Global recession and emerging challenges for human resources management in india

world(prenominal) box and emerging ch everyenges for human alternatives prudence in indiaINTRODUCTIONMeaning of world(a) Recession A nicheal is a regrets in a countrys Gross Domestic Product (GDP) growth for two or to a greater extent(prenominal) than succeeding(prenominal) quarters of a course of instruction. A recession is also preceded by several quarters of slowing down. An preservation, which grows over of period of judgment of conviction, tends to slow down the growth as a part of the normal economic cycle. An economy typically expands for 6-10 geezerhood and tends to go into a recession for about six months to 2 years. A recession normally takes place when consumers lose confidence in the growth of the economy and spend less. These leads to a diminishd petition for goods and services, which in turn leads to a decrease in production, lay-offs and a sharp rise in un custom. Investors spend less as they fear personal line of credits values go away line of despe nny and thus stock markets fall on negative sentiment. Risk aversion, deleveraging and frozen money markets and reduced investor interest adversely arrogate t capital and financial feasts, import export and overall GDP of an economy. This is what exactly what happened in US and as a result of contagion effect get around all over the world due to proud integration in the globular economy. According to the world(prenominal) Monetary Fund (IMF)s latest Global Financial Stability report (GFSR) widening and deepening side effect from the US subprime mortgage crisis have pro form financial system and macro-economic implications. While the US remains at the epicenter, the backwash effect of the Ameri give nonice financial base in other countries reflecting the same overly benign worldwide financial conditions, an inattention to appropriate risk vigilance systems and lapses in prudential supervision. The global slowdown has its implications on the domestic economy. During the l ast three years Indian Economy grew at an average out annual rate of 8.6 per cent. For the starting line time the economy has shown signs of mental retardation and grew at 7.8 per cent in the first half year of 2008-09 (April-September). The service sector, which contributes more than 50% portion out in the GDP and is the prime growth engine, account to be slowing down, mainly in the transport, communication, trade, and hotels restaurants sub-sectors. The industrial growth has decelerated sharply during April-November, 2008 encompassing all the constituent sectors. In manufacturing sector, the growth has come down to 4.0 per cent in April-November, 2008 as compared to 9.8 percent in the corresponding period of last year. The slowdown occurred in the all the utilize-based categories, except consumer goods where it has accelerated.Meaning of HRM clements are an governings sterling(prenominal) assets without them, everyday concern functions such as managing cash flow, making business transactions, communicating through all forms of media, and dealing with customers could not be completed. Humans and the prob altered they possess drive an organization. Todays organizations are continuously changing. Organizational spay impacts not only the business but also its employees. In order to maximize organizational effectiveness, human potentialindividuals capabilities, time, and endowmentsmust be tweakd. Human resource focussing works to ensure that employees are able to run across the organizations goals.Human resource management is responsible for how people are treated in organizations. It is responsible for bringing people into the organization, supportering them perform their work, compensating them for their labors, and solving problems that arise. There are seven management functions of a human resources (HR) department that pull up stakes be specifically addressed staffing, performance appraisals, compensation and benefits, training and develo pment, employee and labor relations, safety and health, and human resource research.Global Recession and HRMThe financial downswing is impacting developed as well as developing economies are likely to get worse as the European countries, the US and others go into a deeper depression due to the increase in job losings which often follows recession. The slump in the market and increased job losings will have some grave implications for the changing task of human resource professionals. As the unemployment continues to increase, HR professionals are likely to be dealing with more stressed employees who are the sole wage earners in their families. As recession is becoming the part of the normal cycle of business. Therefore it makes just as often sense to plan for recession or downturns as it does to plan for good, economic times. OBJECTIVE This economic downfall has affected all the major sectors in India including IT, aviation, banking, strong estate, tourism, outsourcing, telecomm unication, etc with its consequence mainly on the HR policies of these industries. This article discusses Impact of economic slowdown on employment in India. The