Académique Documents
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Ms.Khyati vora
Roll No 12
M.PHIL (COMMERCE)
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GLOBAL RECESSION AND EMERGING
CHALLENGES FOR HUMAN RESOURCES
MANAGEMENT IN INDIA
INTRODUCTION
Meaning of Global Recession
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A recession is a decline in a country’s Gross Domestic Product
(GDP) growth for two or more consecutive quarters of a year. A
recession is also preceded by several quarters of slowing down. An
economy, which grows over of period of time, tends to slow down
the growth as a part of the normal economic cycle. An economy
typically expands for 6-10 years and tends to go into a recession for
about six months to 2 years. A recession normally takes place when
consumers lose confidence in the growth of the economy and spend
less. These leads to a decreased demand for goods and services,
which in turn leads to a decrease in production, lay-offs and a sharp
rise in unemployment. Investors spend less; as they fear stocks
values will fall and thus stock markets fall on negative sentiment.
Risk aversion, deleveraging and frozen money markets and reduced
investor interest adversely affect t capital and financial flows, import
– export and overall GDP of an economy. This is what exactly what
happened in US and as a result of contagion effect spread all over
the world due to high integration in the global economy.
According to the International Monetary Fund (IMF)’s latest
Global Financial Stability report (GFSR) widening and deepening
fallout from the US subprime mortgage crisis have profound
financial system and macro-economic implications.
While the US remains at the ‘epicenter’, the backwash effect of
the American financial institution in other countries ‘reflecting the
same overly benign global financial conditions, an inattention to
appropriate risk management systems and lapses in prudential
supervision’.
The global slowdown has its implications on the domestic
economy. During the last three years Indian Economy grew at an
average annual rate of 8.6 per cent. For the first time the economy
has shown signs of deceleration and grew at 7.8 per cent in the first
half year of 2008-09 (April-September). The service sector, which
contributes more than 50% share in the GDP and is the prime
growth engine, reported to be slowing down, mainly in the transport,
communication, trade, and hotels & restaurants sub-sectors. The
industrial growth has decelerated sharply during April-November,
2008 encompassing all the constituent sectors. In manufacturing
sector, the growth has come down to 4.0 per cent in April-
November, 2008 as compared to 9.8 percent in the corresponding
period of last year. The slowdown occurred in the all the use-based
categories, except consumer goods where it has accelerated.
Meaning of HRM
Humans are an organization's greatest assets; without them,
everyday business functions such as managing cash flow, making
business transactions, communicating through all forms of media,
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and dealing with customers could not be completed. Humans and
the potential they possess drive an organization. Today's
organizations are continuously changing. Organizational change
impacts not only the business but also its employees. In order to
maximize organizational effectiveness, human potential—
individuals' capabilities, time, and talents—must be managed.
Human resource management works to ensure that employees are
able to meet the organization's goals.
Human resource management is responsible for how people
are treated in organizations. It is responsible for bringing people into
the organization, helping them perform their work, compensating
them for their labors, and solving problems that arise. There are
seven management functions of a human resources (HR)
department that will be specifically addressed: staffing, performance
appraisals, compensation and benefits, training and development,
employee and labor relations, safety and health, and human
resource research.
Global Recession and HRM
The financial downturn is impacting developed as well as
developing economies are likely to get worse as the European
countries, the US and others go into a deeper depression due to the
increase in job losses which often follows recession. The slump in
the market and increased job losses will have some important
implications for the changing task of human resource professionals.
As the unemployment continues to increase, HR professionals are
likely to be dealing with more stressed employees who are the sole
wage earners in their families.
As recession is becoming the part of the normal cycle of
business. Therefore it makes just as much sense to plan for
recession or downturns as it does to plan for good, economic times.
OBJECTIVE
This economic downfall has affected all the major sectors in India
including IT, aviation, banking, real estate, tourism, outsourcing,
telecommunication, etc with its consequence mainly on the HR
policies of these industries.
challenges.
