H R looking ahead Jim Arrowsmith

Jim Arrowsmith is Professor at the Department of Management (Albany) and discipline leader for HRM at Massey University.

HR in 2010
You would have to have been living on the moon not to know that the world was in economic turmoil in 2009. Problems remain acute, but these also present opportunities for HRM.
ew Zealand is heavily dependent on the world economy, and the global outlook continues to be bleak. So far, a meltdown on the scale of the 1930s has been avoided by the injection of colossal sums by the governments of the major economies. China alone pumped in US$ 580 billion in 2009, mainly in infrastructure projects which helped buoy New Zealand exporting sectors like logging. But in the short run, this will have to stop, not least because countries like the UK and US are funding the boost by debt rather than from savings. This will impose a burden into the medium and longer term, hitting our leading export sectors which include tourism and education as well as primary products. Domestic demand is also likely to remain weak. This is partly a product of size, but also reflects the low-wage basis of the New Zealand economy. Productivity grew by 82 percent between 1980 and 2008, yet average real wages increased by only 18 percent over the same period. Average incomes are now 30 percent less than the UK and Australia in purchasing parity terms, exacerbating structural skills shortages. And we are
2 h um a n r e s o u r c e s February / March 2010

navigating to nirvana through stormy seas?

unlikely to see anytime soon the levels of consumer spending that were fuelled by borrowing and the housing boom. Further problems lie ahead. First is the impact of government spending cuts. This is partly a product of necessity, as tax revenues fell by a billion dollars in 2008, mostly because companies were discounting prices resulting in lower profits. But it is also due to the decision to proceed with tax cuts.

Though presented as a stimulant measure, the tax cutting strategy is a poor one in present circumstances as much of the benefit will go to savings, service debt, or be spent on imports. Yet government spending cuts will have a real, and multiplied adverse effect on the economy as contracts are trimmed and public-sector workers are laid off. The concern that things might get worse before they get better is also

prompted by the vulnerability of many New Zealand firms owing to their size. New Zealand is a nation of small firms only 3.2 percent of the countrys 470,000 small businesses employ 20 people or more, and 835, 000 people are employed in firms with fewer than 50 workers. Many of these firms will fail or lay off staff in 2010 because of depressed demand - a problem sometimes disguised by a lag effect as owners first exhaust their capital reserves. So, overall, demand will remain weak and there is the potential for unemployment to rise, which will further fuel the deflationary vicious circle. There will be some successes of course, notably the continued penetration of dairy products into Asian markets. But the world and local economy remains fragile, even without the likely impact of interest-rate rises, nor assuming that the kiwi dollar remains high. Clues to higher interest rates are provided by the banks ratcheting up of fixed-term home loan terms. The high exchange rate reflects the nations falling current account deficit and the softness of key currencies such as the US dollar. It punishes New Zealand exporters and rewards importers by making their products more competitively priced. Thus there is a very real danger that any recovery will be short lived, representing a dead cat bounce or heralding a double dip recession rather than promising the long hoped for green shoots.

in order to maintain staff commitment and goodwill. This involves things like being open and frank in communications with staff and listening and trying to act on their concerns. Thus, from a HR perspective, recession provides an opportunity for organisations to pause and self-evaluate: How do we see our employees? Of course, their intrinsic importance is signified in what

for sustained success. HR managers also have to make the case to chief executives and senior leaders that the most important work they do isnt with staff but with managers themselves. A vital goal of effective HR is to recruit and develop managers who can be leaders and not simply bosses (or, even worse, mates). Leaders act as coaches, counsellors and

HR people have to be making a noise that how people are treated at the workplace has a profound impact on their experience of work and therefore motivation and loyalty.
we as HR people do employees are human resources that are useful and therefore valuable to the organisation. Yet they are more than this. This is because employment involves a relationship - and, like any ongoing relationship it requires mutual effort, respect and a bit of give and take for it to work. The corporate clich that people are our greatest asset isnt enough. Assets and resources can be sweated or disposed of as necessary but with people this is selfdefeating in the long term. Employees are rather stakeholders or investors in the firm: they choose to continue to dedicate their time to an employer and how much effort they actually make once they are in work. Managers who respond to recession by forcing through change and simply driving extra effort will find that their greatest assets will abandon them once they can. This isnt a call for ring-fencing training budgets or sustaining current rewards, useful though these are in motivating and retaining employees. Its much more basic than that. In recession, even more so than at other times, HR people have to be making a noise that how people are treated at the workplace has a profound impact on their experience of work and therefore motivation and loyalty. Organisations whose workers think managers are trying to do the right thing by them, procedurally (in terms of consultation) and substantively (in terms of outcomes), are much more likely to emerge from even painful change with high levels of trust, which is the platform mentors to gain and sustain employee trust and inspire their performance. They are also equipped with the professional skills to handle poor performance effectively. Organisations with leaders who listen to and develop their employees will not only be more resilient in weathering downturns, but will emerge from these problems stronger and more agile than the competition. They will have engaged employees and not just survivors; they might even have entrepreneurial employees who are ideas-driven, innovative, and open to change. In this sense, a prolonged recession is an opportunity for HR people to encourage senior management to re-imagine the employment relationship. The challenge is to get them to think of employees in terms of managing investor relations. In tough times even more so than in good, it is vital to enhance the brand reputation with staff.

It doesnt have to be all bad news

To state the obvious, these are testing times for HR. The immediate challenge is how to deliver a first class service whilst coping with our own share of cost savings. The broader, and more profound, agenda is how to motivate and engage employees given the realities of recession job insecurity, layoffs, increased workloads and stress. However, the recession also provides opportunities. First, it can facilitate organisational change. Crisis is the best antidote to inertia, cultural complacency or path dependency. Second, it can serve to pull teams together, as people have to put in the extra effort to keep things afloat. All of which is linked to the most crucial consideration - recession is a leadership opportunity for management. How you handle the bad times will determine not just how you come through them but also the position going forward when the worst is all behind you. Basically, employers need to choose a human rather than simply hard approach to steering through recession,

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February / March 2010 human resources

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