Impact of Global Financial Crisis on HRM - Essay Example

Introduction The emergence of Human Resources Management (HRM) is associated to the historical development of the trade and of the finances in which organizations work. Accordingly, the decisions and roles of human resource managers and functions of human resource management accept to the shifts that emerge in the cycle of economy. Since 2008, international economy has been submerged in one of the most important structural economic recessions of current times. The origin of economic crisis can be identified with the North American economic downturn (Benson and Rowley, 2004), and its results have affected all international economic sectors of production, triggering a huge and deep job crisis which has directed to a profound social downfall around the globe. In Spain, the impacts of the crisis on the labor industry have been much more distracting as compared to the rest of the continent(Burke, 2013), and almost six million individuals have lost employments. In the shadow of this background, it became imperative to analysis what further impacts have emerged on the human resource management after the current global economic crisis and what roles of human resource management have been to react after the crisis. What are the major aspects in acquiring the employee involvement? And what changes have occurred in the HRM operations. The competency of a suitable communication strategy in a situation of crisis, both with regard to organizations and employees, comprises an important aspect which could be elaborated as the strategic responsibility of HRM when confronting with a shift in the economic scenario. In this context, the aim of this research study is to evaluate the response of human resource management in the current economic recessions. Afterwards, there will be a reflective learning about the topic which will highlight the major concepts and learning essence which have been acquired throughout the course. Human Resource Management in Economic Recession Acquiring sustainable competitive edge relies on creation and execution of adequate human resource policies in complex and dynamic contexts. The augmenting interest focus in the strategic management of companies has caused in emphasizing on numerous functions of companies with their responsibilities in the strategic management procedure. Strategic human resource management is the framework of the structured human resource activities and usage intended to facilitate a company to acquire its objectives. Strategic human resource management is a concept to take decisions on the plans and policies of the business focusing employment recruitment and relationship, development, training, reward, performance management and worker relations strategies and activities as well as an important element of the company’s business or corporate policy(Crawley and Swailes et al., 2013). The enhancement of companywide success is a complete aim of human resource management. Human resource policy is a design of human resource plans, policies and initiatives executed by a human resource division. HR strategies are set to determine what the company deliberates to do about its activities and policies of human resource strategy and plans executed by a human resource division and how they should be incorporated with the company strategy. External aspects like changing economic contexts, technology, demographic, uncertainty, consumer demands and aggressive competition context all impact hr strategies of companies(Fadda and Tridico, 2013). At the end of the current decade, the financial outburst had launched itself with a substantial speed over diversified demographic regions, taking a sensitive shape which created some evaluations to relate the crisis with previous recessions in history. The financial crisis speeded across the world and impacted the GDP growth rates and increased inflation(Global Economics Crisis Resource Center, 2009), declining corporate productivities. For instance, major European countries faced the crisis with numerous complex challenges which impacted both private organizations and public sector governmental firms. Therefore, following the period of comparative prosperity which expanded between 2000-2007 identified by the rise in GDP rates (4-8 percent per year) (Gunnigle and Lavelle et al., 2013), the continuous decline in inflation, reasonable financial deficit, decreased foreign debt, and a phase of severe collapse of external indicators were evident, accompanied by another severe decline in the living standards of people. A situation of crisis requires crisis management which refers to a procedure that might direct to a fast and adaptable organizational implementation to the particular situations of this phase. The organizations can manage any crisis more conveniently if they implement a proactive approach rather than a reactive approach. Human resource management is thus a vital component to carry out the decisions important to implement in order to secure both organizational interest as well as its employees. It also needs to resolve existing issues without devastating the strategic interests of the business, to reform the employee list and decrease salary expenditures without bearing the loss of talent employees, to react strongly without devastating the loyalty and credibility of the employees(Harzing and Pinnington, 2010). For an increased understanding of the particular nature and approach of the human resource management during the current financial downturn and in order to observe if there is a focus between the crisis aspects and the human resources management policies, it is important to realize the practical and theoretical structures of the idea in detail. Importance of