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A comprehensive 2 x 2 x 2 on HR and the recession

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Organizing ideas about HR and the recession

Many people are landing on this blog looking for information about HR and the recession.  I suspect, though without any evidence, that many people seeking this information may be students, or people deputed to write a position paper on what HR should be doing.

This is intended to help you out. It is a summary, though a long summary, of earlier posts. I’ve also framed it with ideas you will find in classical text books on HR. I am writing mindfully that you may want to use the information for a presentation.

Any one else reading might like to check through to see what I have forgotten. You might also be interested in my inclusion of positive HR that is not yet in most textbooks. It is a long post though, and you may want to bookmark it for later.


HR strategy, in business or in other organizations, be they public or private, follows a disciplined logic. Before we decide what to pursue in the HR arena, we ask 4 questions.

  1. What are macro-environmental factors that affect everyone – us , our customers and our competitors?
  2. What business are we in, and what are the institutional factors that affect all firms in our line of work?
  3. What are the micro-environmental factors that set us apart from our competitors?
  4. What are the laws and regulations specific to the jurisdiction where we will be hiring people?

A recession falls mainly under the first question. Recessions may also affect the other three questions as well. For this post, though, we will look only at the way a contraction across the entire economy changes the general pattern of HR, no matter what business we are in.

HR managers struggle, typically, to assert itself within the management team. To clarify our role, initially to ourselves, we typically look at our contribution along two dimensions: hard to soft, and strategic to administrative. ‘Hard’ HR looks at issues like productivity and legal contracts. ‘Soft’ HR looks at emotions, morale, loyalty and engagement. Strategic HR asks the big questions about the type of HR that we need – much as we are asking in this post. Administrative HR is the HR we all see – the forms, the interviews, the communications.

We need to be good in all FOUR areas, and all four areas change in emphasis when the economy slows down. I’ll summarise those changes in a moment.

It being 2009, we also need to add a third dimension: positive HR to ‘gap’ HR. Gap HR is the HR that is commonly described in textbooks, which sadly are always somewhat out-of-date. In gap HR, someone – somewhere – has decided what is good, and the rest of us are required to live up to that ideal. It is akin to a jigsaw puzzle. The picture is known, and we are the scrambled pieces to be put together following a preordained pattern. Positive HR is generative. We may have a picture in mind, but we do not believe it is the only picture. Indeed, we define a good day as the day that we discover a better picture than the one we had previously imagined. This is akin to leggo. We have building blocks which we use to test out possibilities.

With three dimensions, each crudely broken into two, we have 2x2x2 or 8 types of HR, that we can think about and ask systematically, how they change when we move at a national economic level from positive to negative growth.

And then we can ask how we can integrate our observations into a general approach to HR in a recessive economy.

1 Hard, strategic, ‘gap’ HR

A typical task of hard, strategic, ‘gap’ HR is scenario planning. Along with other people who are responsible for the future of the organization, we imagine how the economy might change and we anticipate how we, our competitors and our customers will react to each scenario as it unfolds.

Small business owners do this too. They follow discussions about the economy and they will typically look at a worst case, best case and a likely scenario. Yesterday, a business owner told me that he was working on the economy contracting until around September 2009, and then beginning to grow very slowly.

From this thinking, we are able to make ‘guess estimates’ of sales, and work backwards to the number of people who are needed by the organization and the skills they should have.

2 Hard, administrative, ‘gap’ HR

At the administrative level, it is likely that we will bring some contracts with employees to and end using redundancy provisions – so we pull those regulations off the shelf and dust them off. We are also likely to be pulling out the early retirement rules. We may be recruiting less – so we will try to maintain our relationships with the colleges and schools in the area, while tactfully indicating we will be hiring fewer people. We will also be looking out for government-backed schemes to train people and to subsidize employment in one way or another.

3 Soft, strategic, ‘gap’ HR

At the other end of the hard-soft continuum, we imagine what our organizations will look like, and the way members will interact with each other in five years’ time. We discuss, for example whether Gen Y are different from Gen X and baby boomers.

