10 tips to get people management right in a downturn
Thursday, 22 May 2008
Last Updated: Thursday, 22 May 2008
By Mike Preston
As the economy slows, getting staffing right will make or break your business. Here's how to lower staff costs, get rid of the underperformers and protect your stars.
People management is a challenge at the best of times, but when the economy turns bad, making the right human resources decisions can make the difference between survival and destruction.
The challenges come in many forms. Not only are there many tough calls to be made – on issues such as staffing numbers, incentive structures and recruiting strategies – there is often scant information about the economic and business outlook to base them on.
Business owners and managers need to do some crystal ball gazing, and they need to do it now. The signs of slowing economic growth are mounting by the day, with retail sales, car sales, profit growth, building approvals and business and consumer confidence all heading south.
To complicate things, the skills shortage also needs to be taken into account. The labour drought has changed hiring and firing practices, with some businesses “warehousing” employees anticipating future need and others operating with little more than a skeleton staff.
All that means the looming period of slower economic growth presents opportunities and threats for business owners.
Here are 10 tips to help business owners get their human resources strategy right in tough economic times.
ONE Head to the factory floor
Before making any big decisions, it is first necessary to develop a clear picture of your workforce. That means getting out of the office and getting down to the coalface.
Andrew Banks has survived through more than one downturn in a career as an entrepreneur in the fields of recruiting and human resources stretching back more than 20 years. Now running human resources firm Talent2, among other things, Banks says business managers often don’t have the information they need to make good decisions.
“It is the job of business leaders and managers to know exactly how well their people are doing, but over the years I’ve been persistently underwhelmed by how little medium and large business in particular know about where their high performance is coming from,” Banks says.
Poor performance management and measurement systems can be disguised by strong business conditions, but during down times a lack of solid information on workforce performance can lead to poor decision making.
“People sometimes end up making big decisions on what really comes down to little more than a gut feeling, and if you retrench half your workforce on that basis, that could be the worst thing you ever did,” he says.
This view is shared by Jim Downey, the principle of insolvency practice JP Downey & Co. He says the failed businesses he encounters in his work are often characterised by a management that are isolated from their workforce.
“Managers have to be out on the factory floor talking with people and gauging first hand how busy people are and how that matches up with the work volumes you expect. It is all too easy to sit in your office and pretend there is no problem out there until it is too late,” Downey says.
TWO Make the hard decisions
Once you’ve got a solid idea about your workforce’s capabilities, a quick decision needs to be made about whether cuts need to be made to get the business through the tougher times ahead.
A common although understandable mistake made by owners and managers of businesses that flounder during slow times is to delay hard decisions on downsizing their workforces, Downey says.
“You can understand the reluctance of employers to take the knife to their workforces,” he says. “It is a terrible decision to have to make, and particularly hard when views on the economy are vacillating between optimism and pessimism.”
The fact is, however, that sometimes a declining market and reduced workflow mean a business must reduce the size of its workforce by making employees redundant – and if it is a necessary step, the sooner it is made the better.
“If a business is struggling it is decision that needs to be made early in the piece. The longer you defer, the more expensive it becomes – pay rates go up, entitlements are accrued and then there is the multiplier of superannuation on top of that. It requires substantial dollars to make someone redundant and a time to recover from the short-term pain involved,” Downey says.
Continues next page...
Advertisement
