The people factor

The recession has forced a shift in human resource management styles at Irish organisations, which are communicating more with their employees even while cutting staff numbers and wages

A NEW STUDY OF trends and developments in Irish people management to be published this month shows a shift towards the hard skills with a focus on downsizing, making savings and cutting pay. This is being combined with an emphasis on improved and more intensive internal communications and employee engagement as employers try to keep morale up.

“What we have experienced since the autumn of 2008 is the greatest crisis since Ireland became an independent state and the worst of the set-backs experienced by other developed countries, which surprises international observers,” says Prof Bill Roche of University College Dublin, who has been presenting his initial findings to audiences over the past few months.

“International audiences are dumbfounded when they hear about the scale of the setbacks or reverses that Ireland has experienced and has had to contend with as well as being surprised at the pace of the recession’s onset.”

The detailed research says employers are commonly adopting “multi-stranded HR response programmes” geared to reducing payroll costs, but are also seeking to preserve motivation and commitment.

“We are seeing leaner but more influential HR functions while many trades unions are facing unprecedented challenges,” says Roche.

The 280-page study, funded by the Labour Relations Commission, was conducted throughout last year and finalised last January by Roche and Prof Paul Teague of Queen’s University Belfast, along with two colleagues from the Michael Smurfit Graduate Business School at UCD. It included a survey of 445 private and public sector managers as well as five focus group discussions.

The employers’ survey was drawn from a wide sample of senior HR managers and was weighted to take account of firms with more than 50 employees. In addition there were five focus group sessions around the country to get a qualitative feel for how people managers were addressing the challenges presented by the recession. The research involved discussions with 14 trade union officials on their experiences of management behaviours.

It also included an in-depth look at the innovative responses of six organisations: Sherry FitzGerald, Irish Life & Permanent; medical technology company Medtronics; Ericsson; Superquinn; and Dublin Airport Authority.

The wide-ranging research provides a picture of how employees were being managed and represented over the past three years of the recession.

The inclusion of a trade union aspect produced some interesting results, though not much clear evidence that employers were deliberately by-passing or marginalising union representation. According to Roche, there was a low incidence of the trade unions’ preferred manner of restructuring, which involves discussion with union officials before the employer proceeds, and a lot of direct consultation with staff instead. “In many cases, the sheer scale of the recession has meant that trade unions could do no more than acquiesce with managerial priorities. The position of trade unions is weakened further by subdued and compliant employees fearful for their jobs, pensions and livelihoods,” says Roche.

It is not uncommon during an economic depression for academics and commentators to predict dramatic shifts in management styles, especially within the human resources field, according to Roche. There is a view that the extent of the recession internationally has led to reduced demand for human resource managers. There has been a shift towards out-sourcing and off-shoring, especially of the more transactional aspects of HR such as payroll, pension and recruitment services.

At the same time, there is a detectable shift in the relationships between employers and employees, with a rise in employment insecurity. Employees are also expected to be more self-reliant and to find their own training and development opportunities.

There is an increasing “marketised” approach to work, with employees accepting a shift in risk transfer with more dependence on performance-related pay and widespread adoption of defined-contribution pension schemes.

David Ulrich, professor of business at the University of Michigan, and Cary Cooper, an organisational psychologist at Lancaster University, are promoting a more optimistic perspective. They both see the reaction to the economic downturn resulting in HR managers enjoying more responsibility and being seen as business partners rather than executive traitors who are too soft on workers and unwilling to cut costs. Faith in strategies that are believed to boost commitment is gaining acceptance among operational and financial managers who are seeing the advantages of employee engagement.

Some of the larger blue-chip companies are adopting “extreme strategising”, which involves more extensive consultation with employees on potential initiatives to overcome problems or to secure a market or cost advantage, says Roche.

A third strand of people management shifts identified in recent international journals, Roche explains, is of a more variegated reaction. This picture is not very clear and some firms have reduced their HR departments while others have grown them. Sometimes contradictory changes are evident along with a great deal of improvisation. This mixed response is not as clear-cut as the first two contrasting perspectives.

It was against the international backdrop of these three interpretations that the Irish research project asked whether we are seeing a transformation of people management practices in Ireland. They employed the distinction between hard and soft HR practices, a divide some practitioners do not like but academics find useful for comparative purposes.

Hard human resource management, in general, is reflected in downsizing, tighter attendance management, pay freezes and cuts in any bonuses as well as redundancies and clear attempts to boost productivity to reduce costs and safeguard revenues.

The soft alternative is a series of practices to boost motivation with more intensive communication, application of involvement mechanisms, talent management, staff redeployment to retain and reward high-performing employees with an emphasis on solidarity and organisational cohesion. It also involves taking back into the company work that had been out-sourced, so as to retain employment.

According to the Irish research, employers have been trying to balance hard and soft practices in response to the recession. About seven out of 10 combined hard retrenchment programmes with a range of soft practices that included emphasis on communications, employee engagement measures and the involvement of employees in developing response measures.

Nearly a third of the firms surveyed said their organisations combined hard retrenchment programmes with a stronger emphasis on employee communications.

When asked to identify the most effective people management practices in the recession, the most frequently identified initiatives were: communication and information disclosure; efficiencies and cost control; and engagement and consultation.

These practices were also among those strongly associated in focus groups and case studies with “good human resource management” in the recession. Internal communications and employee engagement seems to have increased markedly over the past three years, though not all managers have the skills to build commitment on the back of communication in hard times.

Cut pay not jobs

AFTER THE PROPERTY market collapsed, estate agent Sherry FitzGerald saw new house sales fall off by about 70 per cent. The company made it a priority to safeguard jobs while reducing costs. Initially this was achieved by cutting base salaries on a sliding scale, with the well-paid taking larger cuts and those on the lowest wages exempt from cuts.

Despite these actions, the deepening recession meant more cutbacks were needed. There were rounds of compulsory redundancies in late 2008 and in April 2009, and fringe benefits were suspended. A second round of pay cuts also affected lower-paid staff after employee feedback indicated that many felt that insulating any group from the cuts was unfair.

These moves were backed up by intense internal communications and a rigorous approach towards managing under-performance, promotion of talent and succession issues. Sherry FitzGerald reduced its costs by 48 per cent. Job cuts were necessary but the firm felt that overall staff morale had been maintained as the cuts were seen to have been introduced in an open and fair way.

Brothers and Bosses

THE HUMAN RESOURCES responses study interviewed 17 trade union officials on their experiences of the recession. A major negative impact for them was the change in the relationships between unions and employers. Good relations had existed during the boom and the bubble, but now sometimes the unions were being by-passed. Some officials experienced difficulties in securing negotiations while others were finding it difficult to resist unilateral cuts or what they suspect were opportunistic moves by some employers in a weak labour market.

Union respondents acknowledged that a gap had developed over the two decades of social partnership between the people running the unions and their members. Union members did not see a clear link between union representation and gains secured during national social partnership or employer-union corporatism.

The trades unions identified “good practice” as the union being called in by the company and being asked to work with them to achieve a solution.

They also complained of “sharp practice,” where managements ignored normal industrial relations procedures and processes, including agreed disciplinary procedures. These different management responses were evident in both the unionised private and public sector, according to the officials interviewed.

Gerald Flynn is an employment and communications specialist