<b>Shyamal Majumdar:</b> HR to the fore

A slowdown provides an opportunity to bring the human resources department into mainstream business decision-making

Do companies require a full-fledged human resources (HR) department at a time when the chips are down? Corporate India doesn't have a clear answer, though a majority say in private that support functions such as HR or corporate communications have a very limited role to play during these times.

The head of a mid-cap company says he sees little payback from his investments in the HR department since such "soft exercises" are okay when the going is good but not when survival is the key word. A similar investment in marketing or production will give you a clear idea about the return but that's not the case with support functions such as HR, he says. Though that sounds like a short-sighted approach, the fact is, HR departments themselves should take a part of the blame. In annual review meetings to fix the budget for the financial year, the HR heads usually have no answer on the return on investment on the grounds that they do a lot of intangible things, and quantifying them are almost impossible. That's not logic that holds any longer since recent studies have shown that it is possible to establish a clear numerical relationship between good human capital management and enhanced financial performance.
 

So, there is no doubt that HR departments have to get out of the mindset of defining their job profile as merely ensuring that the forms are filled out in triplicate; and to pull up people who forget to fill out some insignificant details. If that's the job definition, CEOs wouldn't hesitate to wield the axe on HR departments when the going is tough.

But to be fair, that's just a one-sided view. Take the example of this private bank that closed down some of its loss-making divisions in India. Even before the company could ready the pink slips to some of its staff in these divisions, it was faced with an exodus from many departments - and they included people whom the organisation wanted to retain. The moment uncertainty crept in, people started feeling it's his/her turn next to get the axe and hit the exit button even if the salary on offer was at a discount to what he/she was getting. The bank wanted its HR department to spread the good word and keep back critical talent, but the pruned HR department found the job simply overwhelming. By the time the bank realised it was wrong in treating its HR department as a showpiece during good times and as a highly dispensable object during bad times, it was too late.

This is not to suggest that the HR department could have stopped the exodus, but at least no one would have blamed the bank management for not taking adequate steps to do so.

Here's why a good set of HR managers is invaluable even during a slowdown. Global corporations have often realised that a recession increases the stature and influence of the HR function and deepen the appeal and prevalence of good HR practices. For example, if your company is looking for ways to spend less or cut costs, the HR department is the best centralised function to plan and organise structured discussions with employees at all levels. Your employees individually manage so many factors of the business' day to day functions that they often have a better concept than the top management. They see the components that are not used to their maximum and they know when their own time is not being used most successfully. HR can play a catalytic role in this effort.

Here is another reason for not giving a short shrift to HR. Cost reduction can't be achieved by reducing employee numbers alone. The HR department is in the best position to see whether the company can think about alternatives such as in-sourcing production that had previously been outsourced; employee redeployment; staff sabbaticals and greater training and upskilling programmes.

What else can the HR department do during these tough times? You need a centralised department that can communicate effectively. More than ever, during a market downturn, everyone in the company needs to be aware of where the rupee is coming from and how the company is faring. A wide variety of communication mechanisms can be used, such as town hall meetings, CEO and senior management addresses, staff consultation forums, focus groups, regular email briefings, face-to-face communications, etc.

Many argue that's a job every departmental head can organise. But the point is in the absence of central monitoring and planning, leaving the job to an individual department will only lead to adhocism and the central message will be diffused to the extent of confusion, leading to wild rumours.

Also, HR can play a useful role in handling staff reduction by ensuring that this is handled in such a way as to cause minimal disruption to the company. A poorly-managed redundancy process can cost your business in the long term and damage your employer brand for ever. The short point is, slowdown is a period that should bring HR into mainstream business decision-making in the form of providing advice and mentoring managers on dealing with the HR implications of business decisions.