Five HR Strategies in Dealing with Prolonged Low Growth

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1 Departments: Management Five HR Strategies in Dealing with Prolonged Low Growth KHO Hyun-Cheol HR Management during a Low Growth Period Concerns are rising that low global economic growth will persist for a long time. Even if a lengthy trough does not materialize, however, a robust rebound is unlikely to arrive soon. Under these circumstances, corporate management is under heavy pressure to keep costs in check, raise productivity and secure new growth engines. For Korean companies, where labor productivity is just 49 percent of that of the US, such tasks are especially challenging. To succeed, they will need to reshape how they handle their workforce. A low-growth period is characterized by limited resources, squeezed profit margins, increased risks and fragile emotions in the workforce. In response, companies need to stress practicality, fairness and vitality. Practicality involves injecting resources with an emphasis on tangible outcomes. This differs from the typical cost-cutting seen in a downturn. Fairness involves fair HR even with limited resources and growing employment anxiety. Vitality stresses the mental alertness and internal communications of a company. Direction of HR Strategy and Tasks AHead This paper presents five human resource strategies and major tasks based on practicality, fairness and vitality, to help businesses secure necessary capabilities for future growth. Recruitment: Open-Ended Hiring And Looking Internally Strategizing and swiftly responding to demand takes on more urgency during a low-growth period. More than ever a company needs to have July 2013 SERI Quarterly 99

2 Five HR Strategies in Dealing with Prolonged Low Growth Figure 1 Basis of HR in Low-Growth Period Environmental Change HR Basis Limited Resources Practical Benefits Practicality Worsening Profitability Heightening Risk Spreading Anxiety Rising Work Stress Empathy Pressured Atmosphere Fairness Vitality the proper personnel in place. Thus, waiting for a predetermined time to perform annual hiring, as is largely the case in Korea, fails to meet ongoing need. Open-ended hiring should be installed to employ specific talent that otherwise would go elsewhere. This approach will better ensure talent arrives on a timely basis and help reduce the cost and effort required to organize mass hiring. In open-ended hiring, casting a wide net is advisable. Advanced companies, even in periods of low growth, search for skilled people via so- cial recruiting to fill needs in business strategies. But before a new hire is sought, companies would be wise to actively look internally to fill roles. This requires them to recognize latent skills and talent that an employee possesses. Global leading companies have created teams within the organization in charge of internal open recruitment to find skilled people, while operating an Intranet system. They also utilize outside experts for fair employee selection that is reflected in decision making. Figure 2 Five HR Strategies and Tasks Direction Tasks 1 Recruitment Open-ended hiring and nurturing in-house talent Shift to open recruitment from massive regular recruitment Expand recruitment for new businesses HR Management Evaluation & Compensation Organization Culture Strengthening efficiency and fostering leadership Non-monetary compensation and fairness Raising vitality and work engagement Prioritize flexibility, such as worker relocation Foster key leaders for future growth Raise compensation effects via stronger motivation Nurture receptiveness via fair evaluation and compensation Prevent burnout and create an environment for self-engagement Create a culture where challenges with positive tension are formed 5 Empathy Concern and effective communication Ease fears by strengthening mental fitness Help form unity through close communication 100

3 KHO Hyun-Cheol HR Management: Improving Efficiency and Fostering Leaders Personnel management needs to be constantly aligned as business strategy copes with low growth. Reassignments and changes in duties need to be performed efficiently to successfully execute strategies. Employees should be placed in duties according to work priority and strategies. On the same note, it is also important to cultivate leadership in key jobs like R&D, design and marketing. Leading global companies strategically foster key employees who will lead next-generation industries. According to an annual global CEO survey, CEOs most important task in 2013 was fostering key managers. On-site customized training, rather than collective training, can help groom key managers. Evaluation and Compensation: Recognition and Fairness In periods of high growth, companies are able to provide uniform salary increases and bonuses. A weak business environment naturally forces companies to tighten their spending. However, management should not forget that recognition and encouragement are highly valued by employees and can reinforce motivation. Non-monetary compensation also can be applied to meet an employee s desires. For example, someone who is performance-driven can be given education opportunities. In open-ended hiring, casting a wide net is advisable. Advanced companies, even in periods of low growth, search for skilled people via social recruiting to fill needs in business strategies. In particular, monetary compensation itself may be insufficient for high-performers, so tailored compensation is necessary. Accordingly, companies should offer flexible work time, challenging work and opportunities for creating business ideas, all of which will help keep them stimulated and motivated. July 2013 SERI Quarterly 101

