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Using people development to prove HR’s worth


People developmentNatalie Benjamin explains how HR can prove its value in tough economic times and become an essential asset to any organisation, through effective investment in its workforce.

2008 has been a tough year and with the credit crunch and its consequences looking likely to rumble on into 2009, there is unquestionably more challenge ahead on the HR agenda.

At the start of the year, Channel 4 chairman Luke Johnson launched a scathing assault in the Financial Times, suggesting that during tough economic times, there is little room for the HR function. He cited HR as a “simple expense and a burden on the backs of the productive workers” and concluded Albert Einstein’s famous words: “Bureaucracy is the death of any achievement”.

Although it’s apparent that Albert Einstein was not fond of bureaucracy, he was undoubtedly a man who knew a chance when he saw one and another of his famous quotes, “in the middle of every difficulty lies opportunity”, is a concept that all HR directors must hold on to as difficult financial circumstances penetrate every department.

“Who can demonstrate the true value of HR, particularly the ‘softer’ people development side, when all hands need to be firmly on deck?”

From major financial institutions to small businesses, first-time buyers and young professionals, a pressured economy knows no bounds. So, traditionally, it’s those ‘nice to have’ business departments that see their annual spending budgets squeezed immediately. After all, who can demonstrate the true value of HR, particularly the ‘softer’ people development side, when all hands need to be firmly on deck?

“Actually there are many examples of the benefits of investing in people during difficult economic conditions,” explains Matt Rogan, commercial director at Lane4. “A study by Bain & Company, analysing more than 700 firms during the recession of 1990-1991, shows that twice as many companies made market place gains during that year than during calmer periods. You only need to do some research to see that it’s precisely during these times that businesses must nurture and retain their talent to gain a competitive advantage in the long-term.”

Improved performance

The examples to which Rogan refers are widespread and include Southwest Airlines’ significant investment in people development when the industry’s prospects were suffering post 9/11; Dell’s continued investment in leadership development following extensive budget and job cuts; and media company Viacom pushing on with training programmes during a recession, even when their own client numbers were falling. All three companies reported improved performance as a result of the investments they made.

Christian Hobson, head of learning and performance at Nomura, is determined to follow these examples. “Our people are our business and because we’re asking them to respond and perform in tough conditions, we must ensure they remain totally engaged and demonstrate the right behaviours. If we don’t, our business performance will suffer.”

He continues: “Retaining our best people is vital and it’s a challenge that our senior executives continue to focus on.”

History shows that tough economic conditions are inevitable and part of the natural business cycle, but what’s not clear is that when employees feel engaged their productivity and loyalty can ensure high performance in the most difficult circumstances.

“HR professionals must tailor or revamp programmes during any financial crisis to ensure that they are explicitly relevant to the current economic climate.”

Crucially, HR professionals must tailor or revamp programmes during any financial crisis to ensure that they are explicitly relevant to the current economic climate and are designed to help people achieve in tough market conditions. After all, it’s precisely during these difficult times that performance needs to be at its highest level to maintain profit margins and retain competitive advantage.

With greater risk and more uncertainty, particularly in the financial sector, people need the mental toughness to be able to respond well under pressure. Leadership is also a key factor, so that employees understand and are able to fully engage with the team or company vision.

It is when times are tough that people need to be prepared, remain competitive and withstand economic challenge. People development programmes and one-to-one coaching can also help to address stress levels that may be consequences of the crunch.

Negative impressions

Considering this, it’s clear that short-term cost cutting hinders both competitiveness and employee loyalty and only dampens morale, impedes innovation and reinforces the negative impressions of HR. Simply put, if something can be cut with such ease its perceived value will inevitably decrease.

Research indicates that true recession survivors continued to place critical importance on employee development and that when competitors are cutting learning and development budgets, there is a better opportunity than ever to gain competitive advantage.

Adrian Moorhouse, managing director at Lane4 explains: “HR directors and their teams need to role-model open and honest communication in creating their plans for the following year.

“In doing so they must map people development initiatives to overall strategy and therefore business performance. In that way leaders can understand and buy-in to the value of investing in people. Sharing stories and case studies about the ROI of learning and development is vital.”

“Leadership development should also be a priority so that management have the right skills to lead teams in tough conditions. In that way organisations can develop the resilience needed to survive, and even perform, in uncertain times. By creating these conversations and developing relevant skills, HR can use the softer side of its remit to prove its strategic worth during economic difficulties.”

Business leaders know that a financial crisis is not a new phenomenon and that better conditions will inevitably follow. So, rather than being viewed as a threat, the credit crunch should be viewed as a perfect opportunity to energize leadership, develop employees into high performers and demonstrate the true value of the long-suffering HR function.

It is these lessons that CEOs must have reinforced by HR directors when it’s time to set budgets. Of course, this is not always an easy battle to win, but things that are worth fighting for never are.

This article has been extracted and edited from the Lane4 Journal of Excellence – ‘Perspectives on Change’. Lane4 is a professional services firm working in the fields of organisational change, leadership development and executive coaching

One Response

  1. The Value of HR in a downturn
    IS it not too easy just say people development is important in a downturn. Every one of us can make a simple case for the value of our department under any conditions, that does not prove we have value.
    Leadership is important as are management and soft skills.It is after all the manager’s role to lead people not the HR function.
    The chief exec has to look at the bottom line of a business and take care of cash flow. Producing a report that says we need to invest in our people is not going to win the case.
    Why is it that HR does not come up with “and this is HOW we intend to show a return on investment over the next quarter” for as sure as eggs are eggs – that is what they are going to have to do.
    Forget long term training plans – the business needs performance improvement tomorrow. Can this be achived – YES it can, but it means that HR is going to have to re look the traditional ways of training and come up with a performance improvement package for the business.
    This is relatively easy to achieve, but you have to want to change methods and re invent new ones.
    After many discussions with senior HR management, I am of the opinion that change is not something that comes easily. Safety comes first and this causes HR to fall back on tried and trusted methods. The world has changed and the old is no longer good enough.
    I work with business managers who want to try something new, who are not afraid to fail, because we learn from failure,. HR must move quickly if they are to do the same.

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