HR which maintains trust with employees more likely to succeed in pandemic recession

Companies with comprehensive human resource management (HRM) practices and union relationships are more likely to survive a deep recession, say researchers.

Through analysis of the British Workplace Employment Relations Survey in 2004 and 2011, researchers Hossam Zeitoun and Paolo Pamini discovered the factors that helped companies survive the last recession caused by the financial crisis of 2008.

“Workplace performance depends heavily on invisible, unwritten contracts managers have with staff,” said Zeitoun, the paper’s lead author.

He added: “If the trust between management and workers breaks down, there is often a ‘survivor’s syndrome’ as the remaining workforce feel demotivated or even guilty that they still have a job. A stronger employee voice helps to make sure things are done fairly, with a proper procedure, so the remaining workers are motivated.”

Those companies that upheld implicit agreements with their employees throughout the financial crisis, for example continuing to reward loyalty with job security and pay rises, were the companies who fared the best by maintaining the trust of their employees.

Maintaining trust went hand-in-hand with higher investment in HRM and strong union relationships, which helped to protect employees’ interests. In return, organisations earn their employees’ commitment and productivity.

As an example of the business benefits gained through the successful building of trust Ruth Thomas, co-founder and senior consultant at Curo Compensation, told HR magazine how her company was able to request pay cuts from its employees during the pandemic.

She said: “We spent time explaining why we had to make changes that impacted our employees. A great example of this was the number of employees who willingly accepted pay cuts – something that was unthinkable before, but people understood this was required for business survival.”

For Chelsea Pyrzenski, chief human resources officer at HireRight, building trust is done by employers “embracing best practices,” such as open communication, and providing training specific to the new challenges staff are facing.

Speaking to HR magazine, she said: “In any climate, maintaining trust is a key component of ensuring employee engagement. During a crisis like COVID-19, this takes on an added dimension, as employees seek reassurance that their wellbeing won’t be put at risk.

“Furthering trust in such times starts with having a people-centric philosophy – and communicating that transparently.”

Tom Cassidy, head of executive coaching at Working Voices, agreed that the unspoken contract of trust between an organisation and its employees is vital.

He said: “The research rightly states that recessions put unbelievable pressure on decision making in organisations - between profitability and integrity, between survival and prosperity.

“If an HR team, and thereby an organisation, can maintain that trust in its people, to do the right thing when times are hard, to make the tough choices because it is the right choice by its people then that faith is returned many times over by its employees.”

Though HRM practices may be expensive in the short-term, the researchers found that the investment pays off after a deep recession. And, though the investment in HRM is better made in a stable economy, Zeitoun said that it still isn’t too late to do so considering the projected impact of the pandemic.

Cassidy added: “In this era, leadership and line-manager capability is needing investment to square the commitment shown by employees. And trust is the way that investment is made. Profitability will return, but only to those companies that can extend their trust to include all employees and through heartfelt generosity, not hollowing-out for efficiency.”

Zeitoun and Pamini’s paper A promise made is a promise kept: Union voice, HRM practices, implicit contracts and workplace performance in times of crisis, was published July 2020 in the journal of Human Resource Management.