emerging challenges of human resource management in the global recession situation. The strategy adopted by HR personnel to deal with these challenges.HYPOTHESISIn todays economic meltdown where job cuts, loss, pay simplification, last come first go, insecurity of employment atmosphere prevail, HR has special responsibility to create ease environment to the affected by counseling, dis variationing burster and concern, preparing them for multi skill task, engaging and deploying in other required areas of functions like security, crisis management squad, etc.Global recession has raised various emerging challenges for Human Resources ManagersHR needs to be proactive ripe and try to come up with early interventions as for any organization to survive during recession.REVIEW OF LITERATUREThe global economic crisis is expec t to lead to painful cuts in the wages of millions of workers worldwide in the coming year. It predicts that the slow or negative economic growth, combined with super volatile food and energy prices, will erode the real wages of the worlds 1.5 billion wage-earners, particularly low-wage and poorer households. Between the years 1995 and 2007, for individually one per cent winnow out in GDP per 2 capita, average wages fell even further by 1.55 percentage point, a result that points to the possible effects on wages in the menstruation crisis. International Labour Office (ILO), 2007-08.The economic slowdown of the advanced countries which started around mid-2007, as a result of sub-prime crisis in USA, led to the spread of economic crisis crosswise the globe. Many hegemonic financial institutions like Lehman Brothers or Washington Mutual or General Motors collapsed and several became bankrupt in this crisis. According to the current available assessment of the IMF, the global econom y is intercommunicate to contract by 1.4 per cent in 2009.Even as recently as six months ago, there was a view that the fallout of the crisis will remain confined only to the financial sector of advanced economies and at the most there would be a change effect on emerging economies like India. These expectations, as it now turns out, have been belied. The contagion has traversed from the financial to the real sector and it now looks like the recession will be deeper and the recovery longer than earlier anticipated. Many economists are now predicting that this Great Recessionof 2008-09 will be the worst global recession since the 1930s.Choudhari 2008The financial downturn that is impacting developed economies are likely to get worse as the European countries, the US and others go into a deeper depression due to the increase in think over losses which often follows recession. The slump in the market and increased job losses will have some important implications for the changing tas ks of human resource professionals. As the unemployment continues to increase, HR professionals are likely to be dealing with more stressed employees who are the sole wage earners in their families. Mujtaba, 2008The global economic crisis has brought to the header of organizations the concepts of viability and survival which at these times digest be desperate pursuit. There are three main reactions in organizations, that is to say the corporate reactions in organizations, namely the corporate reaction to remain viable, the employee reaction to survive the turbulence, and the human resources reaction ( including recruiting and hiring talent, corporate organization, training and institutional learning). Kathleen Patterson Gray Oster, 2008 In emerging economies, growth is projected to slow down appreciably but still whitethorn reach 5.0 percent in the year 2009. The overall recruitments are lower for the industry this time as companies remain cautious amidst the global financial c risis. Srivastav, 2009 Growth in real wages has slowed down globally in 2008 because of the economic crisis and the trend is expected to continue in 2009, despite signs of economic recovery. Growth in average wages reduced from 4.3 % in 2007 to 1.4% in 2008. Real wages in the first quarter of 2009 also fell in more than half of 35 countries, compared to the annual average of 2008, Wage deflation deprives national economies of much needed demand and severely affects confidence, Minimum wages are an important policy tool for social protection and proposes that minimum wages be combined with other income support measures and/or tax reductions. ILO,2009The last time anyone faced a situation like this was in the 1930s, so if there is anyone who is 98 (assuming they should have been at least 20 then) and is coherent the rest of us are figuring out and learning on the fly, reasons Elango R, chief human resources officer, Mphasis. According to Elango, Managing the unknown, visualizing into the uncertain future, constantly calibrating and tuning the unsettleds and hoping to broad(prenominal) heaven that you are on the right path are responsible for increasing stress levels. He believes that the challenge is to take long term decisions without number the short term. This requires skills, knowledge and thinking that are not called on in a growth