The current economic environment is forcing companies watch every move in their cash flows and grab every little opportunity to either save money, increase cash flows or defer payments. This gives managers more powers when negotiating with their employees. Managers are often faced with questions like “should we lay off employees or stop payments during this economic downturn? In the essay will highlight how performance management, team membership, adequate training, decision making, time tested proposal and pluralism can help managers and employees get through the current economic crisis.
How employees manage labour during economic downturn
There many opinions proposed to managers across the nation on how to raise revenues during this period of economic downturn so as to retain their employees. If the proposed suggestions are not implemented and if the economy doesn’t pick up soon, it will be necessary to reduce staff in order to retain cash flows and revenues. Economic downturns have increased unemployment rates and diminished the urgency of global war for talents as managers are undertaking mass layoffs to be able to survive in the unstable economy.
The available long term structural factors driving human capital are still unable to suppress the recession. Companies that have opted for short term remedies will be poorly equipped to deal with structural changes in global labour markets while managers who have strengthened human resources capabilities during economic recession will be able to gain momentum when the economy resumes (Flath, 2008, p.1).
Managers need to demonstrate strong leadership skills during this economic crisis. There need to be a fine line drawn between rewarding performance and ensuring longevity of the organisation’s prospects. Managers may use down turn to stop all variable payouts. Managers should use this time to seek employees’ views and suggestions. Employees would feel comfortable in volunteering to forgo some payments rather than the decision having been made my managers. This way, the managers can re-negotiate the payout time period and effectively requesting employees for more time to pay.
For employees to make this decision comfortably they need to feel they have an obligation and right towards ensuring the company pulls through the current crisis. Managers should show leadership skills by convincing employees that they are ready to improvise, innovate and find a solution to the current economic situation. Value system, ethics and fair play are very essential in such circumstances and leaders should demonstrate such attributes every day. Managers are called upon to show humility, confidence and will power during this economic downturn (Anandaram, 2009).
Flath, (2008, p.1) proposed a time tested proposal for management consultants in helping staff through this economic downturn. The elements include; endings, transitional phase and beginnings. Endings model means the organisation should honour its past and the current ways of work in order to get past the current economic downturns. Transition, managers should provide employees with guideline post and future promises. This strategy will help gain confidence in critical times and give them sense of direction to navigate through the hard economic times. Beginnings model requires managers to communicate organisation’s vision to employees, enact behaviours of the new organisation and renew the future in a positive and confident manner.
Managers in enacting change in organisation to align with economic down turn should be aware of impacts attributed to it such as employees emotional uncomfortability, loss of social fabric of the organisational culture, disrupted communication avenues and attempts to resume normal work patterns will be experienced. To get through these hard economic times, managers are required to be consistent and offer clear communication channels starting from top management going down wards to guide them through transitional phase and towards the new future.
Managers should be completely honest with employees in explaining what they do or do not know in bailing out the company in economic sanctions. The managers will then clarify to employees the difficult choices they are required to make including layoff to help then pull through (Flath, 2008, p.1).
Key planning Tips
In Ending Phase, managers are required to get the required numbers right at the first time it decides to lay off employees. It’s never a good idea to reduce staff numbers repeatedly. The reason for laying off workers is for organisational change and they can only be a one ending phase, so the organisation should use it wisely. The managers should effectively plan change strategy for the laid off staffs and the unaffected staff. Both groups should be involved in ending process. Economic down turn is a severe test and the organisation can only survive through a well managed process that will stimulate a new beginning (Flath, 2008, p.1).
In transition phase, the manager should provide job skill transition programs for laid off employees. These programs are important because the organization may need to take back the employees when the business gets back on track. The manager should communicate clearly both verbally ad in writing to the reason for lay offs and provide much support during transition time and treat them with dignity. The point to fair treatment is to lay a good example to the unaffected employees. The manager should also provide multiple avenues of support to laid-off employees, the unaffected ones and top executives as they are all affected by the decision surrounding organisation change (Flath, 2008, p.1).
In the Beginning Phase, once employees are laid off, managers need to rejuvenate the organisation with clear visions, missions and goals. They should constantly communicate the vision to employees as it’s essential for successful beginning. Top managers should stand out and take control in implementing new strategy, speak with one voice and frequently communicate to the staff of the new direction. In this phase, employers should readjust job descriptions, salary levels, performance measurement and organizational charts.
This is important because the organisation has changed since workers were laid off and the system should change to reflect organisation changes and organise for frequent town hall-style meeting that will offer effective communication to the new direction the organisation has chosen to follow. Employers will be required to periodically check if the new organisational change was successful through surveys or employee focus groups (Flath, 2008, 1).
