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Recession
A Recession is a contraction phase of the business cycle. A recession is a
decline in a country's gross domestic product (GDP), or negative real economicgrowth, for two or more successive quarters of a year.
National Bureau of Economic Research (NBER) is the official agency in
charge of declaring that the economy is in a state of recession. It define
recession as significant decline in economic activity lasting more than a few
months, which is normally visible in real GDP, real income, employment,
industrial production, and wholesale-retail sales. For this reason, the official
designation of recession may not come until after we are in a recession for sixmonths or longer.
Recession may be caused by Currency Crisis, Inflation,
National/Government Debt, Speculation ,War which may result to Bankruptcy,
Reduced sales, Stock market crash, Unemployment, Lower production etc. A
recession normally takes place when consumers lose confidence in the growth
of the economy and spend less. This leads to a decreased demand for goods
and services, which in turn leads to a decrease in production, lay-offs and asharp rise in unemployment. Investors spend less as they fear stocks values
will fall and thus stock markets fall on negative sentiment.
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In Current recession the main causes are US Sub Prime Lending,
Tightening of Liquidity, Rising oil prices and Capital Flights in emerging market.
Due to this it has become difficult for an individual to borrow, Unemploymenthas increased, Profitability has declined, Stock Price fallen and consumer
confidence has declined. RBI took measures recently to reduce Repo and
reverse repo rate so as to increase money supply in the hands of people.
Recession not always result in losses but also benefits(opportunity) like,
Lower interest for borrowing, lower interest rates, lower inflation, home at lower
price. Some of the sector which has major impact of recession is financial
services, export-import sector, IT sector etc. But another company leastaffected by recession during this phase also are Job portals like Naukri,
Monster etc
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Recession And Human Resource Management
The recession is about the creative Human Resources Management. The
HRM Function is asked to bring new ideas, to change the HRM Processes and
to develop or change the procedures. And this effort has to be cheap or it has to
cut the costs of the organization. The HRM Innovation is easy in times of the
business growth, but the recession is not good for big innovative HRM
Initiatives.
The HR Management has to focus on unpopular innovations during the
recession as the role of HR during the recession is to save money to the
organization. The senior management expects all the support functions to bring
innovative ideas and solutions which will lead to stronger organization, when
the next growth era comes.
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Affect Of Recession On Human Resources Processes
The recession has affects many HR Processes and they need to beadopted to the new situation and they have to be ready for the new reality. The
impact of the recession is not the same and many HR Processes can continue
their regular operation without any adjustment.
1.recruitment process:The recruitment process is the first HR Process to be affected by the
recession. The recruitment freeze is usually the first top management decision,
when the sales numbers goes down. As the top management wants to keep the
cash-flow under the control, the recruitment freeze is the first logical decision.
The recruitment after the recruitment freeze is more selective and the
company has to clearly decide about its priorities as the organization does not
carry additional people on its payroll. The top management decides about the
new strategy and the management is allowed to hire just the missing skills and
competencies.
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2.training and development:The training and development is the second HR Process to be affected by
the recession. The management decides about the cuts in the investments and
Human Resources have to find a way, how to keep the knowledge in the
organization.
The company can survive without training and development for a limited
period of time. The cost savings can be huge and the organization feels no
impact of the lower training budget. But the period has to be really limited as
the organization does not lose the talents and the internal know how.
3.compensation and benefits:The compensation and benefits is the HR Process, which is heavily
affected by the recession. The bonuses are not paid and the base salaries are
under a huge pressure. The compensation and benefits specialists are under
the pressure as they have to identify the areas in the organization to realize the
redundancies.
The recession is a good opportunity for Human Resources to introduce
the changes to the organization. But the reaction of HR has to be quick as the
internal opposition has no chance to form their forces.
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The Point HasTo Be Focused By HR Management During
Recession Are As Follows:
1. To optimize the manpower strength.
2. To take strategic initiatives to increase the productivity and efficiency of the
entire organization.
3. To work on compensation benefits.
4. Redesign training and development programs.
SolutionsToThe HR- Recession Problem:
1. Stop and prioritize the recruitment process.2. The bonus schemes have to be renewed.3. The talent has to be moved around the organization.4. Indentifying the real key employees and to keep them in the organization.5. Indentifying the real top potentials and to strengthen their development
program.