Strategic Initiatives by HRM Since 2008, the international economy has suffered one of the highly important structural financial outbursts of current times. The financial crisis emerged from North America can be regarded to be its point of inception, as its results have had an influence on all international economic production segments, triggering a vast and profound job crisis which has directed to augmenting social downturn across the world. According to the current data emerging from the IMF and the ILO, the international economic crisis has led (GFC) to 30 million individuals becoming jobless-more than the amount for the international downturn (Hayton and Biron et al., 2012). During late 2012, the international unemployment standard will augment to 200 million individuals. As per the data from the OECD, joblessness in improved nations stood at almost 47.8 million individual-13.1 million further as compared with the beginning of the economical recession in 2008. This form of unemployment is known as cyclical and it is typically related to a nation’s corporate cycle (Iwu and Benedict, 2011). This cyclical unemployment initiates to happen during the prior part of the corporate cycle and it touches its zenith when the corporate cycle is at base of the trough. With respect to the general framework of the loss of jobs, the case of numerous countries of European Union is quite similar with each other (Mcdonnell and Burgess, 2013). Although in terms of extent the issue is variable in different nations. For instance, even though Spain is completed incorporated into the European Common Market and the Euro zone, the impacts of the financial outburst on the employment industry have been much more damaging in that nation as compared to the rest of the continent. Spain had sustained one of the top most growth ratios in the Euro zone before the destruction of its economy and construction divisions. Whereas in the United Kingdom, the amount of jobless individuals was around 2.5 million during 2012 and in Spain it was almost 6 million. In other terms, in Spain the percent of unemployment was 26 percent during 2012(Nickson, 2013). For numerous corporations, the GFC has been the cause for a huge number of shifts with regard to their work forces decisions over the past three year. The confrontations of leading and handling individuals were more complex by the economic downturn, because of the augment instability and uncertainty(P.Y and Lai, 2009). The emergence of HRM is associated to the historical emergence of the business and the financial context in which organizations function. Therefore, the responsibilities and verdicts of human resource management and their functions accept the situations of economic recessions. In trying to survive and succeed within their spheres or industries, organizations tend to align their strategies in the times of corporate or an economic circumstance needs flexible options. It is the situation where the employment or human resource decisions obtain from companywide strategy. In this scenario, investigating the impact of economic outburst on the roles and responsibilities of human resource management becomes highly critical for today’s business in order to ensure best possible management to tackle the situation. Among several other outcomes, human resource leaders have had to decrease the amount of employees, decrease working hours, shift operational mobility agreements or work force alignments programs(P.Y and Lai, 2009). The competency of the communication strategy in a situation of economic or any other crisis, both with regard to the organizations and employees, makes an imperative aspect which could be identified the strategic responsibility of the human resource operation when confronting a shift in the cycle of economy. Relied on the model recommended by  Rowley and Warner (2013), it can be confirmed that in this form of financial situation organizations bear both external and internal triggers. The external efficient pressure based from the economic recession creates a drop in requirement and an augmentation in unemployment, which impacts the international competition in the industry. On the other hand, the intrinsic management of the organization emphasizes on competency. This directs to pressure to decrease fringe and costs expenses, as well as to the requirement to validate the requirement for each and the complete amount of all expenses to be earned. Without any uncertainty, these issues impact the strategic functions of HR. during phases of economic progression, it was probable to emphasize on the implementation and structure of intricate policies of human resources or on the search for initiatives to help sustain talent and rise employee engagement. In periods of economic crisis, these bear a substantial reconversion. The role of human resources, adjusted with business strategy, needs an augmentation in innovation and an important amount of leadership potential in order to produce credibility and provide communication(Serriocchio and Tsakatika, 2013). Among various strategic activities that human resources should implement in the current economic crisis are adopting the potentials and efficiencies, operational relocation, outplacement facilities, multiple training, and basically planning the various contexts engaged in the required reformation. All of these initiatives align with the business strategy obtaining from the economic context and assist management to cope up with the complexities. A major aspect in the success of these initiatives is optimum interaction with employees in order to establish a mutual consensus. It is appropriate to think that communication is an important element which is most impacted in the situation of an economic crisis (Stone, 