“Hire and Fire” is not going to work in this new economy. If businesses do not get their act together soon, they will soon have to pay a dear price in the war for talents.

Retrenchment is in the news everywhere and we are looking at 5 figures loss of jobs every month. This is a cyclical problem where companies purge excess in bad times. When economy picks up, companies will be rushing to fill up vacancies to meet the renew demand of the market. To avoid retrenching employees, during good times, companies should exercise discretion in their hiring process. Perhaps this is one area to focus on when we discuss on Corporate Social Responsibility (CSR).

For listed companies, they cut operating cost in order to satisfy their shareholders (hey, revenue is dropping but we are going to make sure earning per share is still within expectations). Realistically (and practically), in a bad economy, weak shareholders will be dumping shares like no tomorrow. The question is, should a company be concerned over a bunch of weak shareholders who does not have any long term commitment to the company? To satisfy these shareholders, companies spend more in the process of firing and hiring. Is it worth it? Is the cost of downsizing justifiable?

Human resource management is a vital component in the company which has consistently failed to play its role effectively. Companies must plan for realistic growth, forecast resource requirement based on historic supply and demand intelligence and having a strategy to operate in a lean and efficient manner. Strategic HRM has to be applied in all business decision making process. If I would take a page off from the manufacturing sector, all companies across all industries should practice what is known as “lean manufacturing”. According to Wikipedia,

…practice that considers the expenditure of resources for any goal other than the creation of value for the end customer to be wasteful, and thus a target for elimination. Working from the perspective of the customer who consumes a product or service, “value” is defined as any action or process that a customer would be willing to pay for.Basically, lean is centered around creating more value with less work…

With this lean approach, companies will not have to spend millions of dollars in hiring, training, retrenching (during tough times) and rehiring (when economy picks up) talents. Business owners must look into streamlining their operations and outsource anything that is not core to their business. Outsource reduces the risks of excess resources but it also presents a different set of challenges as described in “Don’t be doomed by outsourcing”

The best talents now are self employed consultants who feel that they can offer more value to organizations as an individual business than being employees. Companies will soon have problem hiring quality talents because these individuals choose to sell their professional services on a project basis which is measurable and more profitable. What you have learnt from HRM textbook written many years back are probably unusable now. The new generation of workers are masters of their own destiny and are not bounded to any organization. They do not like to follow corporate rules and they want to expand their knowledge and skill sets by constantly challenging themselves with new projects in different economic sectors. The new age workers wants to make themselves redundant so that they are not tied to any single project or organization for extended period of time. They are well informed, well connected and rebellious in many ways. They choose to work at their own time and often they can deliver the same (or better) result at a much shorter time. They are the new economy which is effectively operating in Internet time.

The employees that you are hiring are one way or another, consumers of your goods and they are your stakeholders. If your company focuses on customers, don’t look too far because these customers are also your staff. A vicious cycle forms when staff got retrenched. These consumers of your products(directly or indirectly) will not have the ability to pay for your products and this leads to reduced revenue and further cut of jobs. In a parallel time space , these employees will also develop a distrust and will not encourage others to use your products. No one will stand to gain. Not even the shareholders. So, I would ask all business owners to be more socially responsible when it comes to hiring. You are not just hurting yourself in the long run, you are hurting the society and the economy.

Don’t get it wrong. I am not asking companies to keep the underperforming employees. HR attrition is normal but en mass downsizing is plain reckless and irresponsible

Share with us your thoughts.

I will be discussing in a separate article on what I see is the impending trend in the recruitment space.

Other must read articles

• Stakeholders are critical to your success
• Focusing on Cost
• If you want to be successful, start making yourself redundant now

This entry was posted on Sunday, May 10th, 2009 at 11:51 am and is filed under business, management. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.