4 Five HR Strategies in Dealing with Prolonged Low Growth As employees become more sensitive in a slow growth period, fair evaluation is crucial. If employees believe job reviews are unfair, complaints will ensue along with sinking morale and resignations. Thus, it is important to build a transparent employee assessment system, which can lead to more accurate evaluations and fairer compensation. Regular training of evaluators can minimize evaluation errors and help communicate goals for personal improvement. Multidimensional evaluation, including peer review, should be utilized to raise fairness. Organizational Culture: Raising Vitality and Work Engagement A slow economy can have a heavy toll physically and mentally on employees. Workloads and working hours may increase, leading to burnout. Since time becomes more precious, managers must be more precise about work assignments to avoid unnecessary or repetitive effort. They also should allow employees freedom in deciding the priority and timing of their activities. This can reduce work stress and increase work satisfaction. Low value-added work should be integrated, eliminated or outsourced to raise work productivity. Pfizer has a Pfizer Works system that handles peripheral work for talented workers, allowing them to focus on their key duties. It is also crucial to maintain an atmosphere where innovation and creativity is encouraged for sustainable corporate growth. To this end, employees can be steered toward more challenging work. Empathy: Concern and Communication Companies can expect the mood of employees will be fragile when the economic climate is under stress. Asking employees to take on bigger workloads but without the budgetary strength to increase salaries and benefits will be an obvious challenge to management. Even if employees are understanding, the physical and mental strain of dealing with more tasks and possible feelings of job insecurity can affect work performance. Neglecting employees difficulties can result in major costs in terms of lost personnel, experience and productivity. Companies must be vigilant and take preventive steps to relieve employees anxiety and stress. Insecurities and complaints should also be resolved by enhancing communication, and by sharing companies management status in a transparent manner. Business performance and strategies should be shared with employees, so they can better understand the overall corporate situation. SAS broadcasts live CEO management briefings via an internal network, while taking questions in real time and providing responses. It is also important to strengthen daily communications so employees do not feel isolated. Internal social network and counseling systems can raise emotional closeness and connection. ProposaLS For successful promotion of the foregoing five HR strategies, a solid foundation should be created in three areas of scientific infrastructure, healthy organization and sound leadership. First, a data-based scientific HR management system should be built for effective use of personnel, to prevent employee-related problems, which tend to rise in low growth periods, and to prepare alternative policies. Advanced companies actively use big data in HR, micro targeting and deciding solutions. For example, Dow Chemical coped with the high economic sensi

5 KHO Hyun-Cheol Figure 3 Strategies for Sound Foundation Sound Organization Strengthen soundness of the organization by stressing core values Five Strategies 1 Recruitment Open-ended hiring and nurturing in-house talent 2 HR Management Strengthening efficiency and fostering leadership Evaluation & 3 Compensation Non-monetary compensation and fairness 4 Organization Culture Raising vitality and work engagement 5 Empathy Concern and effective communication Sound Leader Strengthen leader s health and resilience Scientific Infrastructure Build scientific HR management systems based on Big Data tivity of its business by using data to anticipate needed personnel and to minimize loss of talent. Second, companies should be consistent in applying their corporate values to all facets of their business activity, including codes of conduct, criteria for selecting and prioritizing tasks and resource allocation. frustration. They need to display resilience and flexibility. Keywords HR management, HR strategy, low growth period, open-ended hiring, organizational culture Factors that may undermine the basis of the company or upset the internal atmosphere also must be addressed. The risk of corruption rises when business growth stagnates. Also, work stress and shorter tempers may lead to misconduct such as rude remarks and team selfishness. Management therefore may need to highlight workplace etiquette and ethics. Third, leaders themselves should reflect on their physical and mental health to lead the organization in a tough period. Leaders should control their emotions in a highly uncertain period and maintain their balance. Leaders who had been creating high performance can tend to lose confidence and be overtaken by fear or KHO Hyun-Cheol is a research fellow at SERI. His research interests include corporate culture, human resources management and organizational development. He holds a Ph.D. in Sociology from Yonsei University. Contact: SERIKHC@seri.org July 2013 SERI Quarterly 103