Planning the way we interact is the most likely area of HR to be sacrificed in difficult times.  Letting this area go is the biggest mistake we can make.  Managers will react under pressure, in the way we all do, by over-emphasizing their fears, and putting too much faith in their own judgement. We will hear a lot of talk that dismisses the views of other people.

When we hear this talk, it is the sign of an organization in deep trouble. It is in trouble financially. It lacks depth in its leadership. It lacks loyalty to its employees and other stakeholders.

HR leadership needs to be there, to turn around this emotional climate.  We should not let this go.  This is our main contribution during a recession.

4 Soft, administrative, ‘gap’ HR

On the soft side ,at the administrative level, much training, whether it is directed at productivity, or soft interactional skills, is also sacrificed, while more money is spent on stress-relief (usually for senior people) and counselling for people facing redundancy.

It is important to help people cope with the emotional distress of extremely unpleasant changes to their lifestyles, but regrettably in a ‘gap’ system, HR usually steps in after the distress has occurred.  We would be better advised to step in earlier.

5 Hard, strategic, positive HR

Turning now to postive HR, we should note at the outset, that positive management styles are not necessarily cheerful.  To be cheerful all the time is like expecting a 12 month summer, and a harvest every week. Positive management styles accept that life is changing, and that we need to change our ways consistently with changes in the real world. Hard, strategic positive HR attempts to take us, from worlds we know, into worlds we don’t know.

It is an obvious fact that we don’t enjoy recessions because we are losing a world we like. As in winter, we see little sun, and as in winter, if we don’t know how to dress warmly and to cook comfort foods, we may have a difficult time.

This recession that we are encountering now, though, is more like an earthquake or tsunami. We aren’t just dealing with a season that we encounter every year. We are dealing with a large mess that arrived abruptly. Structures, we have formerly depended upon, have been destroyed. What else can we do but rebuild, and rebuild better structures, that will last us for the next 50 to 100 years?

Just as in a natural emergency, first we attend to safety. We count heads and we count our supplies and we set about giving everyone the basics : water, food, shelter, medicine. Then without a break in our stride, we depute appropriate people to work on the bigger issues. We set about searching for missing people. We put people in groups to identify priorities. And we put people to work.

BTW, it is standard practice to fly in psychologists to emergency areas to ‘debrief’ or help people cope with the immediate shock. The psychologists are rotated, and are debriefed themselves as they are pulled back ‘behind the lines’. Emotion is contagious, and emotional sanitation, sorry to call it that but to make the point, is as important as clean water and ways to handle human effluent.

In short, we deal with the situation in which we find ourselves in. There is no going back, and the only forward is together, respecting our distress, and making use of all our resources, within which we will find our answers.

The HR leader understands this process and brings it into the practical work we are doing on a day-to-day basis.

6 Hard, administrative, positive HR

As with hard, administrative, gap HR, we will be looking at regulations but with an eye for possibility. We want to be like the on-line out-sourcers who responded to Hurricane Katrina, and put their computer systems at the disposal of authorities. We want to be associated with ‘delivering a bigger bang for our buck’.  We don’t want to be associated with cutting costs and bringing misery to people who depend on us and trust us.

An example from UK, is the offer of a four day week to KPMG staff. It is a positive move. At the same time, computer geeks in the south-east have got together to make business services available to people starting their own businesses. It would be good to see large firms, who are essentially very profitable and who made a lot of money when times were good, reach out to help parts of the community who are far more distressed than they are.

We can have immense satisfaction and even in triumph in our use of routine facilities.

7 Soft, strategic, positive HR

Soft, strategic positive HR is the most demanding of our 8 areas, and is needed more during a recession than in good times. When we are faced with loss, it is extremely difficult to sit down with other people to think of ways forward. We become very concerned that we will lose out, and we tend to focus more on what we will gain personally, than on what we can create together.

We need soft strategic, positive HR  to proactively help leaders remain generative. Once they’ve moved into a psychological position where they are prepared to be disloyal to their employees, it will be difficult to turn them around. We need to act swiftly to keep their mood positive, so they can imagine possibilities and see constraints as enjoyable hurdles.