environment. In a growth environment, ones pre-occupations are different, and having seen growth for years most of us are skilled at this. The current business environment entails a delicate tightrope walk balancing both the business interests and employee interests. Elango R, 2008 question METHODOLOGYSecondary Data collected from various sources like * Economic Political weekly* HRM Journals* ILO Reports* Ministry of Labour date Labour BureauANALYSIS translation I. Impact of economic slowdown on employment in India. Ripples of recession leading to reduction in exports to developed countries are being felt by all the dev eloping countries. Credit availability and its cost have become major areas of concern. The combined impact of all these factors would be loss of employment and reduction of income leading to social distress. The International Monetary Fund (IMF) placed the estimated world output growth at 3.75 per cent in the year 2008 and 2.2 percent in the year 2009 in World Economic Outlook (WEO), November 2008, which represented a significant slide from a level of about 5.0 per cent in the year 2007. The global situation deteriorated rapidly after mid September, 2008 following the collapse of Lehman Brothers, one of the top five investment banks in the US, the collapse of American International Group (AIG) Bank and also of the mortgage lenders Freddie Mae and Fannie Mae. There has been a massive choking of credit since then and a global crash in the stock markets. The deepening of the global crisis and subsequent deleveraging and risk aversion in the global markets affected the Indian equity an d the foreign exchange markets. While the Indian economy has a sufficient internal ballast to withstand the impact of global recession because of overall strength of domestic demand and the predominantly domestic genius of financing of investment and exposure of exports to less than 20% of GDP, nevertheless some slowdown is inevitable.It may be ob dish upd from put back 1 that the total estimated employment in all the sectors covered by the survey went down from 16.2 million during September, 2008 to 15.7 million during December, 2008 resulting in job loss of about half a million. It is seen that the employment decompositiond every month during this period. It has also been observed that the employment in all the sectors/industries studied went up significantly over the period from March, 08 to September, 2008. Beyond September, 2008, it has however, decelerated at all industries/sectors level at an average rate of 1.01 per cent per month.Table 1 Trends in Average datePeriod Ave rage Employment in ploughshare (millions)changeSeptember, 08 16.2October,08 16.0 -1.21November,08 15.9 -0.74December,08 15.7 -1.12Average Monthly change -1.01 mention Government of India, Ministry of Labour Employment Labour Bureau, Chandigarh.From the above data it is observed that the management people and employees may assure anxiety around a number of issues during an economic crisis or downturn. The periodic average rate of employment loss during Oct- Dec, 2008 was 1.01 per cent whereas in January, 2009 the rate of decline has increased to 1.17 per cent. The increase in rate of change is mainly due to the decline in employment in IT/BPO sector in January, 2009 in compare to the increase in employment during Oct-Dec, 2008 and also higher rate of unemployment in Automobile Sector. The month wise employment trends are presented in Table 1.2.Table 1.2Trends in Average EmploymentSl. No. Period % Rate of Decline1 October, 2008 1.212 November, 2008 0.743 December, 2008 1.125 Jan uary, 2009 1.17Source Government of India, Ministry of Labour Employment Labour Bureau ChandigarhThe economic slowdown is expected to adversely impact the caliber of employment besides the quantity reflected by decline in employment. The quality aspect is measured in terms of decrease in average wages received by theemployees. Hence info is also collected on the total 12 earnings of workers. The results of the survey reveal that the average monthly wages have also declined by 0.26 per cent in January 2009. The average monthly decline during Oct-Dec, 2008 was 3.45 per cent. During the current survey the average monthly wages for frighteningct and contract workers are also collected. The findings of the survey reveal that average monthly decline in the wages are 0.25 per cent fordirect category of workers and 0.63 per cent for contract workers in January, 2009. The information is presented in Table 1.3.Table 1.3Percentage change in Average Monthly EarningsSR.No. Period Percentage Change1 October, 2008 1.742 November, 2008 -11.433 December, 2008 -0.54 January, 2009 -0.26Source Government of India, Ministry of Labour Employment Labour Bureau ChandigarhTable 1.4Month Wise Estimated Job Loss Sl.No. PeriodEstimated Job Cumulative Job LossLoss1 October, 2008 1,96,092 1,96,0922 November, 2008 1,17,550 3,13,6423 December, 2008 1,77,222 4,90,8644 January, 2009 98,156 5,89,020Source Government of India, Ministry of Labour Employment Labour Bureau ChandigarhIt needs to be noted that the rate of decline in employment in January, 2009 is higher than average