ROLE OF HUMAN RESOURCES’ (HR) MANAGERS DURING ECONOMIC CRISIS.
Economic meltdown is the contraction of the economy for two consecutive quarters while economic crisis is a state in which an economy witnesses slowdown of economic activities, increased level of unemployment, decreased consumer spending, low level investments, low level of trading activities and the loss of the value of assets by a segment of the financial institutions, which persists over a long period of time.
For the first time in several decades, the tough talking developed nations are at their wits’ end. Their citizens have been grappling with the harsh realities of increasing food and gas prices, increased foreclosures, massive retrenchment and massive job cuts signposting an economic meltdown. For instance, the United States alone witnessed one of her worst months in unemployment related matters as provided by the Bureau of Labour Statistics, US Department of labour in http://www.bls.gov/news.release/empsit.nr0.htm “In September 2008, the number of long-term unemployed (those jobless for 27 weeks or more) rose by 167,000 to 2.0 million, an increase of 728,000 over the past 12 months. In the
As this was happening, the stock market all over the world tumbled under the yoke of the economic downturn to an all time low. By the last week of October 2008, it was a gloomy picture across the globe. Writing for Associated Press on October 24 2008, Kennedy said “the U.S. dollar sank to a 13-year low against the Japanese currency, falling below 95 yen.
The above is a frightening data from the world’s strongest economies. To stem the tide of further losses and rescue the collapsing institutions, governments hurriedly put bailout options in place. In the
In our own environment, we do know that getting data to back up current job losses is a herculean task. However, it is common knowledge that the manufacturing sector started a gradual move towards a shut down few years ago and the world situation can only but aggravate the situation. The oil and gas sector is in turmoil and releasing workers on daily basis because of the activities of militants, vandalism of petroleum pipelines and reduced production activities. The resonating gloomy economic picture puts a lot of pressures on workers. This leads to apprehension, anxiety and distrust. I am sure that in 2009, the Unions will become more demanding, confrontational and combative.
In the third quarter of 2008, Nigerian capital market witnessed very serious slides in shares and Government had to put in place several interventions to save the market. Abimboye in Newswatch of October 13, 2008, p. 59 says “against this backdrop, the Central Bank of
This is particularly worrisome and devastating because several investors had borrowed money from the banks to trade in stocks. Irrespective of these interventions, interest rates are still high and nothing seems to suggest that the economic meltdown will not scar through our system. While it is true that our economy is not a credit strewn system there is nothing in the horizon to categorically exclude us from what the end of this economic fatality will be.
If the global economic slide continues, the developing economies are likely to suffer the backlash because we are largely a consuming nation. As crude prices dips, the home offices of the multinationals would become stringent with spending and if this continues for too long, foreign aids and recall of capital may occur. Imagine what will happen to our economy if the multinationals decide to pull several billion of dollars from this economy with lower volume sales of oil.
As at today, most of the multinational oil companies have cut their cut production levels because of the Niger Delta crisis. For instance, SPDC that was producing about a million barrels per day about five years ago produces less than three hundred and fifty thousand barrels per day. Chevron intermittently shuts down operations as its facilities because of incessant attacks by militants. If these are aggregated, they will accentuate the economic crisis; then we are heading for real challenges.
During periods of economic crisis, workers put their future security and welfare over above doing their jobs as prescribed by the organization’s procedural handbooks. Therefore, managers of human resources (HR) should have it at the back of their minds that they are dealing with employees that are confronted with high emotions, low morale, curiosity, anxiety, uncertainty, thoughts of negativity, possible loss of life savings, losing their houses, apprehension and near state of hopelessness because of the fear of the unknown over the sustainability of their gratuities and pension. All these lead to increased rumour mongering, accentuated stressed levels, irritability, decreased productivity, disloyalty, cutting of corners and hidden health costs to the organization.