2011). The theories relating with the communication in global economic recessions are based on two generalized models mostly referenced in the textbooks and literature: pre-crisis and post crisis approaches and also the detection-cure-containment-revival-learning approach. Both functions expand the requirement for crisis management and the learning outcomes that any firm should extract from these situations. Therefore, further research is imperative in order to recognize crisis management efficiencies and the performances of the human resource management which can facilitate the opportunity for companies to tackle the economic recession and sustain business productivity and employee involvement. Role of HRM in Current Economic Crisis In today’s organizations, the optimum approach and leadership of the organization’s work forces can hugely impact the organization’s complete outcome. A strategic assumption to HRM is important, particularly in emerging organizations. From ascertaining the right recruitment to retaining top talents, human resource management is critical to establishing not only workforces, however the entire company itself. In spite of, becoming strategic needs that all HR attempts become integrated and combined under a uniform combination of objectives and aims (Thorhallsson and Kirby, 2012). Crisis situation is an event to rediscover the strategic responsibility of human resource managers in enhancing crisis management relating with the leadership. Moreover, human resources actions can participate optimistically as well as pessimistically to the effectiveness of the organization through hiring and growing work force. This becomes dexterous through strategic association where the activities of human resource management are in line with the objectives of the organization’s total policy, and with the plan of crisis management in specific. The global economic crisis impacts the whole business, and needs a team to tackle the issue holistically and HR is an important division of this team(Warner and Rowley, 2004). Furthermore, in the majority of situations, the leadership group (comprising HR) is not capable to handle the crisis situation, and ill management of companywide crisis can create devastating outcomes for an organization’s productivity, reputation in the industry and systems of human resource management. Altering the emphasize of organizational strategy in the course of a financial crisis engages massive measures from HR department. From the procedure of probably downsizing the organization to new determinations of employment statuses, to the reforming and rebalancing the performance-assessment and remuneration mechanisms-everything should be reevaluated. The economic crisis requires the development of a human resource policy that can be aligned to an entirely new and totally altered economic context and to a relating business policy by most organizations (Zanko and Ngui, 2003). The role of human resource management is hugely crucial in executing stable business policy to prevent corporate effectiveness, and in specific circumstances the very existence of the business. A reassessment of strategic options is important when an organization shifts and reforms its HR operation. Effective communication during crisis thus becomes the key component in such situations, and it is expected that the important human resource leader role comprises in facilitating these measures. Concluding Remarks and Recommendations While the fundamental impacts of current financial crisis on human resource management has been a focus of modern corporate world, little concentration is provided to the influence that such hard times can create on an organization’s potential to successfully handle its employees. Businesses today must compete not merely with decline in economic adaptability for their organizations however with the effect that a financial recession has on the needs of employees, behaviors and inspiration. Since they normally consider of people expenses as benefit and payroll costs, numerous organizational managers’ prime reaction to a demand for increased productivity and enhanced cash deposits is to decrease the number of employees and investing on employee improvement programs not considered as important to organizational profit (Benson and Rowley, 2004). This may be an outcome of a historically production based financial context in which organizations were more dependent on sustaining material resources and had diminished option but to remove employees in order to cut expenses. Organizations must change this perception and understand that human resources are no longer regarded as a material since they are unique. Through terminating employees, particularly those with high talents and with exceptional skills, companies pay effectively because of the pervasiveness of separation benefits along with other exit expenses, to let somebody else acquire the assets most probably to offer value in the prospect, a shift that resource managers will accept is the last point a brilliant investor will commit to enhance his profile. An organization that funds in its employees during a financial crisis can establish an authentic competitive edge over its rivals who do not understand the importance to such a perception(Burke, 2013). Through evaluating the discrete advantages that every function of human resource management offers to its numerous ranges of organization, a firm can recognize resources, in the shape of employee reinforcement systems which most effectively raise the worth that highly talented employees offer to the organization. Human resource management entails a strategic responsibility in the existence of a business. In the current phase of global economic crisis, the HR managers