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Recommendations While Your Employer Facing Negative
Challenges During Recession:
1. Top management should know the contingency plan.
2. Do the brainstorming session with your top management and contribute in
their strategic planning.
3. A complete or partial job freeze, however, communicate to the workforce that
the company many continue to recruit key individuals even in difficult times
4. Review the employee performance evaluations to determine the key people
that company cannot afford to lose.
5. Flow of Communicate should be from top to down that will help in making
conducive atmosphere within the organization
6. Make prepare yourself for individual and group concerns therefore there
should be a proper counseling session.
7. To maintain a calm atmosphere
8. Review all HR policies, processes and procedures to ensure that they are
purposeful and contribute directly to the success of the company.
9. Suppose the company has to lay-off staffs ensure that there are no other
opportunities for them in other functions or divisions of the organization.
10. Advise managers to deal the process of managing change.
Managing Human Resources (HR) in a difficult economic environment is
even more demanding than working in times of rapid growth. Therefore the
task of HR is very important to maintain equilibrium throughout the hierarchy.
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How To Intact Your Employee During Recession:
Here is how to keep your employees with you and away from your competitors
during tough economic times.
y Differentiate Between Your Good and Average Employeesy Redirect Your Employees to Other Departments (Job Rotation)y Listen To Your Employees
y Keep Them Motivated and Busy (Communicate-Communicate andCommunicate)
y Show them the long term visionThe above steps will enable the employer to hold its team together during
a recession, and will even make bond between all of you stronger. Employees
should be motivated enough to stick to the employer during tough times and
put in the extra effort required for the organization growth.
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Hr Beating Recession 5ThingsTo Do
During recessions it is often HR and in particular, OD and Learning and
Development, who find themselves cut early in the redundancy process, that
is unless they have particular skills or know how in redundancy procedures.
Seen as a costly overhead divorced from the business, HR is an easy target. As
an HR professional, how do you make yourself indispensible during times of
redundancy ensuring you and your function, remain relevant?
1.Speak language of CEO and FD talk strategy and cost:A major criticism of HR is that it is seen to be too soft and wishy washy
and fails to understand hard business issues. Although this may not be true
in every case it is a sad reality that the number of senior HR taking their
rightful place on the Board of organizations has not grown significantly over
the past 20 years. One step away from the Board puts you one level away on
influence and impact.
Change peoples perceptions of you by speaking the language of the CEO
and Finance Director. Start talking in hard numbers talk about costs
hidden costs, capital costs, and ROI, investment. Initiate and lead top team
workshops to revisit the business goals in response to recession. If youre not
on the Board, offer to facilitate the workshop or meeting to understand the
issues and get closer to the decision makers.
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2.Be proactive in cutting your own costs:Play the good corporate citizen and revisit your own budget before
anyone else does. Identify areas of saving for instance, suggest using internal
facilitators such as senior managers to deliver training courses. This not only
saves costs but it means the courses are usually more relevant and specific to
the business. Encourage and facilitate online training and distribute free
resources and material readily available. For instance, subscribe to McKinsey
quarterly and provide weekly or monthly synopses on each article. Better still;
send targeted articles to the relevant departments for instance, an article on
how to reshape a customer department to the Customer Services Director.
Measure ROI on each and every HR intervention using established
models such as Kirkpatricks Model (1959). Reject every intervention which
does not reach level 4 impacting the performance of the organization.
3. Focus on the longer term:
During times of economic uncertainty it is typical for individuals and
organizations to focus on the short term getting cash in the door is critical.
This short termism which develops means that it is easy to forget the deep
skills and know how that has developed over the years and is critical to day to
day delivery of the business. Understand the core competencies the business
needs to deliver its strategy over the longer term and then undertake an audit
of the skills out there in the business. Highlight those individuals who have
those core competencies and ensure they are not the first ones to be made
redundant. Ask how long it will take the business to replace an engineer with
15 years experience in a particular expertise area as opposed to a new graduate
with 6 months experience? Take a strategic approach to redundancy by
focusing on the longer term and speaking in business terms.
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4.Get close(r) to your customers:HR is rightly criticized for developing and maintaining closer associations
and networks with other HR folk than with their own customers. Getting close
and personal with customers is critical in a recession. Customers dont stop
buying during a recession, they just buy more cleverly. HR needs to
understand what service/info/skills they are looking for, get these in writing
and develop a business case for why HR still has a relevant role to play.