Human resource is slowly moving from the old system of traditional model of HR management that dwelt on administrative process to “New HR paradigm that focuses on strategic dimension of human capital management. This new model requires HR professionals to acquire knowledge of the role of human capital in corporate strategy, have the capacity to maneuver a complex and global labour market and have the ability to engage employees to inject different values and expectations into the organisation (Freed & Battanlia, 2009, p.1).
Managers are required to actively participate in organisational activities so as to identify rising starts within the organisation, pick out mentor aspiring leaders and outshining organisation sod battles that encourage divisional gathering of talent. Economic recession gives managers opportunity to strengthen human resource capabilities including taking back talented employees caught in corporate layoffs.
Managers are required to skilfully manage lay offs by use of strategies such as offering generous severance packages for lay off workers as this will boost the company’s image and strengthen its capacity to attract more talented employees when the economy stabilises. Global war for talent was a common term used by human resource management in the 2000s and surprisingly this model has not be able to salvage the unemployment surges in this economic recession (Freed & Battanlia, 2009, p.1).
Companies who have invested in short term disturbances in global labour markets are risking loosing their long term competitiveness. Globalisation has increased the need for human capital as a competitive asset for companies based in high income economies that rely on profits to neutralise labour cost advantages of rising market competitors. The entry of generation Y into labour markets has raised new challenges for managers to compete for talented young professionals bringing in new different values into the work force.
So far, nothing in the current economic downturn seems to provide a solution to lessen long term drivers of global labour markets. Managers should sustain investment in human capital during economic downturn to enjoy a strong competitive advantage over organisations that neglect HR management when the economy resumes (Freed & Battanlia, 2009, p.2).
Managers should restructure traditional model of HR functions that focuses on administrative functions such as rules compliance, performance reviews, dispute resolutions and employee grievances to actively engaging in corporate strategies. HR should undergo transition from tactical model to mobilising human resources and treating it as a core strategic activity. Managers should support “New HR” because;
- There is recognition of human capital in corporate strategy for managers at all levels in the organisation where strong HR management exist.
- Human resource management is increasingly becoming complex and demands well trained HR profession to recruit the needed manpower and be able to manuever through diverse geographies and cultures.
- Profits gained from investment in new plant and equipment heightens the importance of high-quality employees as they expand productivity and opportunities for outsourcing of HR functions subsequently benefiting the organisation. Outsourcing of HR functions enables organisation free up resources to involve the strategic dimensions of effective labour management.
- Changing attitude towards work of the Y generation required managers to develop professional approach in recruitment and retention and pay special attention to retired employees.
All these factors raise the demand for HR professionals in any organisation that managers should put much emphasis on. They embrace the work force diversity, identify and develop rising stars and embrace the work force diversity as a competitive asset. Managers should align HR practices with labour force charismatic, for example; foresee future work force requirements, evaluate leadership pipeline trends and implement performance metrics that deal with both hard and soft skill employees (Freed & Battanlia, 2009, p.3).
Economic down turn will also be effectively dealt by managers stating clear links between human capital development and corporate strategy, mentoring and coaching young employees with current economic crisis, hurdle organisational structure to expandlateral rising opportunities and maximise deployment of the company’s human assets. Investing in human capital is not a high priority in these times of global downturn but HR management is. Managers should engage employee in professional development and technical training that will bail them out in crisis times as this stimulates their morale and sharpen their skills to push through during hard times. Re-hiring of talented workers caught up in cut-offs is essential for the companies long term growth (Freed & Battanlia, 2009, p.4).
Hospitality industry is often experiences fluctuating and unpredictable volume of customer demands. These industries therefore needs to offer good training and retain skills as a source of competitive advantage and the same time keep up with the day-to-day fluctuations in the volume of customer demands. Companies should learn from the current economic crisis to find, keep and train the best service workers. Taylorist strategies helps a company keep up with “lean production” and minimise labour wastage. The ad-hoc nature of hospitality industries inherits of “hire and fire” should be discouraged by managers as they contribute largely to the current economic crisis. Managers should construct virtual internal labour markets with the intension of upholding informal trust relations at the same time retaining vital skills for the future (Bowen & Youngdahl, 1998, p.207).
The difference between pluralism and unitarism is that managers in unitarism assume that everyone in the organization is a member of a team and are driven by common purposes. All the organizational parties work together harmoniously. Pluralism on the other hand accepts several alternative approaches, interest and goals contributed by members of the same organization. Unitarism approach is commonly practiced in US culture while Europe countries are more driven to the pluralism management (Human Resource Management, 2008, online).
