Top Companies - Recessions

Top Companies Should Learn of Past Recessions in Order to Build a Sustainable and High-Performing

One third of companies in Europe are planning to lay off full-time employees in a move which signals the scale of the collateral damage that the financial crisis is inflicting across the European corporate landscape according to a report published by The Boston Consulting Group and the European Association of People Management.

The UK has the highest proportion of companies preparing a major redundancy program for full-time workers: 57 per cent. In Russia, the proportion is 40 per cent, in Austria and the Netherlands, it is 38 per cent, and in France and Spain, it is 37 per cent. In Germany, Europe's biggest economy, the proportion is 32 per cent. Among industries, the automotive, consumer goods and industrial goods sectors have the highest proportion of companies preparing radical cuts in their workforce: 46 per cent, 45 per cent and 44 per cent respectively.

"Creating People Advantage in Times of Crisis: How to Address HR Challenges in the Recession," indicates that this strategy, while understandable from a short-term cost-cutting perspective, could have a serious and long-term impact on the company. Employee commitment is a key indicator of a company's culture: how employees are treated in bad times will be remembered by them in good times. Given that demographic factors mean that Europe's companies will face shortages of skilled staff in the near future, it is something that business leaders should not ignore.

When shedding jobs, companies should act with great care. "In the last recession, companies cut employees to save money only to discover that they then faced key shortages a few years later. Today, the recruitment challenges confronting companies are especially acute because the size of Europe's workforce is set to decline as a result of a 'double whammy' of factors: falling birth rates and the rising number of 'baby boomers' entering retirement."

The findings show that some of the most popular actions that HR executives are planning to take during this crisis were not only a relatively ineffective corporate response during the last recession but were also damaging to the long-term health of the company's culture. The three most popular planned actions are cutting back on recruiting (identified by 69 per cent of respondents), cutting back on company events (54 per cent) and cutting back on bonus payments tied to company performance (45 per cent).

However, when compared to the average action, the second two were less effective and had an unfavorable impact on employee commitment during the last recession. Another popular action in this crisis cutting back on training was also relatively ineffective, when compared to the average action. The action that had the most positive impact on employee commitment during the last recession hiring high performing employees of competitors is one of the least popular of the actions (19 out of 22) in this crisis.

"Companies should evaluate the strategies deployed by HR executives during the last recession. In this way, they can avoid making similar mistakes all over again."

The best practices of some of Europe's top companies have been used to develop a 12 point HR action plan to help companies reduce costs in a way that will not harm their prospects when the crisis comes to an end.

"HR executives can play an important role in helping their companies address the very real challenges that they face today and to prepare them for when the recovery eventually comes." These include:

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