Human Resource Management in the Recession

Bill Roche Professor of Industrial Relations & Human Resources School of Business University College Dublin Presentation to CIPD, VHI House, May 25 th 2011

The Irish Recession and the Labour Market

Worst economic crisis in modern Irish history and Ireland worst case among advanced economies:

 GDP (2007-2009): -10.9%  volume of retail sales (2007-2010(Q3): -16.7%  sharp rise in incidence of company insolvencies: +80% (2008-2010)  financial crisis – nationalization of the financial system & state capitalization (€70bn)  debt/GDP ratio (2008-2010): 44.4% 97.25% and may rise to c 120%  unemployment (2007-2010): 4.6% 14.6%  net emigration (2007-2010): - 67,3000 + 34,500  collapse of social partnership  pay: (2009-2010(Q3-Q3)):

Average Hourly Earnings

Private sector: -0.2% Public sector: -4.6% (excl 7% ‘pension levy’)

‘Human Resources in the Recession’

2011 Study by Roche/Teague/Coughlan and Fahy *

Survey of 444 employers Focus groups involving 30 HR managers Focus groups involving 17 trade union officials Six case studies of good practice in responding to the recession Irish Life and Permanent, Sherry FitzGerald, Dublin Airport Authority Superquinn. Medtronic, Ericsson * W.K. Roche, P.Teague, A.Coughlan and M. Fahy,

Human Resources in the Recession: Managing and Representing People at Work in Ireland

, 2011 forthcoming.

How is the Recession Affecting Human Resource Management?

3 Views Evident in Commentary and the Literature

1.

The recession as harbinger of HR cataclysm or a new ‘marketized’ employment model 2.

The recession as a ‘shot in the arm’ for HR and a catalyst for high commitment HR transformation 3.

The recession as contributor to eclectic change in HR practice

Research Issues

• How is the recession affecting human resource practices?

• How is the recession affecting the HR function?

• How is the recession affecting relations with unions? • Will the recession transform work and employment arrangements?

HR Practices & Programmes

Balance Between Cost Reduction and Maintaining Motivation & Commitment

‘hard’ HR practices

 curbs on pay & bonuses

HR Practices

‘soft’ HR practices

 communications  headcount reductions  engagement & involvement  cuts in working time  curbs on recruitment & promotion  productivity measures  training, talent management & staff - redeployment  larger pay cuts for higher-paid  in-sourcing work

direct cost reduction maintain motivation & commitment

Firms’ HR Response Programmes

• Multi-stranded HR retrenchment programmes combining a range of hard practices adopted in about 1 in 2 firms & similar incidence of mainly pay-freeze focused programmes • But employers in general seeking to balance hard and soft .

practices – controlling payroll costs & maintaining motivation & commitment:  7 out of 10 firms combine retrenchment programmes with a range of soft HR practices that include more emphasis on communications, employee engagement measures and the involvement of employees in developing response measures  3 out of 10 firms combine retrenchment programmes with heightened emphasis on communications

Most Effective HR Practices

• When asked to identify the most effective HR practices in managing ..

the recession, most frequently identified were: communication & information disclosure efficiencies and cost control engagement & consultation • These practices also among those strongly associated in focus groups ..

and case studies with ‘good human resource management’ in the ..

recession

Role & Influence of HR Function

• HR functions ‘leaner’ but radical restructuring not prominent % fewer staff in HR department 32 (70% firms cut headcount) less use of external HR consultants 43 costs of HR policies/processes reduced 17 HR department restructured 15 (64% firms restructured) business role of HR has been strengthened 59 • Influence of HR has increased significantly • ‘Business partners and working the pumps’

Relations with Trade Unions

• The majority of firms appear to consider the ..

participation and contribution of unions during the ..

recession in a fairly positive way • More than six out of ten firms stated that they had ..

actively engaged with unions in developing HR ..

options with which to respond to the recession • Almost six out of ten firms disagreed that the ..

actions required to respond to the recession have ..

been so urgent that there has been little time to ..

consult or negotiate with trade unions

Influence of Trade Unions

‘ Concession Bargaining’ Dominates the Picture

• Unions do not appear to have been able to exert much leverage on managements’ favoured measures for responding to the recession:  only a very small number of firms (5 per cent) agree that unions persuaded the business to change measures initially decided on to address the recession (e.g. from redundancies to short-term working)  a similarly small number (6 per cent) stated that unions had secured agreement on financial ‘claw-backs’ for their members when business conditions improve  The position of trade unions is weakened by subdued and compliant employees, fearful for their jobs, pensions and livelihoods .

