An article by Dr. Margaret Gremli PhD
Examining The Past: The Status of HR in the 1990’s
To begin a discussion on managing global HR issues in today’s challenging times, it is necessary to revisit the 1990’s. Preparedness of HR professionals to embrace today’s challenging times can be traced back to the legacy of both global and regional happenings of this decade. The positive economic climate of the 1990’s had a direct impact on the management of human resources across the globe. At this crucial time, HR professionals were propelled onto a path of ever-changing demands and uncompromising challenges…
In the nineties, developing countries in Asia benefited from strong and consistent economic growth in the United States and Europe. From 1990 until 1996 the annual real GDP growth of East Asian economies (with the exception of Japan) averaged 6 – 8 percent. Some countries even exceeded 8 percent. Thailand, for example, averaged around 10.5 percent between 1986 and 1990; and an impressive 8.3 percent between 1991 and 1995. The economies of China, Hong Kong, Korea, Singapore and Malaysia and other East Asian countries followed suit with an average of 5 percent annual growth rates between 1986 until 1996.
The role of HR during this growth period was one of supporting management in coping with business expansion. In Asia especially, rapid growth created more and more jobs so that recruitment and retention of staff became a high priority. The HR function in Asia was tasked with filling the jobs created by incoming investment which went hand in hand with expansion into new markets and concomitant economic growth.
Jobs created in this growth period needed people with technical skills and/or managerial experience. Growth in the talent pool scarcely kept up with this demand. Career paths were telescoped. People were often hired with minimal experience and then promoted prematurely after fulfilling the basic requirements of their existing role. Staff turnover was a primary concern since this impacted recruitment and training costs.
On the other hand, given this trend, employees expected rapid promotion and salary increases to match, regardless of individual or company performance. Companies risked employees leaving for better paid jobs elsewhere and, based on market trends, they had little choice but to grant salary increases across the board. HR professionals across Asia became adept at identifying and recruiting skilled workers, attracting experienced professionals and negotiating attractive compensation and benefits packages. They kept their finger on the pulse of the market to ensure that their companies’ compensation levels remained competitive.
During this period, there was also a focus on technical skills training and management development. Technical skills training was needed to upgrade the skills of an expanding workforce, while management development focused on providing young and often inexperienced managers with leadership skills along with exposure to world-class management practices. Growing economies fuelled the blossoming field of training and development.
The Economic “Fall-out”
Then, in 1997, it seemed as if the rug was abruptly pulled from under Asia’s feet. The economic crisis of 1997 started in Thailand and quickly spread throughout Southeast Asia. The devaluation of the Thai baht in July 1997 sparked a phenomenon that had an impact on practically every industry sector across Asia. In 1998, the developing economies of Asia shrunk by an alarming 2.4 percent – the first overall decline in 14 years. Among others, Malaysia, the Philippines, Hong Kong, Singapore and South Korea experienced negative growth. Indonesia and Thailand were particularly affected. The concomitant bursting of the dot-com bubble led to the largest decline in the US stock market since the 1930’s and, not surprisingly, the Asian stock markets followed suit.
The impact of this economic crisis on HR practitioners was significant. They were called upon to do a complete “U” turn. There was no longer a need to recruit and train. Instead, strategies for retrenchments and salary freezes became an imperative. Training budgets were cut and cost control became a high priority. Rapid changes in economic climate forced HR professionals to adapt quickly to changing circumstances. Rather than being valued for their recruiting skills, companies valued HR professionals who knew how to downsize, cut costs, and manage layoffs.
In a survey conducted by the Mercer Human Resource Consulting Group in 2001, the top four reported business responses to the economic downturn are all too familiar:
- hiring freeze (60 percent of respondents);
- reduced salary increments (34 percent);
- retrenchment (28 percent); and
- wage freezes (24 percent).
