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Companies face significant challenges from different angles as it was noticed due to political instability, economical remedies, and recently due to coronavirus pandemic. Despite the fact that various issues present a threat to organizations, they can successfully manage the situation and become more efficient. Human Resources Management (HRM) aims to help companies work successfully and be satisfied with their achievements (Wood, 2018). In the context of a downturn in the economy and the deterioration of the socio-economic situation caused by a drop in the population’s real incomes, businesses face a more acute problem of maintaining their competitiveness in the market, primarily by reducing costs.
It can be noticed that companies in the economic crisis face growing expenditures and the necessity to stay competitive. Companies recognize the potential adverse consequences of not addressing the economic changes that happened. They may include the reduction in the number of staff, the hiring freeze, decrease in bonuses and compensation, reduction of working hours, and, as a result, payment decrease that could lead to lowering the productivity and motivation of employees (Sucher & Gupta, 2018).
During the development of the current coronavirus pandemic and associated economic crisis, many managers of enterprises and organizations decided to reduce payments to their employees (Gopinath, 2020). Such steps have led to a reduction in costs; however, they also had the opposite effect. Part of employees stopped believing in the prospects of their companies, which led to an indifferent attitude to work, reduction of productivity and morale, and loss of organizations’ competitiveness (ILO, 2020). The most qualified part of the staff started looking for more stable work on the side. In the context of high uncertainty, the human resource management system helps to navigate through decision-making and adjustments in organizations.
Economic crises expose fruitful questions that executives ask themselves and consultants who can assist in resolving the major issues during the instability. How can the company address the financial crisis with the help of HRM? Are there any models or frameworks that would help the company to prioritize resource allocation? What to choose: reduction of staff or optimization of the personnel structure and reorganization? What should be done to support the motivation and productivity level and enhance them during the economic crisis?
During the economic crisis, any company recognizes that optimization or cost reduction can lead to decreased productivity and adverse consequences for the profit of the organization, deterioration of trust and morale that directly correlate with the quality of work, efficiency, retention rates, and motivation. Thus, the stakes are high, and the impact can be so damaging that it could result in the exiting of the market in the long-term.
There can be found different approaches towards resolving the major issues during the economic crisis that organizations face. Some analysts suggest focusing efforts on the motivation of employees as it is the most effective method of crisis management when employees face challenges in working together (McGregor & Doshi, 2020). In times of economic crisis, the main goal of human resource management is to increase labor productivity while minimizing costs (Vardarlıer, 2016). Staff motivation comes to the fore with two primary forms, material, and non-material incentives. The basis for applying motivation methods should be the development of stable criteria for the teamwork assessment.
Another way to deal with the economic crisis that is usually proposed is staff optimization and restructuring strategy. This is the solution that I would apply in the situation of instability and economic downturn. Optimization and reallocation of the current organizational and staff structure should be the beginning of introducing changes in the organization and prioritizing costs that should be eliminated. It is necessary to improve the organizational structure, eliminate duplication of functions, an excess of subordinates for one manager, and the personnel qualification’s inconsistency with the company’s needs. To support employees’ motivation and productivity level, open and transparent communication about changes should be introduced by executives and HR managers. Objective information about the company’s situation and plans to overcome the crisis, distributed among the staff, can increase employee loyalty and contribute to the growth of labor productivity.
There are views that optimizing costs and resources cannot be entirely useful to address the economic crisis. Some professionals advocate the opinion that cost reduction and cutting of resources should come first when executives prioritize necessary steps to overcome financial difficulties and adjust to the situation (Scoblic, 2020). Thus, there is a limitation of the optimization structure proposed to tackle the challenges that crisis brings. If the possibilities for staff costs optimization are exhausted, then more radical measures are taken by executives that usually decide to reduce the number of employees and cut their compensation and benefits.
Regardless of potential weaknesses of choosing optimization strategy over staff and cost reduction solution initially, optimization and reallocation of the current organizational structure can be more effective in comparison to a decrease of employees and expenditures (McKinsey, 2017). Primary staff and cost reduction may have potentially threatening consequences, such as loss of employees’ trust and loyalty that lower the company’s operations’ efficiency. Opposite to the adverse impact that reduction has, the optimization and reallocation of resources can help sustain the decent level of the organization’s activities and ensure that employees are satisfied with the situation (McDowell & Miller, 2019).
A system of managing human resources in an economic crisis should meet the primary goal of increasing labor productivity while reducing costs. Whether people will stay close to their leaders, show loyalty and effectiveness, and maintain their faith in success depends on the management team’s solution. The main result, namely the company’s recovery from a crisis, is possible if the human potential is preserved with professionalism, highly motivated staff, and optimization of the company’s organizational structure.
References
Gopinath, G. (2020). The Great Lockdown: Worst economic downturn since the great depression. IMFBlog. Web.
International Labour Organization (ILO). (2020). ILO: As job losses escalate, nearly half of global workforce at risk of losing livelihoods. Web.
McDowell, T. & Miller, D. (2019). Spans and layers for the modern organization. Deloitte. Web.
McGregor & Doshi, N. (2020). How to keep your team motivated, remotely. Harvard Business Review. Web.
McKinsey. (2017). Introducing the next-generation operating model. Web.
Scoblic, P. (2020). Emerging from the crisis. Harvard Business Review. Web.
Sucher, S. & Gupta, S. (2018). Layoffs that don’t break your company. Harvard Business Review. Web.
Vardarlıer, P. (2016). Strategic approach to human resources management during crisis. Social and Behavioral Sciences, 235, 463-472. Web.
Wood, G., Cooke, F., Demirbag, M., & Kwong, C. (2018). Special issue on: International human resource management in contexts of high uncertainties. International Journal of Human Resource Management (IJHRM), 29(7), 1365-1373. Web.
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