Rolling with the recession: how HR can succeed (part two)

The twists and turns of a recession can be unpredictable, yet with the right preparation it’s another chance for HR to show its colours.

This is part two of an article which appears in the September/October 2022 print issue. Click here for part one. 

Don’t fear new things

In a crisis, there is the temptation for people to return to what they know best. Yet relying too much on tried and tested methods, simply because it’s how things have always been done, not only risks pigeonholing HR as a transactional role, but may not be the best for organisations and their people.

One example is how organisations measure engagement. Matt Phelan, co-founder and co-CEO of The Happiness Index, says measuring just engagement, for example through Gallup’s 12 questions, only gives HR leaders one piece of the puzzle.

“Engagement of employees didn’t drop in Covid,” he says. “What that says is employees are engaged. What did happen is happiness massively dropped.

“So, if you go back to just your engagement, you’re effectively turning a blind eye to other things you know are important.”

Bonus pay could also benefit from more creativity. When offering cash payments to those hardest hit by rising costs Ian Milton, senior director or work and reward at insurance firm WTW, advises employers to introduce a rainy-day fund to ensure they can maintain bonus payments for the duration of a recession if they need to.

“A rainy-day fund should be thought of as a contingency or exceptions fund, which is simply a deliberate action to put aside up to 3% of total HR spend in a given year to cover such situations,” he says.

“The logic is to plan upfront for this expenditure rather than having to look retrospectively for such budget, where this may be too late or simply not possible to re-allocate budgets.

“This would also be supported by a review of all compensation schemes, updating where necessary to ensure outcomes are in line with the organisation’s needs while providing meaningful rewards.”

As every new challenge is different to the last, it’s important to adapt accordingly.

For McMinn, the answer is offering leaders other, long-term options, when it comes to the crunch.

“Rather than just jumping to the conclusion ‘We have to make redundancies,’ it’s about thinking creatively,” she says. “Can we do things differently? Is there more flexibility that that people might actually enjoy?”


Turning HR on its head

Many have said the pandemic marked a moment where senior leadership finally understood the value of HR, as the profession was thrust into migrating jobs to people's homes, making workplaces safe for operation, figuring out furlough and, in some cases, making cuts.

“HR is no longer a service delivery function,” argues analyst Josh Bersin. “It is a function of design, consulting, advising, and integrating all the different people practices into one operating system.

“Now HR is really more like a big consulting group and so all of the different specialists within HR have to talk to each other, work together and be more consultative.”

This is certainly the case for flag-bearing examples of HR. In KPMG’s 2021 HR Pathfinder report, it was the strategic aspects of the people profession that were most valued by leading businesses like Microsoft, Aviva and Santander. However, Roche is sceptical that recessions have such a widespread transformational effect on HR.

“The notion that recessions are kind of catalysts to any kind of transformation of models of HR is a bit of a chimera,” he says. “Continuity tends to trump transformation.”

Roche is co-author of Recession at Work: HRM in the Irish Crisis and several other titles which look at the impact the Great Recession of 2008 had on HR.

Though his research focuses on Ireland, which suffered more severely than the UK after 2008, he says the impact was similar.

His survey of 400 HR managers and leaders at the time found: “HR functions became a great deal leaner in the sense that they too experienced cuts in the number of people working in HR and they had fewer resources to spend on consulting and insourcing things like training.”

With fewer resources and smaller budgets, HR became much more influential.

“They genuinely became business partners in a very profound sense,” he says. “The seriousness of the economic crash and the generalised nature of retrenchment programmes put them in a really pivotal business – they were often central literally to survival.”

The drawback of this new clout, however, was that it was gained by what Roche describes as “working the pumps to bail out water from sinking ships”.

“They didn’t become partners in the sense that they had suddenly become grand strategists of the medium- or long-term future... but because they saw opportunities to use the recession to reposition businesses and reposition HR.”

Visionary, future-oriented HR was forced out, Roche says, potentially due to the pressures of recession survival. He argues the same is true of the influence HR found during the height of Covid.

“When I was teaching my MSc students in HR and the effects of the pandemic […] I had a lecture slide: ‘Working the pumps once again’,” he says.

“Again [there were] no major indications across the board of any kind of transformative influence coming through that.”


Strong in a crisis

Still, times of turbulence, like a recession or a pandemic, seem to bring out the best in HR.

Bersin says: “The people in HR are some of the most inspired and hardworking people in any part of a business, so I think HR, to some degree, has been energised by all this disruption because it gets a chance to do some really important things in its companies.”

This year Unilever CEO Alan Jope stated that businesses, especially in consumer goods, need to adjust to “crisis being more or less the new normal”.

The VUCA (volatility, uncertainty, complexity and ambiguity) leadership rhetoric which has developed over the past few decades also supports this theory.

If change is constant then, would a recession be different from any other day in the office for HR?

Garrett argues it is just another thing for the profession to take in its stride. “HR is always challenged,” she says.

“Two weeks ago, we were worried about retaining people and two weeks later, we’re now talking about a recession.”

Similarly, borrowing an ageold Greek philosophy, McMinn says: “Uncertainty is probably the only certainty we have.”

By accepting uncertainty as the standard, McMinn argues HR can continue to build on ground made during the pandemic: “I don’t see that as pushing HR back into kind of a transactional role. I think it’s a massive opportunity for the HR profession to say: ‘Look, this is what we’ve been talking about for ages.’

“Rather than seeing uncertainty as something that we are always going to have to deal with, HR is actually – by playing a more strategic role – able to help organisations through it.”

It is impossible to predict the depth of the challenges HR, its organisations and its people will face in another recession. The degree to which a new crisis may transform roles will depend too on leaders’ and employees’ perceptions of the HR team.

It stands to be another crisis, but it won’t be the last. And it seems the profession’s greatest strength will be how it will adapt.

“The thing for HR people is probably less about dealing with whatever is in front of you,” says Garrett.

“It’s understanding that you’ve always got levers. You’ve always got something in your kit bag and it’s understanding which of those levers you have to pull given the circumstances that you’re in.”


This is part two of an article which appears in the September/October 2022 print issue. Click here for part one. 

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