5.Encourage use of experienced interims or consultants whohave worked in recessionary times:
Its been nearly 18 years since our last recession. A generation of
workers does not have the skill set or the experience to lead their organization
safely through a recession and out the other side. Identifying this and having
an action plan to counteract this will mean you are seen as proactive, strategic
and indispensible and definitely too valuable to lose as we move into
recessionary times.
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Case examples
Religare Security limited
Religare Enterprises Limited (REL), is one of the leading integrated
financial services groups of India. The company offers a diverse bouquet of
services like
Equities
Commodities
Insurance broking
Wealth management
Portfolio management services
Personal financial services
Investment banking
Institutional broking services
The services are broadly clubbed across three key business verticals-
Retail, Wealth management and the Institutional spectrum. Religare
Enterprises Limited is the holding company for all its businesses, structured
and being operated through various subsidiaries.
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Vision:
. To build Religare as a globally trusted brand in the financial services domain
and present it as the Investment Gateway of India'
Mission:
Providing complete financial care driven by the core values of diligence and
transparency.
Brand Essence:
Core brand essence is Diligence and Religare is driven by ethical and dynamic
processes for wealth creation
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Major HR policies before recession:
1.Leave Policy :As per Religare Policy, An employee can avail following leaves in a year
starting 1st Jan ending 31st March which must be sanctioned(unless its not
an emergency)
y Maternity leave:Maternity leave is provided as per provisions of the Maternity Benefit Act.
All female employees who have completed at least 80 days of service will be
eligible for maternity leave.Individuals will be entitled to a maximum of 12
weeks of maternity leave with pay of which not more than six weeks can be
taken before childbirth. However the entire period of 12 weeks can be
utilized post delivery.
y Casual leave:Casual leave is restricted to a maximum of three days on one occasion.
In case the individual remains absent beyond three days of casual leave the
entire leave will be adjusted against annual leave. Casual leave cannot be
combined with any other kind of leave. Casual leave cannot be accumulated
and will lapse at the end of the year.
y Sick leave:All Sick leaves in excess of 3 days should be supported by medical
certificate from a Registered Practitioner. Sick leave can be combined with
Annual leave.
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y Privilege leave:Privilege leave may be accumulated to a maximum of 120 days at any
time. Privilege leave can be encashed on the basis of Basic salary. Privilege
leave can be combined with sick and maternity leave. It can be availed only
after completion of at least 6 months in the org. In the event of a
probationer requiring privilege leave for compelling reasons, clearance must
be obtained from Regional Head. Such leave will be debited against
prospective entitlement. In case employee leaves before earning that leave
the wages paid for such period will be recovered at the time of settlement.
LEAVE RECORD
HR will maintain the leave record in Delhi and designated persons at various
locations would send the monthly attendance data along with leave
applications to Corporate HR. Details of leaves with leave applications availed
by employees will be sent to HR by Branch heads at the end of the month.
LEAVE RULES
In case of some emergency where prior sanction is not possible, information on
telephone/in writing must be sent to the concerned authority. Any absence
from office for more than 2 days without any intimation will lead to disciplinary
action.
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If an employee is absent from the services of the company without prior
written permission or intimation or overstay the sanctioned leave for 7
consecutive days , he/she will be deemed to have abandoned the service
voluntarily without giving due notice and the name will be struck off the rolls.It must be understood that leave is granted at the discretion of the
management. Employees must be prepared to adjust their leave in keeping
with the exigencies of their work.
Leaves cannot be claimed as a matter of right where the
exigency of service so requires.
2. Local Conveyance Policy:
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3.New Health Insurance Policy:Religare cover its employee under Group Health Policy with New India
Assurance Co. Ltd. It covers not only its employees but also their dependents
(as mentioned). The policy helps employees to take care of heavy financial
burden of treatment in hospitals for illness, disease or accident involving
surgery or not.
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The Salient Features of the Policy are given below:
1. The claim will only be admissible when there is a hospitalization for aminimum period of 24 hours. However, this time limit is not applicable to
specific treatments where due to technological advances hospitalization is
required for less than 24 hours only and surgical procedure is involved for
e.g. Cataract operation.