To neglect early soft strategic HR will be our biggest failure. From that we can never recover.

8 Soft, administrative, positive HR

Soft, administrative positive HR is slowly coming in to focus in an area dubbed .personal leadership.. Personal leadership is easiest to understand when we observe the 24/7 nature of the internet. Whatever we do, where ever we do it, becomes visible as someone photographs us and tags us on Facebook, or another network.

The internet provides both the challenge, and the opportunity, to live coherently and authentically. No longer do we go to work as one person and change into another at the door. Gen Y are used to being the same person all day long, and though employers have found that confusing, it is now an advantage.

Gen Y are very receptive to setting personal goals that are big enough to include the company, but also not totally dependent on the company. They make energetic partners, who sense wider possibilities, which they bring into the firm. Yet they are willing to move on if necessary.

HR’s role is to ensure that everyone has developed their personal plans and are pursuing them with gusto.

Putting it all together

Eight parts of a portfolio are many parts, and these are only the features of the macro-environment, the first of the four questions we asked at the start. But lets pull together these 8 ideas before the patchwork grows any more complicated. This is the order in which I would think about an HR policy during a recession.

  1. Look after ourselves. In a recession, we feel as if someone has taken away our toys. We aren’t happy, and what’s more, we worry, that someone will come along and take away some more. Our first goal, in this state of stress, is to restore a mood in which we can deal with threats objectively, and return to a generative and imaginative outlook. In short we must be as good at winter as we are at summer. And because winter makes us gloomy, we need to look after ourselves and deliberately allocate time and resources to nurturing an appreciative outlook. Are we enjoying the winter?
  2. Be purposeful, one and all.  Recapturing a positive mood is not simply a way to have a party. We have a purpose. After a recession, and particularly this one, we are not going back to where we were. This is the equivalent of a hard winter that will affect the next summer, and harvest as well. So we need to set up goals for the cold season, and the seasons that follow. Each person should have a goal. If mum and dad are retiring to have quiet mumbles, leaving the kids to do whatever they see fit, they will be surprised the day there is no food on the table. Our task is to get everyone to discuss the practical issues openly and calmly, to work out the schedules and goals, and to monitor our progress. Our goal is not to carry on as usual. It is to understand the meaning of a hard winter and to find roles for ourselves where we contribute to the common good.
  3. Weave in dreams.  Nonetheless, we don’t really understand what is going on and there is some panic about. We might be trying to hide our panic but, to continue the analogy, kids know more than we think, and can solve appropriate age-related problems quite well. People like being consulted and depended upon, so we should put people onto solving the problems where they have the greatest expertise. The hardest problem to solve is the disappointment of people who need to delay life plans – a person who has to delay going to college, for example. Our task as leaders is to acknowledge the difficulty, and to bring the person’s life story into the frame. What are the things that they could be doing now that they are particularly good at, that help everyone else too, and that get them ready for their life ahead? There is a a lot of work doing this with everyone in even a small firm, and we must remember that we too, need to rest, recover and attend to our own dreams.
  4. Let former experts work on well understood problems. Though there is much we don’t know, there is still plenty that we do. I would ask a mixture of implementers and defensive pessimists to explore and plan our responses to well known issues.
  5. We still need the regulation gurus. New government regulations will almost certainly come into play. People with detail-oriented, administrative minds and experience will take charge of this for us.
  6. Bring all the good ideas together and let people see them. All this while, people are generating good ideas that are grounded in their own work and experience. We want to catch the ideas and weave them in to our plans, in an open wiki, so everyone can follow how our ideas are developing.
  7. Celebrate our past, good and bad, as our foundation of the future. And finally, I would capture the essence of what we are doing and show how we are carrying the strengths of our past with us into the future. I wouldn’t bury the negative. I would look to it for what we learned, and the relationships which emerged from our difficulties.

Come with me!

I hope this helps you. I have started a wiki called MGMT101 to organize ideas about managing in the 21st century. If you would like to add your own ideas, or comment on others, please do drop a comment here, and head over there to add your thoughts.

Have a winning week!

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