Insight from our experts

HR for the Hard Times.

Martin Smith, Managing Director of Croner, UK's leading provider of health & safety and employment law, talks about adapting your HR strategy in a challenging environment.

Martin Smith
Quick Facts Name: Martin Smith
Company: Croner
Position: Managing Director

Overview

The current economic climate requires informed action by businesses to survive the downturn. Handling redundancy programmes, managing people through mergers and acquisitions and keeping your staff motivated when times are tough, are all challenges businesses might face in these times, while striving to win new business in existing or new markets. But taking the right action now to restructure your organisation to achieve efficiencies, keep the best staff and maintain high standards can actually help your business to come out stronger at the other end.

Croner is the UK’s leading provider of information, advice and support in the high risk areas of employment, health & safety and environment legislation. Supporting over 75,000 companies ranging from small businesses to multinationals, the company has a unique view of trends in the issues facing businesses as they address the challenges of keeping up with workplace legislation while trying to survive the recession. Martin, along with other members of his team will provide insight into some of the ways organisations are addressing the challenges to protect and grow their business.

Back to top Fine-tuned HR Management

Many organisations’ approach to HR is based on a simple premise: that the removal of the most valuable (read expensive) of assets, namely staff, will bring about a cost saving. This is true. However, redundancies and associated cost savings do not equate to long-term value or survival of an organisation.

In a downturn, the HR function needs to be particularly fine tuned. You need to be aware of how to apply innovative HR management alternatives in order to not only survive, but come out the other end uncompromised in terms of appropriate skill-sets and the trust of that most valuable of assets, your employees.

Poor HR management in any organisation will function in an ad-hoc, reactive fashion. Mediocre HR management will have adequate processes and procedures in place. But mature HR management will be predictive in nature, leveraging best practice from its own ranks and possibly from recognised external experts. Croner fits in the latter category. According to Richard Smith, Head of Croner’s Employment Tribunal Support Service, “It is difficult, particularly for smaller organisations, to quickly put in place and execute plans for these challenging times. In the current environment, you need to equip yourself with a different toolkit to tread the fine line between treating your employees fairly, avoiding tribunals and at the same time contributing to the organisation’s cost reductions.”

Croner, part of Wolters Kluwer UK, specialises in helping organisations navigate the choppy waters of maintaining staff satisfaction and trust, avoiding the feared fines, and keeping the business running in restrictive financial circumstances, whilst staying close to the long term strategic objectives of the organisation. They have partnered with thousands of organisations over the last 50 years, working with start-up businesses right through to large corporations. According to Martin Smith, Croner’s Managing Director, “Each one has very different needs. But what each one has in common is a desire to be successful, profitable and grow their business. Now in the credit crunch, those aims are accompanied by a similar set of challenges.”

Back to top Innovative solutions to challenges

How do you ensure that downsizing does not harm the mainstay of your business in the long term? First, you need to identify the challenges for your particular organisation type. Larger enterprises can be better equipped for the challenges of a credit crunch. They have larger HR departments, access to larger knowledge-bases, skills, tools and practices, although they don’t always get it right. For small to medium sized businesses however, the challenges that arise in a credit crunch can prove to be a quagmire and have even more devastating effects. And up-skilling key staff to deal with myriad new aspects of employment law may not be an option.

For smaller companies there is the added complication of something that is otherwise a very pleasant benefit, namely the personal relationships that are built up over the years. Never mind acquainting oneself with all of the rules and regulations that need to be complied with, how do you break bad news to a respected colleague? How do you optimise a ‘tightening of the belt’ for colleagues that you know on a personal level?

According to Vivienne Copeland, Head of Client Services at Croner Reward, the pay and benefits specialists, “Part of the answer, lies in recognising the pitfalls in advance and mitigating risk. From our years of experience, we have found that some of the key areas to look at for any organisation size but especially for smaller organisations are pay, benefits and redundancies.”

Back to top Pay and benefits

Taking the time to create clear, consistent communication that leads to organisational transparency has been proven to promote employee trust and loyalty during rough times and sustain these feelings once the economic situation improves. But how do you retain good staff? And what will happen to pay increases and benefits?