HYPOTHESIS
In today’s economic meltdown where job cuts, loss, pay
reduction, last come first go, insecurity of employment atmosphere
prevail, HR has special responsibility to create ease environment to
the affected by counseling, displaying care and concern, preparing
them for multi skill task, engaging and deploying in other required
areas of functions like security, crisis management team, etc.
REVIEW OF LITERATURE
“The global economic crisis is expected to lead to painful cuts in the
wages of millions of workers worldwide in the coming year. It
predicts that the slow or negative economic growth, combined with
highly volatile food and energy prices, will erode the real wages of
the world’s 1.5 billion wage-earners, particularly low-wage and
poorer households. Between the years 1995 and 2007, for each one
per cent decline in GDP per 2 capita, average wages fell even
further by 1.55 percentage point, a result that points to the possible
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effects on wages in the current crisis. [International Labour Office
(ILO), 2007-08].
"The last time anyone faced a situation like this was in the 1930s, so
if there is anyone who is 98 (assuming they should have been at
least 20 then) and is coherent… the rest of us are figuring out and
learning on the fly," reasons Elango R, chief human resources
officer, Mphasis. According to Elango, "Managing the unknown,
visualizing into the uncertain future, constantly calibrating and
tuning the variables… and hoping to high heaven that you are on
the right path… are responsible for increasing stress levels." He
believes that the challenge is to take long term decisions without
issuing the short term. This requires skills, knowledge and thinking
that are not called on in a growth environment. "In a growth
environment, one's pre-occupations are different, and having seen
growth for years most of us are skilled at this. The current business
environment entails a delicate tightrope walk balancing both the
business interests and employee interests." [Elango R, 2008]
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RESEARCH METHODOLOGY
Secondary Data collected from various sources like
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➢ Ripples of recession leading to reduction in exports to
developed countries are being felt by all the developing
countries. Credit availability and its cost have become major
areas of concern. The combined impact of all these factors
would be loss of employment and reduction of income leading
to social distress. The International Monetary Fund (IMF) placed
the estimated world output growth at 3.75 per cent in the year
2008 and 2.2 percent in the year 2009 in World Economic
Outlook (WEO), November 2008, which represented a
significant slide from a level of about 5.0 per cent in the year
2007.
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Trends in Average Employment
Period Average Employment in
Percentage
(millions)
change
September, 08 16.2
October,08 16.0
-1.21
November,08 15.9
-0.74
December,08 15.7
-1.12
Table 1.4
Month Wise Estimated Job Loss
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Sl.No. Period Estimated Job
Cumulative Job
Loss
Loss
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information age, organizations need to adapt to the changes in
technology and the changing issues in management of people.
I. The emerging challenges of Human Resource
Management in the times global recession……
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First things first, the base idea is not to wait and find ways to
weather the storm but to take proactive measures to tide the wave.
The world is changing very quickly to combat recession and it’s
about time we translate our thinking into action or else we will be
late. The main reason being the companies who are hiring have
recently made drastic cuts in their recruiting budget and are in the
process of streamlining their side of the story.
Companies (clients) has to demand greater accountability from
recruitment agencies and focus on improving their recruitment ROI.
Recruitment agencies / staffing companies who are agile in their
operation and can quickly adapt to the changing environment will
emerge victorious at the end of this recessionary period.
Few areas where placement agencies should focus:
• Closely monitoring the way each industry is changing in
current times and the way companies within the industries are
changing their hiring strategy.
• Build stronger relationship with clients thereby working closely
with your contact points in the company to get clarity on their
internal hiring plans and prepare accordingly. This will also
help protect your share in the pie from your competitors.
• Clients will use this recession to re-negotiating the recruitment
contracts with recruitment agencies. Since numbers are falling
every day recruitment agencies will be concerned about their
cash flow situation and as a result will have no option but to be
forced to negotiate their existing contract. New client would
want to start the relation on the terms advantageous to them,
that means lower rates and tougher terms.
• Look out for companies who are brave and would consider
recession as the right time to recruit good quality talent at the
right price. These are usually multinationals with deep pockets
and would want to drive competitive advantage home. Be
smart to attack these companies.