While these occur, it behoves on HR practitioners to start a realignment of thoughts, synergy and step up programmes that will give hope to workers. Only an inward looking HR management, which is strategically positioned, efficient and effective that will successfully swim through this ocean of uncertainties into a period of boom, which usually comes after a period of downturn.
In the third quarter of 2008, Nigerian capital market witnessed very serious slides in shares and Government had to put in place several interventions to save the market. Abimboye in Newswatch of October 13, 2008, p. 59 says “against this backdrop, the Central Bank of
While it is true that our economy is not a credit strewn system there is nothing in the horizon to categorically exclude us from what the end of this economic fatality will be. If the global economic slide continues, the developing economies are likely to suffer the backlash because we are largely a consuming nation. As crude prices dips, the home offices of the multinationals would become stringent with spending and if this continues for too long, reduction of foreign aids and recall of foreign capital may occur. Imagine what will happen to our economy if the multinationals decide to pull several billion of dollars from this economy with lower volume of oil sales. As at today, most of the multinational oil companies have cut their production quota because of the Niger Delta crisis. For instance, SPDC that was producing about a million barrels per day about five years ago produces less than five hundred and fifty thousand barrels per day. Chevron intermittently shuts down operations as its facilities because of incessant attacks by militants. If these are aggregated, they will accentuate the economic crisis; then we will be heading for real challenges.
Reasons for the Economic Meltdown.
- Negative impacts of borderless markets (globalization).
- Criminal borrowing.
- Incompetent practices.
- Weak regulations.
- Lack of transparency.
- Corruption.
- Unrestricted mortgage activities and lending to those with bad credit history.
- Decreased consumer spending as a result of massive job losses.
- Questionable greed.
- Break neck expansion craze.
- Stiff competition by corporate bodies.
- Lack of proactive strategy by the executive, legislature and the financial experts to deal with the symptoms at an earlier stage.
- Absolute freedom of the market economy.
Negative Impact (s).
- Closure of enterprises because of lack of access to borrowing from banks and high interest rates.
- Massive job losses and accentuated unemployment (In the aftermath of the South Asian crises in the 90s, job losses rose from 5,015 in 1996 to 38,217 in 1997).
- Erosion of the middle class.
- Decreased consumer spending.
- Decreased capacity utilization.
- Increased cost of available goods.
- Hyperinflation.
- Bad debts.
- Recession.
- Negative impact on our foreign reserve. On the foreign reserve, (Aluko says “If one looks at its website www.cenbank.org – Foreign Reserve Movement page – starting from January 2, 2008, one sees that our gross foreign reserves steadily increased from $51.2 billion to a high of $63.5 billion on September 10, 2008, before declining to a value of $61.99 billion on October 1, 2008 – the last recorded entry. That is a decline of $1.5 billion within a two-week period, following which, after three weeks (today is October 23, 2008), there are NO MORE ENTRIES in the table).
It is vivid from the above that there is no hiding place for any of the world economies from the negative impacts of the economic meltdown. Even before the financial crisis, Nigerians have been witnessing some of the impact of a receding economy because of lack of infrastructural support, manipulation of the electoral systems, which littered the political landscape with corruption and other related vices as typified by the activities of the EFCC and ICPC. If unaddressed, the multiplier effects of all the indices will make life unbearable for the masses of this nation.
How the economic crisis affect Human Resources Management (HRM) in Nigeria
- Decreased oil revenue. In the first week of July 2008, Nigeria’s Bonny Light Crude sold for $146.15 but slipped to $76.24 and $57 per barrel at the middle of October and November 2008 respectively and Light Sweet Crude Oil. $47.78 on 3rd December 2008. This represents a dip of about 69.83%.
- Dwindling revenue will affect budgetary performance and allocations to sub sectors because of the country’s monoculture economy.
- Possible delays in the discharge of government’s responsibilities in recurrent expenditure.
- High indebtedness to internal contractors.
- Pension payment might become a huge source of worry because of the dwindling finances to meet up with the financial obligations of recurrent expenditure.
- Restriction or reduction of foreign aids, which may affect counterpart funding of projects.