Evidence of Transformation of Work and Employment?

‘new employment deal’ prevailing models high-commitment /market-driven model ?

of work and ?

model employment • Much tumult, adaptation, improvisation and innovation evident in the actions of firms – but are firms moving in any clear direction?

• Abiding appeal of received principles of good HRM – ‘

plus ca change’

• HR – ‘business partners’ but ‘working the pumps’ – strategically reconfiguring HR practices for recovery and beyond?

• Case studies reveal firms for the most part seeking to preserve existing models

Human Resource Management in the Recession: Some Key Conclusions

• Employers commonly adopting multi-stranded HR ..

response programmes geared to reducing payroll ..

costs but also seeking to preserve motivation and ..

commitment • Leaner but more influential HR functions • Unions mainly negotiating concessions & facing unprecedented challenges • Few indications that the recession is breaking the mould of established patterns of work and employment

Supplementary Powerpoints

Headline Findings: Incidence of ‘Hard’ HR Practices

% Firms % Employees at work

cuts in pay for all staff 40 19 cuts in pay for some staff 16 16 pay frozen for all staff 60 69 pay frozen for some staff 11 14 lower pay for new staff 23 17 compulsory redundancies 48 37 voluntary redundancies 30 39 changed pension arrangements 35 40 reduced overtime 63 60 Reduced part-time/contract working 21 26 performance managed more rigorously 47 50 tightened discipline, time-keeping, attendance 48 40

Headline Findings: Incidence of ‘Soft’ HR Practices

% Firms % Employees at work

staff trained for new roles in business 40 53 undertook talent management measures 21 32 staff redeployed within firm 43 56 cut training & development budget 51 54 communications more important # 89 employee engagement measures undertaken # 52 active involvement of employees in developing options to respond to recession # 55 higher pay cuts for senior staff 25 17 Higher bonus cuts for senior staff 12 20 introduced in-sourcing 5 7 # Proportion of firms ‘agreeing’ or ‘strongly agreeing with item

Combinations of ‘Hard’ HR Practices

Table 3.10: Combined use of HR response measures Firms Adopting General HR Retrenchment Programmes Firms Adopting Pay Freeze Focused Retrenchment Programmes Cluster Size

HR Measures Adopted:

50.2

Predicted % of firms

49.8

Cut wages and salaries for some or all staff

87.5

8.6

Froze wages and salaries for some or all staff Introduced lower pay/pay scales for new staff Introduced voluntary and/or compulsory redundancy Reduced overtime Introduced short-time working Reduced use of part-time and/or contract working Changed pension arrangements for existing or new staff

56.0

28.9

77.1

75.1

62.6

22.5

37.9

Managed staff performance more rigorously and/or tightened discipline, time-keeping and attendance

66.0

(Clusters identified through latent class modeling of unweighted data) 89.6

14.3

45.8

54.2

22.4

16.7

18.8

59.7

Combinations of ‘Hard’ and ‘Soft’ HR Practices

Table 3.10: Combined use of HR response measures Combined ‘ Hard ’ and ‘ Soft ’ Response Programmes ‘ Hard ’ Response Programmes Allied to Communications Predicted % of firms

73.3

26.7

Cluster Size

HR Measures Adopted:

General HR retrenchment programmes Employee engagement measures undertaken Communications more important Active involvement of employees in response measures Talent management measures undertaken

45.7

69.0

95.3

60.1

28.8

56.6.

22.0

71.5

26.4

3.9

(Clusters identified through latent class modeling of unweighted data)