monthly rate of the previous quarter, whereas the total loss of employment estimated is less than the previous monthly estimates. In this recession period HR play an important role to make the industry sustain and the entire economy flourish. This paper expresses the challenges of human resource management in the global recession situation. The role of the Human Resource Manager is evolving with the change in wa r-ridden market environment and the realization that Human Resource Management must play a more strategic role in the success of an organization. The most important challenge in recession period that is revolutionizing the Human Resource systems to identify, maintains, develop and utilize talents across the organization to their fullest capacities. The management of Human Resources has now assumed strategic importance in the achievement of organizational growth and excellence. As globalization advances and we move into the information age, organizations need to adapt to the changes in engine room and the changing issues in management of people. II. The emerging challenges of Human Resource Management in the times global recession The role of the Human Resource Manager is evolving with the change in competitive market environment and the realization that Human Resource Management must play a more strategic role in the success of an organization. Organizations that do not put their e mphasis on attracting and retaining talents may find themselves in dire consequences, as their competitors may be outplaying them in the strategic employment of their human resources. With the increase in competition, locally or globally, organizations must become more adaptable, resilient, agile, and customer-focused to succeed. And inside this change in environment, the HR professional has to evolve to become a strategic partner, an employee sponsor or advocate, and a change mentor within the organization. In order to succeed, HR must be a business driven function with a thorough understanding of the organizations big picture and be able to influence key decisions and policies. In general, the focus of todays HR Manager is on strategic personnel retention and talents development. HR professionals will be coaches, counselors, mentors, and succession planners to help motivate organizations members and their loyalty. The HR manager will also promote and fight for values, ethics, beli efs, and spirituality within their organizations, especially in the management of workplace diversity. These paper discusses unexpressedly a(prenominal)er important challenges of HRM due to recession and i.e Problem of recruitment. Managing downsizing program appropriately. Talent management. Stress Management. The Return on Recognition in a Recession.1. Recruitment and Recession.Recruitment industry is going through a tough time at this moment, the numbers have dropped drastically for the biggies and even recruitment agencies are battling for survival. Synergy Solutions provides recruitment services to companies in India and in US, the biggest challenge today is to find parvenuer and better ways to add value to the clients. There is a need to find innovative ways to emend recruitment ROI for the client. First things first, the base idea is not to wait and find ways to weather the storm but to take proactive measures to tide the wave. The world is changing very quickly to com bat recession and its about time we translate our thinking into action or else we will be late. The main reason being the companies who are hiring have recently made drastic cuts in their recruiting budget and are in the process of streamlining their side of the story.Companies (clients) has to demand greater accountability from recruitment agencies and focus on modify their recruitment ROI. Recruitment agencies / staffing companies who are agile in their operation and can quickly adapt to the changing environment will emerge victorious at the end of this recessionary period.Few areas where placement agencies should focus* Closely monitoring the way each industry is changing in current times and the way companies within the industries are changing their hiring strategy. * Build stronger relationship with clients thereby working closely with your come through points in the company to get clarity on their internal hiring plans and prepare accordingly. This will also help protect you r share in the pie from your competitors. * Clients will use this recession to re-negotiating the recruitment contracts with recruitment agencies. Since numbers are falling every day recruitment agencies will be concerned about their cash flow situation and as a result will have no option but to be forced to negotiate their existent contract. New client would wishing to start the relation on the terms advantageous to them, that means lower rates and tougher terms. * Look out for companies who are brave and would consider recession as the right time to recruit good quality talent at the right price. These are usually multinationals with deep pockets and would want to drive competitive advantage home. Be smart to attack these companies. * Train your recruiters to be