2. The expenses payable includes Room, Boarding & Nursing Expenses asprovided by the hospital/nursing home including registration and service
charges, Surgeon, Medical Practitioner, Consultants and Specialists fees
respectively.
3. The pre-existing condition means a medical condition which existed on thedate of cover in the policy for which insured employee received medical
advice and treatment or symptoms are such for which an ordinary person
would seek medical advice or treatment. Hence if any claim is arising due to
said conditions will be payable subject to certain conditions. However, there
is waiting period of 30 days for new joinees from addition in the policy
(which happens on 6th of every month).
4. The treatment taken in hospital/nursing home arising from or traceable topregnancy, child birth, including normal caesareans section only for first
two children with maximum sum insured of Rs 50,000 per case is
admissible . However, there is waiting period of 9 months for new joinee
from the day of addition in the policy.
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5. The new born baby is covered from day one and available sum insured for itwill be shared from available sum insured for maternity coverage i.e. Rs
50,000.
6. Relevant Medical Expenses incurred during period up to 30 days prior tohospitalization on disease/illness/injury sustained will be considered as a
part of claim.
7. Relevant Medical Expenses incurred during period up to 60 days afterhospitalization on disease/illness/injury sustained will be considered as a
part of claim.
8. The claimant will receive Rs.1000/- per day for hospitalization period inaddition to an admissible hospitalization expenses.
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4. Other Benefitsy Marriage gift
All employees of the company, on the occasion of theirs or their wardsmarriage, shall be given a gift in the form of a gift Cheque worth Rs. 5100/-.
The HR department shall coordinate the exercise and get the gift Cheque,
flowers and a greeting card signed either by the Functional Head or the
Managing Director.
y Late sittingsi. As far as possible, late sitting at work must be avoided. Still, however,
if employees are required to overstay at work beyond two hours, they
will be provided local conveyance reimbursement at the rate of Rs.
2.50 per k.m. to the maximum of Rs. 50/- per day.
ii. In case employees are required to attend office on an off-day, they shallbe eligible for claiming reimbursement of Local Conveyance at the rate
of Rs. 2.50 per kilometer to the maximum of Rs. 100 /- per day.
Besides, the employee shall also have the provision of claiming Mealexpenses @ Rs. 30 /- per day.
iii. These shall be applicable only till the Executive grade and not abovethat.
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5. Medical Policy
Medical Reimbursement: The medical reimbursement is applicable to all the
employees in the Executive Grade & above.
GUIDELINES
1. Actual medical expenses will be reimbursed against receipts/vouchers forall the employees and their family. The family includes:
y Spouse and dependent childreny Dependant Parents (In case of male and unmarried female employees)
2. An individual can claim medical reimbursement from the date of joining onpro-rata basis.
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3. Employees in Grade Executive & M1 have an option to include for medicalreimbursement in the remuneration (Cost to Company). The entitlement
depends on the grade of the employee.
The employee can choose from the options which are mentioned below
S.
No
Earlier
Grade
New
Grade
Amount(per
annum)
1 Jr.
Executive
L8 NIL
2 Executive L7 5,000
3 Executive L6 7,500
4 M1 L5 10,000
5 M2 L4 15,000
6 M3 L3 15,000
7 M3 L2 15,000
8 M4 L1 15,000
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6.Exit Policy1.Incase employee plans to leave the organization, he must inform the
organization 45 days before his date of leaving (except emergency case )
with the written reason for leaving the organization.
2.If employee has been terminated than he must return all the organizationbelongings within a period of 7 days. If he doesnt comply with it he may
be liable to legal actions. He would be payed his dues only when he
returns these belongings.
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Changes Done In Hr & Business Policy In This Recession Phase
1. Exit policy has changed. Now employee requires giving only 7 days timeperiod to leave the organization.
2. Employees job is directly proportional to the business he gets. Eachemployee must get business minimum up to 1.5 times the salary he or
she is taking. If he or she doesnt do so, he must be given warning letter
for showing performance for next 2 months; after that he doesnt
perform, than he may be terminated.(This policy is verbal to all managers
not in written)
3. For the local conveyance reimbursement only L8, L7 and L6 categoryemployees are applicable.
4. No leaves are sanctioned by managers. Since we are hard pressed withtime and cant employ back up for every employee for a period of 6
months no leaves must be sanctioned.
