This year does not look like it's going to be a good one. I don't hold out much hope that 2.5% off the price of goods or services will transform the economic environment over the next 12 months; indeed nor probably does the Government. Until liquidity increases, personal debt levels are lowered and people feel they have extra resources available, we face a miserable time.
So this year brings little in the way of cheer and much in the way of challenge. At the heart of the dilemmas for the vast majority of European management in business, public and voluntary organisations will be people: regrettably not what they can do, but what they cost and how to reduce it.
This can only mean one thing for hundreds of thousands of people: an uncertain future. Faced with uncertainty people in organisations are prone to believe the worst and are more willing than at other times to listen to the naysayers and merchants of doom. While times are tough for all of us, for many organisations this will not mean lay-offs and closures: it will mean reduced budgets, recruitment freezes and vacancies not being filled.
It goes without saying HR will bear the brunt of this. Now more than ever those in the function and those responsible for leading it must look hard at what they do and how they do it. By their actions over the next 12-18 months will they be judged: and I fear that, if found wanting, they may sow the seeds of their own destruction.
The economic downturn we are now in will be longer than any experienced by the majority of people in work today; and while we feel uncertain about the future we have to accept that, more than any time in recent history, now is the time to see major changes in HR orthodoxies and practice. The real opportunities for change lie in three areas: compensation and reward; performance management; and organisation and people development.
We have to develop frameworks for reward and recognition that end the practice of big annual bonuses. HR must tie incentives into a much longer timeframe, hold down the spiralling pay inflation at the senior ends of organisations and put in place some core philosophies of pay and reward that encompass the maximum multiple that a top executive can earn over that of the average employee. In addition, in the public sector the pension issue has to be grasped and resolved if it isn't to end up bankrupting the country.
In performance management we have to move away from the approach that imposes systems on managers as a reaction to their non-compliance. Instead we need good management principles and to drive the implementation of these principles. Complex form filling is a coercive approach to a cultural problem. Simple processes encourage commitment. There needs to be serious consequences for cultural non-compliance - and that doesn't mean not getting a bonus.
In organisation and people development we have to move from a training approach to one that supports lifelong learning and development. We have to build real understanding of organisation and individual behaviour in those who want to be effective HR business partners. That means time in the line, time in the business or public service and an intellectual and emotional intelligence level that meets the demands of the role.
Finally, it's time the function made 2009 the year that it works hard to attract the very best people into HR jobs. The quality in the function overall is highly variable, especially in the change, OD and development areas that will be so critical in the years to come.
The HR function needs to take the opportunity presented by the downturn to upgrade its thinking, its people and its reputation. If not, then it will continue the slow and painful slide that unfortunately it has already embarked upon today.
Chris Bones, dean of Henley Business School chris.bones@haymarket.com