must not merely innovate, however they must also perform as change catalysts, strategists, counselors, inspiring leaders and mentors. They must implement an employee-centric approach of management in place of the go-get-them perception. The latter concept will not only decrease the morale of the people but will also compel the talented people to leave the company (Crawley and Swailes et al., 2013). Therefore, retaining the precious talent is a vital aspect for any human resource management. Employees are actually the core of any business and they can contribute to unimaginable success for any organization, if only they are managed rightly. In a global economic downturn, human resource leaders must establish an appropriate strategy to keep the highly potential people on board and simultaneous, replace the unproductive employees so that organization can be saved from any damage. The global financial crisis is compelling organizations to expand their economical assets to buffer the impacts of restricted revenue as a consequence of the sensitive reduction in the demand of their services and products. Competency is the core component to the existence of any business in this form of economic situation. Operating the firm at the least probable expense should be the preference of human resource management; however it must be done appropriately. For the aim to acquire that, organizations must keep a combination of talented and efficient work force which will reinforce the organization in generating sales, widening their operations, creating innovative services and products to keep the outcomes as competent as possible(Fadda and Tridico, 2013). Personal Reflection After understanding and learning the concepts described in this research study, I have realized important concepts related with the human resource management in times of global economic crisis. Human resources experts mostly struggle to acquire the assets they require to successfully handle people in the organization, and the complexities that they confront are increased when financial conditions get adverse. The existing international economic crisis has caused the majority organizations to re-evaluate the alignments of assets more important and as a consequence, companies of diversified sizes have determined a substantial number of employees at all levels of potentials. Since human resources departments attempt to retain their employees involved, encourages, and adequately trained and skilled, they confront numerous challenges comprising decreased human resource recruitment levels and plan investment, psychological complexities for employees handling with the recession, and employees with various generational perceptions and preferences(Global Economics Crisis Resource Center, 2009). These and various other complexities make it complex for HRM to not merely handle their employees through the recession however to ascertain that their organizations are adequately recruited with skill when economic circumstances enhance. In this research study, I have evaluated the major exclusive confrontations that human resource managers suffer as an outcome of economic recessionary situations and offer recommendations for not merely surviving the economic downturn however ascertaining that a company is ready to contend when expansion comes back. I assume that organizations manage their procedures of human resource management utilizing an investment profile approach whereas they align their limited investment for human resource initiatives during an economic crisis and beyond to those measures that offer the highest financial incentives. Through estimating the advantages practical from investment in different assignments, organizations can ascertain that the economical assets they align to human resource measures offer them with brilliant returns and strategic benefits over their rivals (Gunnigle and Lavelle et al., 2013). These complexities place limitations on a human resources manager’s capability to successfully handle his employee in all factors of the HR operation. Ambiguity in corporate performance and in the labor industry offers a HR manager with confrontations in expecting both supply and demand for labor. When hiring finances are cut down, recruiting managers can try to successfully discover talented work forces when they require them. Little budgets for training and development can damage a worker’s skill to acquire the needed skills and knowledge to successfully conduct the assigned jobs. Organizations are confronted with challenges, both morally and practical, regarding the suitable standard of compensation for existing and new recruits. Although numerous organizations suffer these issues even in stable economic phases, they are pressured in times of financial turn down(Iwu and Benedict, 2011). Through this study, I have also learned about the most important influences of current economic recession on human resource management procedures. Primarily, I have learnt that how the recession influence on individual behaviors of employees and how the manager handle those fluctuating behaviors during the time of economic outburst. Also, how the economic outburst influence on a human resource manager’s restrictions his skill to handle employees. Within each scenario, I have observed the impacts of a crisis on the procedures and strategic human resource management, comprising HR planning and the construction of jobs as well as performance systems and the influences on four operations of HR. References Benson, J. and Rowley, C. 2004. The Management of Human Resources in the Asia Pacific Region. Routledge. Burke, M. 2013. Who benefits from the crisis in Ireland. [e-book] [Accessed: 9 Mar 2014]. 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