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HR Strategies for a Challenging Economy

Posted by Aaron Green  November 16, 2009 05:00 PM

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There's no question that the past year has presented plenty of challenges to Boston's human resources professionals. Recently my firm, Professional Staffing Group, received survey responses from more than 100 Boston organizations across 13 different industry groups about their human resources planning for the remainder of this year. The responses were a mixed bag with some organizations moving forward with recruiting, hiring, rewards and retention practices and other organizations remaining hunkered down.

We asked respondents whether they planned to make any changes in the way they reward, retain, and recruit employees in light of the current economic conditions.

Reduction in Benefits
Cutting employee benefits, which can be very costly to employers, is one strategy for responding to current economic changes. Sixteen percent of companies plan to reduce benefits, 29 percent are considering this action, and 55 percent of respondents said they won't cut benefits. Employees that need to cut their benefit offerings or contributions to employee benefits should evaluate the real costs. Consider which benefits are most valued by your staff and which might demoralize employees if they are lost, resulting in a more significant cost to the company over the long-term. Any cuts in benefits must be handled delicately with lots of communication.

No Pay Reductions: The Vast Majority of Companies are not Considering Pay Reductions
Cutting pay is one of the most drastic strategies and one that rarely ends well in terms of long-term employee motivation and retention. According to our survey only 13 percent of organizations are even considering pay reductions. That said, the current economy has certainly raised awareness of compensation levels across specific markets, and about one third of the companies in our survey say they are interested in comparing their pay to the market and ensuring they are in-line with what others are paying. I happen to think this is a healthy exercise in any economic climate.

Most Popular Change: Alter the Mix of Base Pay, Incentives, and Benefits
Forty-one percent of the companies surveyed plan to change the component parts of compensation by altering the mix between base pay, incentive compensation and benefits. Forty percent of the companies surveyed say they are interested in strengthening the link between pay and performance. While this is a great way to motivate employees and align their interests with the company's, it's important to carefully weigh the mix. If employers go too far and shift too much risk onto the employee, they could have difficulty retaining valuable employees over the long term.

Focus on Low Cost Training options
By now you've listened to me warn about the long-term effects of some of the strategies mentioned above. An HR strategy that has proven long-term benefits is the investment in training. Therefore, it's heartening to learn from the survey responses that finding and investing in low-cost training options is the most popular talent retention strategy. However, reading between the lines we can tell that survey respondents are spending less overall on training and development, which, in the long run, could have a negative outcome.

Limited Hiring
The majority of respondents said they will not increase their staffing levels. However 37 percent claimed to be more likely to hire temporary or part-time employees instead of full-time employees. This approach is consistent with past economic cycles as well as consistent with the US Bureau of Labor Statistics employment report which shows temporary staffing as one of the few categories of job gains last month (33,700 jobs added in the US in October). I wrote about this pattern and how staffing firms can be used as a strategic resource to HR departments during recession/recovery cycles earlier this year.

While no one has a crystal ball to see what the future has in store, most organizations understand that business is cyclical and the current economy will improve. Human Resources can play an important role in helping a business navigate today's challenges and prepare for tomorrow's climate. Decisions related to hiring, training, staff development, and everyday workplace management are being made against an ever-changing landscape and their actions now will have long-range repercussions on the business. There is currently a brief window of opportunity during which an employer's efforts to maintain high standards of management practice will yield a more productive and more loyal workforce in the long term.

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Aaron Green is founder and president of Boston-based Professional Staffing Group and PSG Global Solutions. He is also Vice Chairman of the American Staffing Association. He can be reached at or (617) 250-1000.

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Featuring human resources advice and columns from The Boston Globe's On Staffing and Hire Authority writers.