tactically smart and agile in their actions. During the boom there were a lot of idle positions and even more candidates available so the match making activity was comparatively easy and largely govern by the good sentim ents in the market. During tougher times recruiters need to be smart and get themselves deeper into the fit gap process and ensure win win situation for the client and the candidate * Use of technology and social media applications to hunt better profiles as compared to job boards. Sites like LinkedIn, Facebook, Twitter and other social and business networking sites are fast becoming every recruiters exceed card. Lot of head hunting can happen over these networking sites. * If your salary component are on the higher side and you foresee that its going to be difficult to sustain then take adequate action now try and offer a mix of lower fixed and higher variable with an assurance that salaries will get back to normal once the market stabilizes. 2. Managing downsizing appropriately. Virtually every country has to face the impact of a global economic downturn which can be in the form of recession, slowdown, depression or growth recession. When a downturn occurs, the organizations hav e to suffer heavy losses and bear the brunt of slow revenue generation. During this period, there is also less spending by the consumers, less investment by the investors and more of savings. Even the sectors who have been boom in the boom period try to save more. Numerous causes can be attributed to the economic downturn and one of which affects the business is lack of skilled manpower. former(a) reasons could be the increasing population, lack of food supply, climatic condition, and entry of substitutes, inapt investments and technological changes. The shift in supply and demand hugely affects the entire business cycle. There can be acute shortage of cash supply leading to less or poor investments. only of this may ultimately affect the morale of the employees which should be a concern to every organization. Also, the decline in growth and decrease in profits certainly calls for certain top-of-the-line strategies to make adjustments to serve organizational needs. Managing the te ams or human capital at this juncture is a Herculean task. So, a manager should devise certain strategies in order to manage teams during down turns. Downsizing during this period is certainly not a good option because if there are merits of laying off of employees, there are some(prenominal) demerits too. What should a manager do to manage teams or workforce?* Hold special meetings During this unsafe situation, the organizations top most head or CEO should picture the meeting where the main subject should be the employees and their concern. If the head of any organization feels confidant, the whole organization feels confidant. Alternatively, middle-level managers and senior managers can conduct private meetings where they can console their subordinates. Also, give your workforce to ask questions and express their feelings regarding the business insecurity. * Motivate the employees The key to managing and retaining the employees during downturn is motivation. Apart from the speci al meetings being conducted, a manager should regularly be attending to their problems and constantly trigger the employees to have good mood. * Offering thought-provoking assignments and opportunities If you offer your teams the challenging assignments, they spirits will be lifted and they will manage to survive even in bad times. * Explain to them the importance of their existence in jobs There is no use crying over the botch up milk, just like economy turning to a bad shape and business showing downfall. Its better that you discuss about the new projects and subsequently recount them what role they have to play. How their productivity can make the organization grow, explain to them. * Initiate change by identifying key people There are few employees who are influencers and can bring about a lot of change in the organization. If these employees are given the right message to convince other team workers, the organization can move in the right direction.* Identify the achievers and reward them Even during this period, you should give your employees the bonuses and increments if possible. In this way, they will always remain motivated and perform.All the above points are crucial to letting the organization grow to greater heights and following the above strategies will promote the general health of the organization despite economic downturns.3. Talent Scenario during RecessionThe law of demand and supply mercilessly applies to human resources, also. During the economic downturn, companies were able to downsize by getting rid of redundant work force and dead wood. They also restructured the employee compensation (mostly by decreasing) to stave off financial losses. Only those employees were retained who proved their worth. The employees had to accept all kinds of compensation-related compromises spell maintaining the same or even higher level of efficiency and productivity. They could thus survive the financial tsunami.These survivors got