• Train your recruiters to be tactically smart and agile in their
actions. During the boom there were a lot of open positions
and even more candidates available so the match making
activity was comparatively easy and largely govern by the
good sentiments in the market. During tougher times
recruiters need to be smart and get themselves deeper into
the fit gap process and ensure win - win situation for the client
and the candidate
• Use of technology and social media applications to hunt better
profiles as compared to job boards. Sites like LinkedIn,
Facebook, Twitter and other social and business networking
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sites are fast becoming every recruiter’s trump card. Lot of
head hunting can happen over these networking sites.
• If your salary component are on the higher side and you
foresee that it’s going to be difficult to sustain then take
adequate action now try and offer a mix of lower fixed and
higher variable with an assurance that salaries will get back to
normal once the market stabilizes.
1. Managing downsizing appropriately.
Virtually every country has to face the impact of a global economic
downturn which can be in the form of recession, slowdown,
depression or growth recession. When a downturn occurs, the
organizations have to suffer heavy losses and bear the brunt of slow
revenue generation. During this period, there is also less spending
by the consumers, less investment by the investors and more of
savings. Even the sectors who have been thriving in the boom
period try to save more.
Numerous causes can be attributed to the economic downturn
and one of which affects the business is lack of skilled manpower.
Other reasons could be the increasing population, lack of food
supply, climatic condition, and entry of substitutes, inapt
investments and technological changes. The shift in supply and
demand hugely affects the entire business cycle. There can be acute
shortage of cash supply leading to less or poor investments.
All of this may ultimately affect the morale of the employees
which should be a concern to every organization. Also, the decline in
growth and decrease in profits certainly calls for certain top-of-the-
line strategies to make adjustments to serve organizational needs.
Managing the teams or human capital at this juncture is a
Herculean task. So, a manager should devise certain strategies in
order to manage teams during down turns. Downsizing during this
period is certainly not a good option because if there are merits of
laying off of employees, there are many demerits too.
All the above points are crucial to letting the organization grow to
greater heights and following the above strategies will promote the
general health of the organization despite economic downturns.
While many have forgotten the term “War for Talent”, the
phenomenon is slowly re-emerging. “A study by Accenture has
found that more than two-thirds of executives are now deeply
concerned about not being able to recruit and retain the best talent.
In today’s global and highly competitive economy, the war for talent
is now global, not local. The survey of more than 850 top executives
from the U.S, UK, Italy, France, Germany, Spain, Japan and China
found worries about talent management were growing, with 67 per
cent this year putting it second only behind competition as the key
threat, up from 60 per cent last year.”
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New Definition of Talent
While war for talent continues, the bar for talent also goes up. Old
skills and competencies may not work. Companies now need
salesman who does not sell products but does sell solutions;
production managers no longer control the operations, they are
expected to innovate and improve productivity; and quality
managers need to study competitive products with more zeal and
help develop better products and services. The employer’s
expectations have changed and are set to grow:
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4. Stress Management
The financial recession is impacting large and small organizations
and countries in similar devastating manner. For example, as the
prices of goods and products increase, consumers tend to buy less
and thus companies end up having to lay off some of their
employees in order to avoid bankruptcy or just to stay in business,
in the US during the first two months of 2009, over 17 banks have
gone out of business and more such bankruptcies and closers and
expected in the financial industry. Such failures tend to increase the
number of people losing their jobs and moving them closer towards
poverty.
“Stress is an inevitable
reality and everyone
needs to find their own
ways of beating it”.
Stress is an inevitable part of work life. A recent Assocham
survey lists construction, shipping, banks, trading houses, electronic
and print media, courier companies, SSI, retail, card franchise
companies, and even government hospitals as high stress prone
zones… akin to chart toppers like BPOs, call centres and IT
companies. The pressure is truly spreading everywhere! There is
ample evidence of the fact that stress impacts employee health and
productivity. And of late, hundreds of articles have been written on
how financial stress due to the current economic recession is having
a dangerous impact on health and productivity. Results from the
AARP survey, "Impact of Economy on Health Behaviors" reveal that
20 per cent of people 45 and older reported health problems due to
financial stress; 22 per cent have delayed seeing a doctor due to
cost; 16 per cent had to use retirement savings or other savings to
pay for medical care; 21 per cent have cut back on other expenses
to afford their medical care; and 16 per cent are not confident they
will be able to afford health care in 2009. Bob Gallo, AARP Illinois
Senior State Director is reported to have quoted that right now
"people are increasingly concerned about their jobs, retirement
savings and simply being able to provide for their families and it's
taking a major toll on their health".