While these short-term solutions may have been necessary to survive the economic downturn, they were unhelpful in preparing companies for future uncertainties in the economic climate. Since then, many economies and business sectors in Asia have been on a roller-coaster ride. HR professionals have been bombarded with continuously changing expectations as a result of wide swings in the economy. Retrenchments due to the downturn were followed by pressures to hire or rehire to meet renewed growth. Demands to keep salaries competitive once again came on the heels of dictates to freeze salaries.
The Crises That Followed
Next came a series of crises that added a new dimension to the scope of HR work and created new and challenging expectations. The 9-11 attacks on the World Trade Center and the Pentagon in 2001 had an impact without precedent. Global investment and job creation was once again in jeopardy. Hard on the heels of 9-11 came the terrorist bombings in Bali, Jakarta, and more recently in Mumbai. Such events inevitably shake investor confidence in Asia. Compared to the threat of terrorism, the SARS epidemic now seems like a mere hiccough which was simply the first in a series of unpredictable events that caused economic disruption and a concomitant redefinition of HR’s scope of work.
The SARS outbreak in the first half of 2003 hit many parts of Asia in no uncertain terms. Travel came to a standstill, business activity fell, and supply chains were disrupted. HR practitioners found themselves in a pivotal role as companies tried to cope with both the concerns of employees and the needs of the business. The threat of Avian Flu followed more than a year later with similar impact. HR professionals were called upon to minimise the damaging effects of these events on employee morale and productivity.
Businesses in general and HR professionals in particular, discovered that they need to prepare themselves for crisis no matter when, where, or how it occurs. In facing the prospect of crises, HR professionals now need to prepare themselves to play roles which stretch their comfort zones:
- contingency planning and preparation for crisis
- coordinating responses to crises;
- damage control that will result from crises
Effective crisis management means developing communication tactics as well as putting appropriate systems and processes into place. During a crisis, it is the responsibility of HR managers to represent the interest of employees and advise management and employees on contingency plans. As part of the crisis communication preparation, HRM staff needs to get to know what emergency benefits and assistance are available and how to get these benefits quickly into the hands of employees and their families. Time is of the essence during a crisis. Furthermore, HR professionals need to acquire crisis management skills long before such skills are actually required.
The Centralisation-Localisation Struggle
Being proactive and attentive to localised events is not the only demand that HR has had to contend with. Demands from headquarters put added pressures on local operations within Asia. The pendulum continues to swing ominously between centralisation and localisation.
- Local operations increasingly feel pressure from US and European HQ to control manpower and other costs.
- Corporate HR carefully reviews local and regional performance-linked pay to ensure it is aligned with business results.
- Global HR policies increasingly take precedence over local practices. Local operations are tasked with implementing practices that are aligned with global policies.
- Technology is used to achieve greater consistency in HR practices on a global basis. The advent of HR information and record management systems means that local practices have become much more transparent and open to scrutiny.
- The tendency to outsource has created a new dimension to the scope of HR work.
Demographic Trends
Changing demographic trends have also presented challenges to HR professionals. Asia became and still is a much coveted global source of talent for jobs in IT, health care, finance, and the hospitality industry. Asian-based recruiters have to compete, not only with other Asian-based employers, but also globally. Wherever companies are prepared to offer highly attractive compensation packages to lure talent into their back yard, counter-measures need to be taken to retain talent. Career opportunities for talent and the incentives to relocate continue to escalate and are more difficult to counter.
Moving people around from country to country creates its own set of issues which end up under the purview of HR. Relocation packages need to be created. Cross cultural training and host country orientation become an issue. Housing needs, medical benefits and provision of education for expatriate children are of primary importance.
Relocation of talent also necessitates HR professionals to understand the complexities of managing talent. HR professionals must liaise with the line to define precisely the talent they need, strategies that need to be put into place to attract and recruit talent, as well as designing policies to motivate and retain the talent pool they have. Asia-based companies need to attract the best talent and offer challenging career opportunities that match those offered elsewhere.