- Job cuts, layoffs and increased unemployment.
- Loss of jobs of Nigerians abroad who send money to their relatives in
- In worst case scenario, multinationals may withdraw huge sums from their portfolio in the country to support home offices and operations.
- Increased restiveness of the labour unions.
- Industrial actions. Howbeit and irrespective of the state of this seeming hopelessness, rather than brood over the present global financial crises, HR practitioners have a huge challenge and an opportunity to reinvent HRM; engender increased developmental processes to improve human behaviours, attitudes and staff relations that will bring about improved productivity; which at the end put them be on top of corporate policies for a key turn around.
Suggested HR strategies to reduce effects of the crisis.
Communication.
Dedicate time to positive reasoning. Hold town hall meetings involving staff and management on ways to tackle the challenges of the downturn. Hear the staff out. Take time to listen to the employees for confidence building. During such engagement, declare immunity to cover all staff, in which any staff that offers to critique the organization is insulated from witch-hunting sanctions and victimization. This gives room for sincere invectives and inputs, which may turn the organization around for good.Staff should be encouraged to objectively give their assessment of where the organization was, where it is and where they believe the organization should be and what should be done to survive the recession.After listening to the staff, thank them for valued contributions and promise to work with their inputs. Reiterate the vision and mission statements of the organization. Appeal to staff to do everything possible to actualize the goals and objectives of the organization. They should show more personal and collective commitment, loyalty and dedication to the organization for improved productivity. Seek their support for the strategic action plans.At the same time, strengthen the two ways communication process and dedicate time to feed backs.
Positive team culture.
Stress shared vision, strategies and belief in team culture, improved symbiotic team spirit because of the positive value addition of synergy. HR Managers should at this time radiate and give hope and lift their staff from negativity to positivity. A positive team culture stresses collectivism, and symbiosis. Do well to stress the importance of every team member.
Learning.
Learning is the key that opens the individual employee to knowledge beyond his/her immediate reach. It helps to bring a strong barrier against failures and landmines that may bomb the organization out of existence. It assists the worker to open up to new initiatives, ideas and best practices. Design programmes that put the organization on top of the pack and enable the organization have a competitive edge. Staff may not necessarily be moved from their places of work because of the innovations in as e-learning and intranet services are becoming a way of life. Encourage staff to participate in workshops and conferences to enable them compare notes on experiences and learn from others. Where only a few staff can attend, those who attended should be given an opportunity to share their learning experiences with their colleagues at a forum.
Leadership focus during the downturn.
- Transparency.
- Accountability.
- Courage to effect necessary changes.
- Training.
- Proactive strategy.
- Sacrifice.
- Incremental changes.
- Address issues of insecurity.
- Credible leadership.
- Mentoring.
- Coaching.
- Nurturing.
- Sifting down process between the effective staff.
- Walk-the-talk.
Performance incentives.
- General Motivation techniques: Positive and negative sanctions
- Performance Incentive Bonus (PIB)
Review of organizational structure and procedures.
- Reduce complex structure to a simple structure.
- Increased autonomy to improve decision making process.
- Concentration on core areas.
- Elimination of tribal, political and racial considerations in the appointments of chief executives and recruitment processes.
- Review of recruitment policies. It is a well known fact that in most parastatals of government in
- Review financial management procedures to optimize profitability.
- Improve cost culture and asset utilization.
Redefinition of business value system.
This is a moment to re-examine the organization’s business value system, goals, roadmaps, strategies and practices to align with the anatomy and physiology of the organization. The vision of the organization should be cascaded down the ladder so that there will be a total buy-in; into the new ways of achieving the vision even at these difficult times. A shared vision sets the tone for the conscious will power to achieve the impossible.
Succession planning.
The chief executives of many parastatals of government are removed and replaced at will. The high turnover of the top management is the bane of poor performance of some organizations. It makes planning difficult, truncates strategic plans processes and kills any organization’s initiatives to achieve a well tailored succession plan, which is a Sequa-non for organizational success. There should be a reversal of this unwholesome process.