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Humor is a wonderful stress-reducer. Experts say a good laugh
relaxes tense muscles, speeds more oxygen into your system and
lowers your blood pressure. Tune into your favorite program or
comedy shows on television. Read a funny book. Attend comedy
shows. Call a friend and chuckle for a few minutes. Share funny
episodes with your spouse that can relieve stress as well improve
communication. It even helps to force a laugh once in a while. You'll
find your stress melting away almost instantly.
Humor is used to facilitate communication and avoid conflict. It
gives us a different perspective on our problems. If we can make the
situation lighter, it no longer feels threatening to us. With such an
attitude of detachment, we feel a sense of self-protection and
control in our environment. Bill Cosby says, "If you can laugh at it,
you can survive it."
It's sometimes difficult to force a laugh in tense situations. But
that's precisely when you need it most. One trick for finding humor
in the worst of situations is to blow things absolutely, ridiculously out
of proportion. When your scenario reaches the point of absurdity,
you begin to smile. The situation is put in perspective and you can
calm down. Remember humor about sex or gender, ethnicity,
politics, humor or joking about tragedy or disease-related symptoms
are considered humor exclusion zones.
STRESS BUSTING
Understanding what triggers your stress and how to deal with it
helps in staying healthier. Here are a few tips:
➢ Listen to your family and friends as they know you best, and
are often the first to tell you that you are stressed. Their
insight may reveal situations or incidents that you weren't
aware of-such as consistently being short-tempered with one
or other family members. Seek their support to help ease
workload, which in turn will help reduce your "stress load."
➢ Learn to say no. If you find that you're being asked to do more
than you can manage-whether physically, emotionally or
financially-learn to set boundaries and remember that "no" is a
complete sentence.
De-stressing at work
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2) More work, less motivation – The survivors are also paying close
attention to how management handles the layoff and subsequent
redistribution of the work. With more tasks on each employee’s
desk, managers need a way to encourage strong individual
performance while reinforcing priorities based on ultimate corporate
strategic objectives.
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Strategic recognition programs:
• Drive productivity and morale by giving far more frequent awards
to far more employees.
• Use non-cash recognition, which produces twice the performance
boost as cash.
• Offer a hard, predictable budget to manage against.
•Become a scorecard for executives on increased productivity
“As companies tighten their belts during tough times, it’s important
to remember that money isn’t always what matters most to
employees. When it comes to encouraging employees to pour
discretionary effort into their work, the chance to make a difference
and be recognized for their contributions can provide a much
stronger incentive. Unfortunately, only 49% of non-management
employees report that their contributions are recognized by their
company when they perform well.” – Hay Group Insight, September
2008
Boost Morale
Strategic employee recognition programs reaffirm employees
in the value of their contributions, acknowledge the additional work
and effort they are being asked to perform, and allay rumors
through frequently updated executive messages. By using the tool
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to frequently recognize and encourage team members in a stressful
time, company leaders communicate clearly their commitment to
the wellbeing and future of the employees.
Increase Productivity
Strategic recognition acknowledges and rewards individual
performance, personal achievement, and team successes. By tying
every recognition to a company value demonstrated or strategic
objective contributed to, employees begin to see how their efforts
directly impact company success, giving them meaning and
purpose. This recognition reinforces and increases repetition of
precisely those actions and efforts the company needs from
employees to succeed. Deployed correctly, strategic recognition
programs also become a scorecard for executives on increased
productivity and what factors are specifically driving that increase.
Realize Savings
Consolidating multiple disparate programs into one
comprehensive, compliant and governable program saves 50-70% of
a company’s current investment in tactical recognition and incentive
efforts. Company leaders also realize cost savings through global
corporate program governance, tax compliance, and program
measurement and management. Studies show non-cash recognition
produces twice the performance boost as cash with praising
employees – saying thank you – equal to a 1 percent increase in
pay.
