draw into the future, I am joined today by Professor Shaun Tyson. Now Shaun you have commentated on, and been part of the experience of recessionary processes and how HR has responded to that over quite a number of years now. ST Indeed, recession is no new thing is it? It is a part of our capitalist system that every now and again we have these massive upheavals – what Schumpeter described as these massive waves of change and what he called waves of creative destruction. We have certainly seen the destruction in the last few months and years. People obviously are harking back to the 1929 crash and to the recession of the 1930s and there are some similarities because clearly what has happened is that we have a recession led by the destruction really of our financial system and not just in the UK – which is the other feature of this recession, but around the world. A global recession. So I think although we look back at different recessions, each one has its own particular characteristics and the lessons that you learn are very much around the people management side from each of them, but one shouldn’t forget that they had different causes and have had very often different effects. SM Yes, I think that is a useful reminder to set it in context. What struck me recently, I saw on the television that 800 workers were called into a room and sacked and I thought immediately haven’t we learnt anything over these last decades? ST Now I think something seems to have happened in this particular recession, as I indicated earlier this is not really a recession which is being led by a slow decline of industry or by a need to improve efficiency. It is led by a collapse in the financial sector and I think that has created a suddenness in the way that organisations are reacting because they are suddenly realising that they don’t have the amount of credit that they had. So suddenly you can’t carry on as a business. Therefore I think there has been an element of that coming into it. But I also believe that managers, maybe underneath, have reverted back in Professor Shaun Tyson some cases to a more theory x view of employees and have tended not to consult, not always to go through process. SM So do you think this whole area of consultation, which was trumpeted as being the kind of thing that every manager should do, was skin deep? ST Well I think some elements had been blown away. This is Schumpeter again – the idea of waves of creative destruction. It swept across the globe and there has been no time, there has been no opportunity to do anything about it. Lehman Brothers disappeared in a few days – a company which had existed for many, many years, decades. It seemed a great pillar of the establishment in the United States. So I think there has been this kind of unusual situation. Having said that, I also think that managers have behaved very often in a crass way in not seeing the possibilities for reducing staff numbers more gradually, involving trade unions. SM One of the areas that we thought we had learnt the lessons on, really from the 1970s onwards, was the importance of communication and we started to get things like briefing groups and so on and company newspapers and regular updates on a company position. I guess in a sense that some of that has tailed off too? ST Yes. I don’t know why because we have spent, as you indicated, an enormous amount of time over the last ten years emphasising the need to involve employees rather than just have a one way communication, but actually to involve them in decision making. I think, once again, maybe the scale of the change, the changes that are being forced through in many cases, are being forced through from the board level, not from middle management and they are happening with a degree of urgency and speed that makes it difficult for some of those processes to happen. I think we haven’t always grasped the scale of the change: that’s one point. The second point is that I think managers don’t naturally communicate in these situations. I think there is an element of, as I said earlier, a sort of theory x approach. They suddenly feel the need for action rather than for discussion. Mistakenly I believe, because that is really only satisfying that psychological need they have to be doing something in the face of apparent problems and threats to the company, whereas they should perhaps do more considering about what they can do with the people and how they can help them. I suppose the third element is in a financial crisis the possibility of doing anything which costs: more is less – and time of course is a cost. So you can’t spend time doing things if you don’t have the money to spend. So I think that is part of it – those are some of the reasons. And I think the other point is the one you made yourself, that there has been some forgetting here. That people have not remembered the lessons of the Page 2
Professor Shaun Tyson previous recessions; they have not remembered the lessons really of good management. This may seem the best thing for them to do at the time, but of course there will come a moment – perhaps not so far ahead, we hope – when they will be recruiting again. And in that situation if they have not gone through any proper processes to create redundancies then the local labour market will remember and they will find it more difficult to find and keep good people. So there is a long term effect of bad management in the local community. SM For years you have examined and had some prescriptions for the role of HR managers and how important they are in the whole business process. I am getting a sense that HR are getting sidelined here? ST Yes. I think they could be. I think that where they can make a difference is first of all in their planning processes. Some of these problems that we see are because there has been no proper planning and nobody seems to know where the money is coming from or how to budget or how to organise themselves. I think that poor quality management in itself will lead to redundancies and problems. So HR has a role to create high quality management and also to create processes which are transparent where everybody understands what is happening so communication doesn’t become something unusual that you have to do because there is a redundancy, it is something that you would do naturally. And there are good companies that do that. I think the second thing that HR people have been doing is to try to find ways to ameliorate the effects of a downturn by, for example, being imaginative with short term working, two months off, that kind of thing, two month stopping of production so people could come back and get into the marketplace again. There is a limit to what anybody can do. You could really accuse the marketing people, for example, of not doing enough. It’s very difficult to create marketing strategies in an environment where nobody wants to buy the product. SM Shaun, I am very grateful for a good perspective on this and picking out some important issues at a time when things seem so chaotic, the people aspects are so crucial for the future. Thank you. Page 3