Leveraging HR in Tough Economic Times

There is no question that tough economic times bring challenges to businesses. But they also present an opportunity for organizations to strengthen their footing, as well as position themselves to make the most of the inevitable economic rebound. Resilient companies—those that can manage for performance, as well as adapt during a downturn—are the ones that will both survive and hit the ground running when the recovery happens.

In order to achieve this resiliency, businesses require an HR organization that has shifted its focus from a traditional approach that deals for the most part with the processes, policies, programs and compliance centred around their people. According to Dave MacKay, President of Ceridian Canada, "it's not enough to merely do the right HR activities—that's just the price of admission". Instead, businesses must leverage their HR organization to becoming a strategic catalyst for the rest of the company.

Leveraging HR

The transformation occurs when HR goals and strategy are aligned with the organization's overall business goals and strategy. The HR organization's focus shifts to driving organizational change and aligning the workforce with the strategic direction of the company. HR managers work with general management to bring about business changes, whether new products, new go-to-market strategies, or new approaches to meeting customer needs.

By the same token, during tough economic times, the HR organization must have a broad understanding of the overall business and strategies, and HR leadership must be aligned with the overall leadership of the organization. It must be strongly aligned with the company's IT, finance, marketing, etc. in a way that goes beyond the traditional HR function.

There are five key drivers to ensure that your HR organization has a strategic impact in 2009:

• Performance Culture
• Communication
• Trust
• Engagement
• Investing in People

Performance Culture

Part of the impact of HR lies in developing a strong performance culture. This underlying culture enables success and is built on an organizational structure that encompasses job design, organization design, and team design.

Of course, this includes traditional elements such as recognition programs and compensation systems. But, a true performance culture goes further and leverages many less tangible factors. For example, leading organizations draw on the talent and diversity of the entire workforce—not just diversity in the traditional sense of employment equity, but in a wider sense that includes different experiences, knowledge bases, and professional disciplines.

Communication

Communication is a critical factor in maintaining performance, as well as a resilient, stress-resistant workforce. Especially in the current economic climate, effective communication is open, honest, consistent and two-way. It is key to channeling people in constructive directions and goes a long way toward maintaining engagement and energizing your workforce.

Honest communication—even if the message isn't completely positive—removes the stress of uncertainty. Generally speaking, employees know how their company is faring, and they will sense when communications are anything less than accurate. This only adds to the danger of eroded trust and employee engagement.

Communication should also be consistent in both message and timing—and whenever possible, face-to-face. Regularly scheduled meetings and townhalls go a long way toward providing people with the information and motivation they need, in a regular, personal and reassuring form.

Not only that, but such meetings underline the importance of maintaining two-way communication. Especially when financial conditions put the entire organization under more intense pressure, it ensures that employees feel they are being treated fairly, even in the face of cutbacks. It can also make everyone in the workforce feel they are part of the solution. According to Dave MacKay, Ceridian experienced high levels of participation and buy-in by involving its employees in developing cost-cutting strategies. Not only has this resulted in effective strategies for positively impacting the bottom-line, it has gone a long way toward maintaining employees' trust in the organization.

Trust

According to Stephen Covey, business excellence expert, "The job of a leader is to go first, to extend trust first. Not a blind trust without expectations and accountability, but rather a smart trust with clear expectations and strong accountability built into the process—on both sides."

During stressful times trust is more important than ever. Building and maintaining that trust is a priority for businesses and their HR organizations alike. Without it, disengagement ensues and retention issues arise; employees become understandably nervous, fearful and uncertain. It is trust in their organization, leadership and peers that keeps them resilient.

Typically trust is built through communication, interactions and actions. It is also important for HR leaders to consider two distinct dimensions to trust. One is trust in a person's competence—what they're able to do. The other dimension is trust in a person's intentions and integrity; if they say they're going to do something they will do it because they said they were going to do it.

Engagement

As studies have shown, engagement—the state of mind of employees in an organization—is directly related to a company's performance. A recent one-year Towers Perrin survey of 50 global companies showed that organizations with high employee engagement had a 19% increase in operating income and almost a 28% growth in earnings per share. On the other hand, companies with low levels of engagement experienced a drop in operating income by more than 32% and a decline in earnings per share of over 11%.

In addition, engagement leads to other very important elements critical to corporate success, including attraction and retention of good talent, high staff morale, and productivity.

Clearly, one of the keys to maximizing HR's impact on the bottom line is through engagement. Leading companies achieve high levels of engagement by taking a holistic approach to their strategies and policies—through employee involvement, effective communication, work environment and by nurturing a strong culture of engagement.

Investing in People

Perhaps one of the most significant ways to maximize HR during economic hard times is by strategically continuing to invest in people. There are many ways to do this — through leadership development, learning and development, succession planning, and talent management.

But one of the most important investment strategies is often times overlooked—employee health and wellness. While some companies may look to cut programs in this area, economic downturns are when such initiatives are most needed. Workforces are shrinking, workloads are increasing, and employees are dealing with great uncertainty.

Of course, the human cost to employees and their families is reason enough to maintain this investment. But in addition, organizations should be aware of the cost to the bottom line. For example, while the impact of absenteeism is obvious, the cost of "presenteeism" can be greater; i.e. lost productivity from employees who are at work but are disengaged or not focused.

Also, studies have shown that a majority of workers in large companies felt stressed, and a third feel burnt out or depressed. This represents a significant impact on the bottom line when you consider that general health costs for depressed workers is 70% higher than for non-depressed, and 50% higher for those feeling stressed.

While controlling discretionary spending is important, it shouldn't be done by cutting investments in our high value resource—people. Investing in the talent in your organizations, in the capabilities of those organizations, aligning employees with the business's strategy, is investing in the future.

Leveraging HR for the Future

Today's economic climate is a challenge to both maintain performance and position your organization for success in the future. Transformational HR can meet that challenge by proactively aligning HR strategy with corporate and financial strategy, and by maintaining a resilient organization and workforce. The business that leverages its HR organization as a catalyst for the transformation is the business that will not only weather the storm, but will also thrive when the weather clears.

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