Attitudinal change.
- Paradigm shift in work culture and values.
- Stop the attitudes of being busy doing the wrong things. The aim is to change from busyness to effectiveness as being busy does not connote effectiveness. Being busy and working hard without focus does not translate to results the organization needs to be effective.
Job rotation.
- Temporary postings to areas of unsaturated staff.
- Equal opportunities.
- Redeployment.
Pre-retirement seminars.
- Pre retirement workshop.
- Incentives for early retirement (discourages swearing affidavits to cheat on age).
Personal income management.
Almost all staff are now very heavily indebted to the banks with slimmer income. It is often said that the “take home pay of workers no longer take them home”. Staff of various organizations have found themselves in this conundrum in
Engage external consultants to talk to staff on personal income management and the need to prepare for retirement. HR managers should help enforce the one-third rule of loans over which a staff cannot approach the organization for loans so that staff will be able to maintain and cater for their immediate families at this critical time.
Proactive HRM.
- Application of emotional intelligence strategies.
- Fair HR practice in the use of the carrot and stick approach.
- Assessment of the competencies of employees and productivity level. Do not wait for the end of year.
- In-plant knowledge sharing forum should be enthroned to encourage staff to share their knowledge in an in plant workshop. This will assist the organization to source for and maintain a knowledge pool in the organization.
- Change management. Change will be effected in bits and not radically so as not to further stress the staff.
- Review the organization’s customer management processes.
- Enthrone an integrated research and development processes.
Performance evaluation.Enthrone an effective performance management system.
Performance evaluation should focus on:
1. The organization.
2. Departments.
3. Customer service.
4. Teams’ performance.
5. Processes.
6. Individuals.
- Solutions to challenges rather than sanctions, condemnation and the blame trade.
- Seek to be understood before seeking others’ understanding.
- Expectations should be mutually agreed using basic standard benchmarks.
- Consider individual strengths, experience, priorities, inner motivation (is he a loner, extrovert) and confidence in assigning tasks.
- Acquire the skills to align the staff skills and competency to align with the organizational objectives.
- Monitor performance (don’t wait until the end of the year).
- Reward top performers and ascertain collateral damage if any.
- Investigate and sanction poor performance.
- Watch out for the aftershocks of performance evaluation.
Any of the following models could be used to address the performance challenges that organizations may face during the periods of financial crisis:
- The Balanced Scorecard (Kaplan and Norton provides the theoretical framework for the Balanced Scorecard (BSC) with four perspectives - financial measures, customer knowledge, internal business processes, and learning and growth. The BSC helps the organization to strike a balance between short, medium and long-term objectives. The BSC is a tested tool change processes.
- Ulrich model.
Conclusion.
The conclusion that could be drawn from our economic position based on the global financial indices, our monoculture oil economy, the need for the readjustment of government spending because of the uncertainty in oil prices, the increasing interest rate and high unemployment situation; the depression in the capital market is that HRM needs a new approach in strategies and direction. CEOs should not wait for a time like this to cut their perks as the $1 salary proposals of the CEOs of the
End notes.
Abimboye D, (2008); Global Financial Crisis, Newswatch Magazine,
Aluko M, (2008); The Global Financial Meltdown: Impact on
http://en.wikipedia.org/wiki/Economic_crisis.
http://biz.yahoo.com/ap/081024/world_markets.html.
http://www.bls.gov/news.release/empsit.nr0.html/.
http://www..economicconfidential.com . http://www.balancedscorecard.org/BSCResources/AbouttheBalancedScorecard/tabid/55/Default.aspx.http://www.paypershop.com/articles-UK/ulrich.html. http://flowingmotion.wordpress.com/2008/07/24/3-steps-to-positive-hr-with-a-recessionlooming/. http://hrmadvice.com/blog/2008/09/07/hrm-innovations-in-recession/ .