the opportunity t o handle a variety of tasks that further sharpen their skills and made them multi-skilled. Thus, overall quality of talent has increased. At the same time, those who were out of job lost this opportunity to hone their skills in a new challenging environment. Adding to our woes, slashing of training and development budgets has led to a depletion of the number of skilled employees within the companies.Such steps from companies have created an altogether tricky scenario The quality of talent within the companies has increased (raising the bar of the talent), while the quality of skills available in job market has dwindled. Now, recruiters can hire the required quality talent not from outside but from inside their competitors workplace. While many have forgotten the term War for Talent, the phenomenon is slowly re-emerging. A study by Accenture has found that more than two-thirds of executives are now deeply concerned about not being able to recruit and retain the best talent. In todays global and super competitive economy, the war for talent is now global, not local. The survey of more than 850 top executives from the U.S, UK, Italy, France, Germany, Spain, Japan and China found worries about talent management were growing, with 67 per cent this year putting it second only behind competition as the key threat, up from 60 per cent last year. It may be worth noting that great companies such as Infosys, responded to the downturn by investing more in training. Instead of fearing of financial losses, these corporate focused on improving the quality of their employees skills. And the effect is visible in their financial results. Member of Infosys board of directors and head of HRD and Education and Research, T V Mohandas Pai said, In response to the economic crisis, we had stepped up our investment in training. This has made us more competitive in fulfilling clients needs today.The demand for talent in the market will never cease. safekeeping will always be a challen ge.New Definition of TalentWhile war for talent continues, the bar for talent also goes up. Old skills and competencies may not work. Companies now need salesman who does not sell products but does sell solutions production managers no longer control the operations, they are expected to innovate and improve productivity and quality managers need to study competitive products with more zeal and help develop better products and services. The employers expectations have changed and are set to grow passing Productive The talented employees need to be highly productive. They should deliver much more than they are compensated for. If that happens, employers are willing to give larger share to them. Multi-Skilled Companies have discovered that one way to decrease recruitment cost is to have multi-skilled employees. Multi-skilled employees help reduce manpower dependence, and the overall sum of all the multi-skilled employees is greater than the same number of equal number of specialist. Self-Managed and Self-Motivated Self-managed and self-motivated employees reduce managerial efforts. This helps organizations to have less number of managers. Innovative and Out-of-the-Box thinkers As the rules of the business change and competition increases, the existing solutions no longer work. Companies need employees who constantly infuse new ideas and provide out-of-the-box solutions to meet a customer need that seems to have no end. The Key to obtain Talent Lies in HR Policies and PracticesAs organizations increase their expectations from employees, employers too have to significantly change the way they manage the talent. Talented employees continuously need new challenges and goals they can achieve, and a continuous supply of information and resources they can use to solve business problems. And needless to say, they will in return demand more lucrative and effective compensations, a great work culture and friendly HR policies.Even during the recession, companies are re viewing and revising their leadership development programs. Survey after survey indicates that people who quit their jobs do so because of their relationship with the boss, not because of dissatisfaction with their job. A recession is a perfect time to take a hard look at leadership style and training to increase employee satisfaction with management. Five Important Talent Retention FactorsLets us consider five factors that can help organizations retain talent to meet the client and business requirements in post-recession era Clear Goals, Targets and Expectations You need to tell them what exactly you expect from employees and what should they do to meet these expectations. A talented mind without a direction is most likely to pull the plug than a mediocre or a dead wood. match Work Environment Talented employees have huge positive energy and they exhaust this energy to meet the deadlines. But often they need time to re-energize themselves. Organizations that want to retain talent ed employees need to provide a positive environment that allows them to re-energize themselves more often. Track Performance Goals and Provide Analysis Innovators and hard workers