Human capital management in times of risk


In times of crisis it is important to preserve employees and identify those that can help strengthen the organisation’s capabilities in the long run

Today’s disruptive business, economic and organisational world is filled with various types of crises that require managers to solve them creatively. If avoided or dealt with incorrectly they will likely accelerate and result in severe organisational damage.

A common immediate action taken by administrators in times of crisis is initiating a 'swinging-axe' employee cutback policy. This seemingly-easy solution, based on the bottom line, is typical to the perception that organisations must execute immediate short-term projects in order to move on to more pressing matters of achieving business goals. However, this ad-hoc solution damages the organisation in both the short and long term. It sours the atmosphere, doesn’t necessarily solve the crisis and sometimes even expedites future crises.

In tough times of resource shortage elevating employee commitment is crucial. It can be achieved by a transparent communication policy that raises employee awareness of the company’s objectives and solutions to deal with the crisis. This includes clear messages, maintaining positive personal connections with employees, and strengthening their sense of belonging by developing creative solutions for social cohesion. These actions do not entail significant costs, if any, while their value to the organisation is immense.

Personal development should take place not only in times of prosperity but rather when an organisation aims to resolve a crisis. Transferring employees from departments that require cost reduction to either open positions or backed-up departments, changing work-hours division and reorganising tasks can replace layoffs in hard times. Once the crisis passes this will benefit organisations with priceless employee gratitude, loyalty and engagement.

Hay Group’s longitudinal study conducted among industrial enterprises in the US examined their conduct during the global recession. Findings show that the most successful organisations were those that viewed investment in human capital as a guaranteed return. These companies executed minimum termination (10% versus 23% in less-desirable companies) while continuing to recruit talented people. Accordingly they branded themselves as desirable employers that despite the crisis were not solely focused on sales. The study’s long-term follow-up showed that the most desirable organisations were those that considered preservation of human capital as the most important component, especially in times of crisis. By investing in professional training and organisational restructuring they delivered an important message to their employees: we care about both your future and the future of the company.

For executives, organisational crises are a balance struggle. We must invest time and energy to fully understand the crisis and address it correctly, while adapting a ‘business-as-usual’ approach to avoid sweeping the entire organisation into turbulent waters of fear and uncertainty.

Yet once we keep the axe from swinging automatically during crises, and we harness our human capital to assist us, our organisation's chances to successfully recover from the crisis rise significantly. Management theorist Simon Sinek gave a concrete example of this. He presented a company in crisis whose CEO replaced the dismissal policy by offering employees a four-week unpaid vacation to take on their preferred time. This company emerged from the crisis successfully.

Former General Electric CEO Jack Welch argued that although the uniqueness of each crisis makes it difficult to formulate guidelines for overcoming them, they present us with learning, growth and organisational development opportunities. Accordingly, when a company deals well with a crisis its coping methods form the basis for values and organisational mechanisms better-suited for dealing with future crises and unexpected changes.

To ensure organisational productivity during and after times of crisis, relevant corporate infrastructure and processes should be reinforced and uninterrupted at all times: prosperity, crisis, and transition as one. Challenging as they may be we should remember that crises are temporary and eventually end. As Scarlett O’Hara perfectly put it in Gone with the Wind: “After all, tomorrow is another day”.

Ravit Oren is an organisational leadership expert, an academic lecturer and researcher, a corporate HR executive, a public representative of the Israeli Labor Court and a board member in public and governmental companies