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The Ultimate Test For HR People
Tanuj Kapilashrami (Head-HR, HSBC India) argues the case for HR managers to provide intangible benefits to employees that compare with increases in salaries
Economic downturns put HR strategies to their ultimate test. Do employees constitute an investment to be managed or a cost to be reduced? Traditionally, the way of dealing with reduction in profits was to shrink employee costs as a means of maintaining/ increasing earnings. Given the scarcity of talent and the high attrition levels we have experienced in the recent past, measures focused on cutting people costs to match revenue losses may no longer be the best ones.

Over the past 60 years, economic downturns have lasted, on average, from 15 to 18 months. This means that there is a risk in making sweeping organisational changes, like layoffs, pay cuts, etc., that proceed from a short-term orientation. The outset of economic turbulence is accompanied by rising employee demotivation, and anxiety about future pay levels and job security, and all these issues need to be managed.

Given that the long-term potential of the Indian economy is still very positive, companies need to think about managing their HR programmes with a balance between the short-term and the long-term, so that they are equipped to meet their objectives in 2009 and beyond. Some factors to consider are detailed below.

Flexible staffing plans: Business plans change frequently during tough market situations, and HR plans, on account of staffing, deployment, offshoring and redundancy management, need to be robust and flexible to ensure cost optimisation and adequate returns.

Rewarding critical talent: More than ever, organisations have to continue identifying and acknowledging deserving employees. HR and business managers have to determine those employees that contribute significantly more than others. Cost-cutting has to be done in a manner that closely reviews and ranks high performers, so that critical talent across the enterprise can be identified and retained.

Staff benefits: This is also a good time for companies to bring in employment benefits and flexible work arrangements for staff. Companies need to educate their employees on a ‘total rewards perspective’ that involves considering base pay, variable pay, employment benefits and work-life balance together.

Effective talent management: Amidst a crunch in employee compensation increases, an effective talent management strategy must be built to retain and reward employees appropriately. In times of turbulence, HR and business managers have to identify their critical employees and draw succession plans, if they do not already exist.

Budget cuts (actual or anticipated) may cause good employees to look for better opportunities. Companies need to give them reasons to stay by creating advancement opportunities. If promotions or raises are not possible, high performers need to be given chances to make lateral moves or take on struggling departments.

Organisations need to keep the critical talent pool growing - not necessarily through salaries, but through experience, responsibility and other intangibles. Critical employees need to be shown plans that go further than the current turbulent times, as this will motivate them to stay with the company.

Employee productivity: The pressures of lower budgets need to be partly offset by increasing staff productivity and performance targets. Effective evaluations must start with the establishment of new benchmarks that raise the performance bar. Employees need to be aware that performance expectations for a particular level of reward will tend to be higher than those during times of economic and organisational prosperity.

Managing workforce costs while retaining talent is more critical than ever for making it through these difficult times. Providing career development opportunities and recognition for staff achievements will prove to be effective methods of employee motivation and retention. Costs will have to be managed wisely and strategically to ensure that companies do not lose the talent pool that has been built over the years.

Companies need to look at cost-effective and customised benefits for employees. Tailored benefits, like insurance for dependent parents or the flexibility to work from home, can be worth as much as a pay raise. The cost of providing these benefits is much lower than the perceived value by employees, and can partly take care of lesser ‘salary increases’ for a particular year.

Such benefits are practical as they are less costly than comparable pay increases, and they give a unique proposition to the workforce. Employees should be encouraged to think that they are worthy of best-in-class perks. This is an easy way to maximise the companies’ returns on such costs without increasing across-the-board expenses.
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