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# 4 The Global Financial Crisis and HR |
GFC: How HR is tackling the challenges CEO Forum The unfolding global financial crisis (GFC) is placing unprecedented demands on HR directors in the Australian operations of multinational companies. Pressures to cut costs are extreme, coming both from parent companies who face falling revenues in key global markets, and from local senior management trying to pre-empt what now seems an inevitable recession in the Australian economy. Just how HR Directors are responding to these virtually unprecedented operating conditions is the subject of a new report by CEO Forum: HR Responses to the GFC: How Australian subsidiaries are tackling the challenges. Based on a survey of more than 50 member companies of the International HR Director Forum, and featuring interviews with six leading HR directors, key findings of the survey are shown below: 1. A wide array of cost-reduction measures have already been adopted by virtually all responding companies. The three most common measures were reduced use of contractors/consultants (reported by 74% of companies), hiring freezes (in effect at 70% of companies), and headcount reductions (already applied at 66% of companies), but multiple cost reduction measures were in effect at almost all surveyed companies. 2. Most companies expect to further reduce their headcount in the near future. Just on 60% of surveyed companies expect to further reduce their headcounts in the next six months, and, of those, 28% expect to make work force reductions of 5% or more. 3. Salary reductions are also being targeted by some companies. Around one in six companies (17%) have already reduced salaries, and/or are planning to in the next six to twelve months. 4. Employee morale and engagement levels have been affected at a majority of companies. Just on 60% of companies reported that the onset of the GFC has had a moderate or significant effect on employee morale and engagement levels. This in turn has led many HR functions to make communication with employees a higher priority than ever. 5. While engagement and morale may be down, voluntary departures are also way down, leading to something of a 'prisoner' mentality amongst some employees. Almost two thirds of companies (63%) reported a decrease in voluntary departures, while only 4% reported an increase. This led some HR Directors to talk of a 'prisoner' mentality amongst some employees: they may not be really happy where they are, but they feel they can't leave, thus creating a new and very different engagement challenge. 6. As the GFC has bitten, local operating autonomy for many HR Directors has decreased. 40% of HR Directors felt that they had less autonomy than 12 months ago, whereas only 4% felt they had more. These HR Directors reported being more directed, more controlled, and required to provide more information to the parent than was the case a year ago. 7. Parent companies are likely to want deeper cost reduction than the local senior management teams. Almost half (43%) of respondents reported that the parent company was arguing for deeper cuts than those being proposed by local management, suggesting complex negotiations may be required on the extent and timing of cost reduction measures in the Australian operation. 8. Most HR functions face the GFC challenges with less resources than a year ago. Just on 60% of HR Directors reported that they had less resources than a year ago (and, of those, 19% have had resources reduced by 10% or more). The report was sponsored by Kelly Services, and a full copy of the report can be obtained from www.smartmanager.com.au . |
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