Copeland explains, “Many HR professionals’ perceptions of salaries can be inaccurate when held against benchmarks. For example, there is a general perception, that salaries in Scotland are much lower than the national average. This is untrue. The average manager’s salary in Scotland is £31,568 only .02% below the national median, compared with similar salaries in the West Midlands being 4.1% or even those in Northern Ireland being 4.2%, or those in the North East of England being a full 5.2% below the national median. Given that many HR professionals are not privy to this information, they can react inappropriately when confronted with salary increase requests. Aware of this information, they are in a better position to explain the facts to employees and in turn help employees understand why HR is looking to alternative means of rewarding them.”

Copeland adds, “We show employers how to avoid the trap of increasing salaries and needing to pass that increase on to the consumer.”

Back to top Affordability and alternatives

Pay and benefits come down to affordability. Copeland explains, “If an employer has 3% in the pay bank, they need to achieve the most value from that 3%.”

“This could mean implementing a well thought-out training programme, or getting input from employees on how they would review their remuneration package. You will find that some employees will be comfortable with forfeiting the company health insurance, gym membership or maybe even pension plans, if their partner has a similar option from their employer.”

So assessing and allowing employees to voice their opinion in what can be a particularly emotive process has been found by Croner to be of benefit all round. It ensures that they know they are important stakeholders in the fiscal health of the company and that they are contributing to its competitiveness and perhaps even ultimate survival through the credit crunch. And it enables the organisation to refocus spend from non-cash awards to more value-driven HR investments.

Back to top Budget and plan ahead

It is no surprise that companies such as Croner are seeing a marked increase in calls to their helpline about redundancy. Richard Smith says, “Statistics from our helpline show that while redundancy is always in our top 3, it is now clearly an increasing issue with 15% more calls relating to redundancy over the last 12 months.” So there is obvious concern on the part of employers that while endeavouring to manage the HR function in this tough climate, they may fall prey to bad decisions or even employment tribunals.

According to Smith, “Employers are unsure of the legal constraints that they need to work within. For many it’s the first time in a recession. And this is at a time when it’s more important than ever to get it right. Accountability is paramount and many companies, even the larger ones, are finding that they have ‘good times’ contracts.” So organisations fall foul of policies and plans for redundancy selection that were not contentious when set back in the good times. Smith adds, “Wise employers will have looked at these issues five years in advance and not have to manage in a reactionary manner now. They will have flexible, comprehensive and appropriate plans in place or ready to be implemented.”

Back to top Hit the ground running

Business strategy will be affected by the opportunities that are presented whether it is to downsize, upscale or move markets. Smith explains, “You can retain the dignity of your employees and avoid unnecessary tribunals by understanding your employees’ rights and offering them alternatives to headcount reduction such as reduced hours, temporary staffing arrangements or perhaps over-all pay cuts.”

So keeping the business running and planning for exit of the downturn requires informed action. In fact, according to the experts at Croner, the economic downturn is an ideal time to either retrain or show continued interest in employee development so, once through the downturn, the organisation is positioned to come out stronger than ever at the other end.

Even though unemployment is up and the economy is struggling, unemployment is at about 5.1 percent, which is still extremely low. And when it comes to unemployment of qualified talent, it is a lot lower. This should not be ignored. You certainly don't want to come out of a credit crunch in a situation where your strong talent wants to leave because they didn't like the way you treated them or their colleagues during the downturn.

Back to top Downturn stifling innovation?

If you do end up in tribunal however, it seems you can exercise some damage limitation. According to Smith, “We deal with over 1,000 tribunal cases a year and win 85% of those tribunal cases.” Given that in 2007 for example, there were some 33,000 tribunals in the UK and only one in three were won by the employer, this is no small feat.

Smith adds, “Almost all organisations have some issues trying to sustain creativity and innovation on a downturn. There is no ‘one size fits all’ solution for HR management in a downturn. But you can streamline without affecting your long term capability by adding some innovative approaches to HR management.”

Back to top Where to go for more information
If you would like to discuss any of these topics further, please contact your local Barclays Commercial Bank Relationship Team or visit www.barclayscommercial.com.Back to top

Extracted from Business First Sunday Times 28th January 2009.