In the current economic crisis, the relationship between finance, government and people has broken down in the UK over the years. Managers and corporate leaders need to invent new kind of pluralism that opens up economic life and extend the ethos of democratic living. Economic idea of pluralism is limited to mean that within an organization there can be variety of groups and beliefs that may be considered to solve the current economic crisis. Pluralism is a source of collective dynamism and energy that can get the organization through bad times (economic down turn) and rejuvenate our collective existence. Economic crisis is the major proof of the dangers of concentrating economic power and activity on a single dominion. Economic pluralism means merging all sectors of economy under one leadership run by a central government. In the past years, countries established regulatory and legislative systems to protect themselves from the government power. In pluralism society, decisions are spread among many groups. Organisations should wok together during this economic down turn to implement solution to the current crisis just as the Eurotunnel did (Estes & Rodriguez, 2003, p.202).
Demographic conditions have a huge impact on characteristics of team members, SWMT and organisational performance. According to 21st century birth rates surveys, fewer white males and higher percent of females and older workers will be able to keep up with the future work force. These trends are affecting the numbers of people who will be available to work as team members of SMWTs. These groups have different working schedules that the management may want to consider. For instance, older workers prefer part time employment, while women prefer flexible working schedules that will allow them to maintain family responsibilities. Demographic conditions affect the economic structure by affecting the composition of a team. A team enables the organisation to work in unity in attaining organisational goals thereby keeping the economy stable (Yeatts & Hyten, 1998, p.217).
Unions at the Australian telecommunication Telstra Company called up a strike demanding the company to negotiate package that would accommodate employees during the economical downturn. Rather than defending jobs, pay and working condition of employees at the company, the union has been instead focussing on securing a seat at the managerial table. Unions have not formed strong claims making companies free to make any deals thereby affecting workers interest. An employee at Telstra Company is critical of the role of unions in protecting interest of employees claiming that labour unions deliver poor pay outcomes. He continuers that seen a union wage real campaign (Holt, 2009). Unions should therefore represent the interest of employees by securing better packages during lay offs so that they employees don’t get abused by employers. Economic downturn has not had a significant impact on unions. About 26 percent were considering cutting cost, 14% were attracting more members while 13% said were loosing members. Very few companies were cuing down on campaign activities; some were considering a merger while 4% reported loosing memberships as employees were unable to pay for subscription (ERS Research, 2008, p.2).
Eurotunnel Restructuring Case Study
After 18 months of negotiating, creditor of Anglo-French Channel Tunnel concessionaire Eurotunnel consented to reconstructing companies debt cut from £ 6.2 billion to £ 2-9 billion. The complexity of the corporate and capital structure of the organisation complicated the Eurotunnel in the following ways; the asset was governed by both English and French laws, so the groups operated through a bi-national partnership structure composed of UK and French concessionaires and controlled by joint board of directors. Restructuring left Eurotunnel with an extremely huge debt structure that had only a single security package. The problem facing Eurotunnel was lengthy negotiations same problem experienced in labour unions in Australia.
What Australia unions should learn from this is to put employees’ interest first before their own. Lengthy negotiations would mean that employers would not put efforts in impacting attractive packages for laid off workers. The board was reluctant to agree the terms of a waiver with the selected committee to allow restructuring negotiation to continue. 2005 seemed fruitful when the committee finally agreed on the negotiation terms. The step was when the ad-hoc committee and the company agreed on a debt wire-down which granted creditors convertible debt instrument replacing Tier 3 debt and bonds (Rothschild, 2007, p.17).
Convertible debt instrument allowed the company to cut debt from £ 6.2 to £2.9 billion by converting company’s equity by 87% on a fully diluted basis. Managers of the company, Cadwalader and Rothschild played an important role by leading the restructuring negotiations agreements and devising a transactional structure which was accommodated by both sides. The company followed a safeguard procedure which required the company to drop all the claims against the debt company and allow the court to impose its own restructuring plan to creditors which could possible mean partial debt wire off with two thirds approval of creditors by value and the majority in number. In attaining creditor approval, MBIA being the largest holder of Eurotunnel debt, lead by example by supporting the renegotiated restructuring plan.
Creditors representing 73 percent of Eurotunnel’s financial creditors committee gave their votes in favour of restructuring at the meeting held on 27 November 2006. The court order is still pending on that matter. Meanwhile the plans were underway to launch a tender offer for the existing Eurotunnel Units by February 2007 while still waiting for the court order. This case study is a perfect example of how managers should step up and rescue their companies during economic downturn by mobilising their resources. They should all come up with one strategy and speak with one voice in implementing solutions to current economic crisis. This idea if implemented will save tremendous number of jobs and stabilise the economy (Rothschild, 2007, p.17).
Economic conditions have compelled managers to seek new ways of competing. Managers did not consider implementing teams until economic crisis forced them to look into more effective ways of producing quality products and services at low costs. When economic conditions are poor, managers are forced to provide adequate training in interpersonal skills, decision making and provide a base for conflict resolution. Managers should also adequately invest in time and human resources to be able to sustain them during this economic downturn (Flath, 2008, p.1 :Bray, 2005).
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