5. Office has been shifted from Nehru Place to Noida. Bus conveyance hasto be paid by employees @ Rs 1,500 per employee.
6. Benefit of long working hours has been discontinued for the period of 6months.
7. All employees of the company, on the occasion of their marriage, shall begiven a gift in the form of a gift Cheque worth Rs. 4,500/-.
8. Companys Laptop and Mobiles are shared by two to three employees.Two laptops are available in case any employee requires it at same time.
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Some Of The Malpractices/Practices Noticed By Us
1. In one of the place, regional head wanted to remove three people under him whowere not signing resignation on their own. But their performance was very low.
And they were in regional head A (name not known as HR person were talking
about this case informally) team for about an year and was the reason for
regional heads bad performance. Regional head told watchman not to allow these
three personnel in the organization for about a weeks time and hence issued
them notice for termination of their services. There case is now handled by legal
department of HR.
2. In other case, one of the manager asked HR executive the way he can throw outan employee who keeps on using employees resources for his personal use
thereby wasting his time in organization. For this HR advised to give a month
notice with proof to employee telling him he need to improve his acts or else he
may be terminated
3. In another case a female employee threatened his male manager through anoutsider that he needs to stop his acts or else acid may be thrown. This was due
to managers pressure on his team for showing performance. Employee was
terminated as soon as the information was provided to HR and police was
informed for the same. This case is fought by Legal department on the behalf of
manager but here employee has not filed case on real scenario. She filed case
saying that his manager misbehaves.
4. Employees bonus due on November has been delayed to March.5. Shifting of employees to Noida office resulted in resignation of27 employees. This
helped organization to downsize but in this process it also lost 3 of its best
employees. Bus service was provided after a months time so that people
themselves leave and hardworking ones remained with organization.
6. In order to improvise on its one of the SBU Fortis sales, they provided discount of10% on billing of medicine and 5% on other items.
7. There were rumors that high management level employees salary may be cutdown to 10-20%.
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Result of these policies
1. Employee Satisfaction :Employee Satisfaction was very low. One of the employee told that if
given a chance she will move to other organization even if it pays her equal
salary or low job profile. She was looking for an opportunity outside the
organization
2. LEGAL CASES:Legal department has to handle some of the cases in which their
managers were at mistake. Their burden has increased during this period.
3. Turnover Rate:Turnover rate has increased. Though it is taken positively during this
cost cutting phase but thinking long term is not at all a good idea because it
is also incurring huge cost on recruiting by paying to consultants to cover
some of the important positions
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Layoffs in kingfisher
Along with the IT & Financial companies
across the globe going for a massive lay off, Kingfisher Airlines is the latest on
to join the bandwagon. The most happening airline company of India,
Kingfisher Airlines, decided to go pink-slips to its employees and go for a
massive layoff.
Reasons of lawoff:
Due to volatile fuel prices burning a hole in the pocket of Airline
companies, they are forced to go for cost cutting measures. In the aviation
industry, Vijay Mallya-promoted Kingfisher Airlines is cutting 300 jobs, besides
returning surplus aircrafts.
As per the news, the developments are a part of a concerted company-
wide effort aimed at minimizing the impact of the ongoing turbulence faced by
the aviation industry, Kingfisher Airlines has, over the last six months,
embarked on a series of restructuring measures designed to achieve cost
savings and rationalization and operational efficiencies
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This move was expected from the in the aviation industry by the
Kingfisher Airline Company. Recent takeover of Deccan Airways which is now
known as Simplify Deccan, and the volatile ATF prices were bound to have its
effect on the aviation companies. Elaborating the reasons behind downsizing of
staff, he said as the process of integration of the two entities (Kingfisher and
Simplify Deccan) nears completion; the carrier examined the complete
organization structure of the airline and mapped the skill sets of the existing
talent pool with the projected talent requirements of the company.
Solutions for employees:
Many employees were counseled on their career path progression and best
utilization of their individual skill sets
As a token of goodwill, the carrier is offering all these employees a severance
package equal to two months gross salary for every completed year of service
(subject to a minimum of 3 months pay-out).
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Conclusion
y The human resource management has to co-operate closely with the topmanagement.
y The ability to attract and retain workers when times are really toughrequires leaders to be at their best.
y Issuing pink- slips and managing layoffs are the biggest challenges thatHr faces.