AFG Venture Group Dispatches

Corporate advisory and consultancy in Australia, South East Asia and India.

HR in a Changing World – Peter Wilson, National President, Australian Human Resources Institute

Dating from the collapse of Lehman Brothers in September last year, the global financial crisis has brought about considerable change in the world of business and government. By this time Australia’s human resource practitioners and people managers were already at the pointy end of significant challenges wrought by changing circumstances in business and the world economy.

A global talent shortage impacts dramatically on Australian business. A case in point was the recent burgeoning resources boom that created an insatiable appetite both here and abroad for scarce skills. Australian business competes in the global marketplace for skills and HR is in the frontline when it comes to providing business solutions that will deter out best talent from looking elsewhere, while at the same time taking steps to attract people with much needed skills from competitors, both here and abroad. Governments play their part, and Australia’s 457 immigration scheme is still widely used, and is but one of a number of possible and sustainable solutions that HR is called to advise business on.

Following the overhaul of the Australian industrial relations landscape with the Howard Government’s Work Choices laws in 2006, Australian business is now preparing for another seismic shift in the industrial relations framework with the introduction of Fair Work Australia by the Rudd Government in the latter half of 2009. HR is at the forefront of implementing Fair Work Australia just as it was with Work Choices.

Apart from coming to terms with the compliance requirements of the new workplace legislation and ensuring that management and the general workforce understand its requirements, HR is also responsible for advising the business on how best to use the new laws to capture future growth potential. Many questions will arise and policies will need to be drafted, adopted and implemented. What workplace relationships should now be struck with the unions? How can union delegates be engaged to work in the interests of both their members and the business? What policies will the company adopt on bargaining? On retrenchments? On leave? On union right of entry? Developing appropriate IR policies for this new business environment requires HR to adopt innovative positions not only to influence management, but also to train and communicate with the workforce on how best practice policies must be adopted relevant to the new legislation and to enhance business growth and employee welfare.

The global financial crisis is a useful prism through which the changes in business are affecting the HR function.

At the same time as Australia is introducing new workplace laws, the economic environment is becoming a very unfriendly place for workers as many organisations attempt to come to terms with decreasing consumer demand and the cash flow and liquidity issues that arise from that, by slashing costs. People and people-related business expenses such as training can be high on the list of items that some CFOs want to cut. At times like these HR is caught in the position of having to acknowledge that costs and margins need to be improved but that in many cases to sack staff and reduce training would be counter-productive. In order to convince management, especially CEOs, of the merits of such contestable positions HR needs sound arguments and robust data.

With that in mind the organisation I head brought to Australia in February a leading international expert on restructuring to speak to Australian business and government. Professor Wayne Cascio from the University of Colorado has undertaken nearly two decades of research with S&P 500 companies, and his analysis showed that knee jerk layoffs of more than 10% have historically been associated with poorer long-term share performance than those with average 5% cuts or less. Essentially his responsible restructuring message to business was two-fold: when cutting costs, staff lay-offs need to be a last resort not a first port of call, and companies cannot shrink their way to prosperity. Further Professor Cascio found those who cut 10% staff or more would see another 15% of their workforce leave voluntarily in the next two years. So HR practitioners can tell CEOs or CFOs thinking of a 10% staff cut across the board that this decision will actually cause one quarter of the organisation to turnover in the next two years, and your top performers will be among the first to leave in the second voluntary phase. Food for thought for those knee jerk CEOs, who shoot first and ask what happened later! Those messages resonate with many businesses today, as well as with government.

Thus while HR has been at the coalface of implementing retrenchments, they also have responsibility for advising the business on the longer-term impact with respect to the capacity of the business to recover during the upswing, especially in organisations whose people are their competitive advantage. In addition, HR has to deal with the negative fallout among survivors.

The fracture in the state of the world economy has also thrown the spotlight on remuneration, and especially on executive remuneration in a context in which indefensible excesses have occurred at the same time as shareholders have suffered and employees in their thousands have lost their jobs. HR is one of the players that advise CEOs and boards in the area of executive remuneration and governments are under pressure in the developed economies to be taking decisive action. Prime Minister Rudd, for example, has signalled the need for intervention in Australia. HR needs to ensure that the organisation is well placed to attract the best people to run the business while at the same time keeping faith with shareholder sentiment, government regulation and community expectations.

It is often said that change is the one constant in business, and HR is in a critical position to assist business to take advantage of the opportunities provided by change and to minimise unacceptable risks.

HR practitioners who take sensible risks, including standing up for the people in their organisation when that is difficult, will contribute to the sustainability of the business they advise, the community which the business serves, and the robustness of the larger economy in which we are all co-dependent.

About the Author
Peter Wilson
is national president of the Australian Human Resource Institute and also as president of the Asia Pacific Federation of Human Resource Management is a board member of the world governing body for the HR profession.

Copyright 2009, Peter Wilson, AHRI. All rights reserved. All material in this article is the Intellectual Property of Peter Wilson, AHRI and cannot be reproduced, copied, published, quoted or disseminated without the prior permission of Peter Wilson, AHRI.