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Strategic HRM in the New Era – Post 2008 Global Meltdown. By Saurabh Dixit. In August 2008 who would have predicted that Wall Street as we knew it for 50 years would simply disappear ?
In August 2008 who would have predicted that Wall Street as we knew it for 50 years would simply disappear ?
The Financial tsunami was a long time in the making and its consequences inevitably will be with us for a long time.
Credit is the oil of the economic engine, and credit ultimately is a creation of confidence.
Leaders must be prepared to make strategic, structural, financial and operational changes – many of them drastic – in a hurry and with information that at best is incomplete.
DuPont CEO Ched Holliday was visiting a major customer in Japan. The CEO of this most respected Japanese Co. told Holiday he was worried about his company’s cash position and had ordered his executives to conserve cash.
When Holiday landed back in US – he summoned six top leaders and asked How bad it is now & how bad it could get ?
DuPont supplies 30% of paint to US Automobile Industry and has 48 hrs j.l.t. cycle – There were no production plans in Auto companies for a month.
DuPont thus called in to action its contingency plan – or Corporate Crisis Plan.
DuPont had a face-to-face meeting where a Manager explained what the crisis was and what the Company needed to do.
Each employee was asked to identify three things he or she could do immediately to help conserve cash and reduce cost.
Its not enough to sit in your office, read reports and issue directives. You need granular understanding of what is happening outside your company, with customers, and in your own operations.
The need is for ‘Ground level Intelligence’.
E.G. – Wal-Mart observed that for first time ever, its sales of baby formula were coinciding with twice – monthly pay periods.
You have to increase your frequency of control.
Time for tough decisions, including choosing which people will stay (the real change agents) and which will go, whose budgets will be cut by how much, and which plants will be shut down and which will survive.
HR will bear the brunt of the transition to crisis management in the early stages because so much of that transition will affect people at every level of the organisation.
Head Count Reduction
You will be judged by how well and how fast the process works and how humanely it is carried out.
Your will be central in helping determine what needs to be done and then executing the decision.
Your integrity, impartiality, and objectivity will be tested. Play no favourites.
In dealing with highly talented individual contributors, you face a dilemma. They are very valuable assets but they don’t have specific budgets supporting them. You will need innovativeness to retain them.
You need to demonstrate your leadership by cutting your own budget by as much as 20%.
In a normal environment, compensation typically is based on one indicator – bottom line results, which usually are stated as operating profit.
In a downturn, managing for cash is the goal and compensation formulas have, at minimum, four principle indicators : cash, operating profit, working capital and customer satisfaction.
Direct compensation and bonus compensation will be foremost in everyone’s mind and they underestimate the cost of benefits. Your focus point is to find efficiencies in benefits.
Succession and Talent Planning
Downturn is a great opportunity to make sure that the right people are in the right jobs.
Don’t keep a person who is no more value for money and don’t make the mistake of elevating someone who hasn’t shown the potential.
Look at the long term and use the buyers market to hunt for and bring in talent who will build your company’s future.
Over the years training has become increasingly important part of HR function but in many cases has lost its value.
Training should provide knowledge and skills that can be put to work immediately.
Training in how to manage in slow growth environment is important. HR needs to create and deliver appropriate materials and methods in areas such as contract negotiations and price setting, with an emphasis on collaboration.
Motivating your own Sr. Executives to become ‘trainers’ using company information, problems and challenges.
Do not underestimate the need to keep up morale during tough times.
A slowing economy will generate a constant drumbeat of depressing coverage by newspapers, television, and blogs.
You need to be sure that employees are getting accurate and timely information about the company’s efforts to survive and thrive in the new environment.