The consequences of an aging workforce in developed economies is another part of the demographic equation. However, its impact on the developing economies of Asia has been less well documented. Nevertheless, as the population in Asia ages, companies will face increasing pressure to fill vacant positions with people who have the requisite skills set.
The pressures on HR professionals to deal with these demographic challenges continues to grow. The HR manager still needs the skills, knowledge, and experience to efficiently manage the day-to-day functions of the HR. Yet, all of the functions of HR described until now have been largely reactive rather than proactive responses. In fact, this is what HR professionals have been extremely good at doing in the past: delivering in a reactive mode. It is timely for HR to become more assertively proactive.
But to truly have a strategic impact on their organisation, and to be proactive rather than reactive, HR professionals must earn their place at the “top table”. Aside from their functional knowledge, HR practitioners need to have:
- a solid grounding in economics and politics;
- knowledge of organisational functions and OD
- industry knowledge and familiarity with business functions;
- analytical skills and advocacy capability
Looking To The Future: The Premise of HR Value
Earning a place at the “top table” requires HR professionals to be more integrated players or “business partners” relative to the core business. Since value is defined by the receiver and not by the giver, any value proposition HR espouses should begin with a focus on the receivers and not on the givers of the purported value. HR professionals need to be more consultative, open and receptive to what the business perceives as added value.
The HR function has lacked credibility in the past because it has not been seen to propose and deliver innovative and future-oriented solutions. Although the situation is changing now, senior management remain somewhat sceptical and resistant to initiatives that emanate from HR. One of the reasons for this is that is that HR professionals often hold altruistic beliefs that translate into things that they want to see happen in their organisation. They go straight for the desired results without paying attention to the business perspective. Real impact starts when HR professionals understand the beliefs and goals of the receivers. When these requirements are fully understood, then the HR professional can demonstrate how an investment in HR practice will help the stakeholders gain value as defined by the stakeholder.
HR begins with the business and goes beyond the business itself. Knowledge of external business matters are important to HR practitioners because external realities ultimately determine the relevance of all internal operations. HR professionals must have knowledge of external and environmental factors that interface with the business before they can frame, execute and create substantive value with even the most basic of HR agendas.
The successful HR professional must therefore have the confidence and conviction to act as an equal business partner with top management. They must be able to articulate and explain the business issues and their implications, articulately advocate their response to top management and disseminate information skillfully and with conviction to employees. They must then follow through with formulation and implementation of policies that have a measurable positive impact.
The implications of the changes and challenges for the success of the HR function in the present and in the future are profound. HR is continuously undergoing a transformation and HR professionals walk a delicate balance in their role as an advisor to management in employee-related business strategy, and an expert in functional operations. They need to align HR policies and practices with the business, and then ensure that those policies are carried out demonstrating a return on investment. To have a value-driven HR function in an organization, HR’s impact should be apparent to investor, customer, business and employee results.
More than ever, business success is about getting the HR function correct. And the DNA for HR success is the HR Value Proposition. With this Value Proposition clearly in focus, HR professionals have a clear notion of their role with regard to all stakeholders.
Concluding Remarks
In this paper, I have outlined the past, present and future of managing global HR issues in today’s challenging times. I have emphasised the need for HR professionals to adapt to take into account the global economic situation, deal with crises, handle demographic changes, manage talent as well as act as a strategic partner to the business.
The experience of the past has not served HR professionals in Asia well and it has not prepared them for the challenges of the future. In the past, functional expertise in the transactional elements of the HR function was enough to propel an HR professional into a successful career. Such experience is now insufficient. Knowledge and skills in economics, business, crisis management, leadership, consulting, and communications have become necessary pre-requisites for successful managing of the increasingly complex HR function in today’s challenging times. But, as in the past, I believe that HR professionals will demonstrate their resilience and resourcefulness as they proactively tackle the challenges of the future, just as they have done in adapting and responding to the challenges of the past.
Good read.