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According to the company, for the first time in six years,
India will see single digit salary increases. Importantly, the
data for the survey was collected from December 2008 to
January 2009 and Hewitt expects that the salary increase
projections may fall even further in coming months. Hence,
this period can be viewed as an opportunity to streamline
salaries and cut costs.
iii. Make organizations more performance-centric: The
recession has forced organizations to take a close look at the
workforce and identify the real performers. The non-performers
have either found their way out of the organization or have
been put on a short notice to ‘deliver or perish’.
iv. Identify real talent: The renewed strict focus on
performance alone for survival in organisations has not only
exposed low- and non-performers, but has also brought to the
fore ‘real talent’ in the organization.
v. Develop talent as leaders: A recession is the right time to
wisely invest in the development of talent, both in terms of
skill sets and in the form of future leaders. The focus has to be
on how much they are investing in their employees and what
skill sets they will need to grow their businesses in the future.
vi. Review and restructure policies: The mad pace of hiring,
training and appraising seems to have come to a screeching
halt. And if not to a complete full stop, the rate is low and slow.
This also gives HR the time to revisit its policies, compare them
with the best-in-class practices and restructure them for
maximum effectiveness in the present and the future.
vii. Build employer brand: Despite the fact that many
companies have put a freeze on hiring, both hiring talented
people and retaining them will continue to be a challenge for
HR. Hence, keeping the employer brand intact and re-building
the same could have a cascading impact later.
viii.Communicate and build trust and morale: Communicating
with employees not only remains one of the greatest needs of
HR, but is also an opportunity to build the trust and morale of
people during tough times. It is vital for HR to see that the
morale of employees does not sag while the organization is
sailing through rough waters.
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Cancellation of several benefit schemes
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employees a handbook in a language they can read and
understand.
• Layoffs are never easy. Ensure you are familiar with your
legal responsibilities in a lay off to minimize your
organization's risk. Be sure that you have properly defined the
criteria you are using to determine who will be let go.
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• Downsizing does require internal document maintenance for
your organization. As jobs are modified and responsibilities are
increased changes also must be made to your job descriptions.
CONCLUSION
To sum up we can say that the global financial recession which
started off as a sub-prime crisis of USA has brought all nations
including India into its fold. The GDP growth rate which was around
nine per cent over the last four years has slowed since the last
quarter of 2008 owing to deceleration in employment, export-
import, tax-GDP ratio, reduction in capital inflows and significant
outflows due to economic slowdown. In India, the impact of the crisis
has been deeper than what was estimated by our policy makers
although it is less severe than in other emerging market economies.
Since humans are an organization's greatest assets; without
them, everyday business functions such as managing cash flow,
making business transactions, communicating through all forms of
media, and dealing with customers could not be completed. So when
we are discussing the topic of recession and recovery from
recession, Human Resources Management plays a very vital role.
Human Resource Management must be able to address the
right kind of demands related to Human Resource functions during
the recession. Human Resource Management must play a highly
proactive role in managing the issues of global recession by helping
organization to enhance their abilities to learn and collaborates,
manage diversity, ambiguity and complexity. Human Resource
Management is responsible to manage the human resource of the
corporate to maximize the productivity, efficiency at minimal cost
and maximize profit. During this global recession, Human Resource
Management is facing the many challenges and changes in
organizational level, workplace and HR department level itself. The
challenges can be faced by HR Managers effectively if proper
strategies are implemented. The recession is the temporary
economic climate of the business world. It will be changed through
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more productivity at minimal cost and maximize profit at moderate
price of products in business.
BIBLIOGRAPHY
1. Economics and Political Weekly Journal.
2. International Labour Office (ILO), Global Wage Report 2008/09
3. Choudhari 2008, HRM Journal.
4. Mujtaba, 2008, HRM Journal
5. Kathleen Patterson & Gray Oster, HRM Journal
6. Elango R, Chief Human Resources Officer, Mphasis.
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