Impact of Recession on Recruitment and Selection

Impact of Recession on Recruitment and Selection 1.0 Impact of current global economic situation on recruitment and selection The collapse of 2008 caused unemployment for many people in major countries of the world. The affected nations tried a lot to combat effects of slowdown in economy. We can easily conclude that the unemployment rate and the growth rate of a country are closely related and are inversely proportional. During the slowdown when the growth rate of various economies decreased the unemployment rate increased and now when the economies are recovering then the unemployment rate is decreasing (Roberts, 1997). During the economic crisis 2007-2008 the GDP growth rate of major economies decreased. For United States of America it decreased from 2.9% in 2008 to -6.8% in 2009, United Kingdom from 0.3% in 2008 to -2% in 2009, China from 11.2% in 2008 to 6.8% in 2009 and India from 9.7% in 2009 to 6.1% in 2010. The unemployment rate increased from 5.00% in 2008 to 7.70% in 2009 for United States of America, from 5.20% in 2008 to 6.60% in 2009 for United Kingdom, from 4.00% in 2008 to 4.30% in 2009 for China and from 7.8% in 2008 to 8.8% in 2009 for India (Rachel Potter,, 2001). The GDP growth rate of major economies has improved over a year. For United States of America it has increased from -6.8% in 2009 to 2.5% in 2010, United Kingdom from -2% in 2009 to 0.8% in 2010, China from 6.8% in 2009 to 9.6% in 2010 and India from 6.1% in 2009 to 8.8% in 2010. The unemployment rate decreased from 7.70% in 2009 to 7.60% in 2010 for United States of America, from 6.60% in 2009 to 6.30% in 2010 for United Kingdom, from 4.30% in 2009 to 4.20% in 2010 for China and from 8.80% in 2009 to 8.00% in 2010 for India (Pescha, 2001). It is clear from above that there is a very high correlation between GDP growth rate and unemployment. Also, after the setback to economy in 2007 the economy across the world has shown the sign of recovery which is also reflected in the employment trend across these countries (Armstrong.M 2003). Especially companies of Information Technology (IT) sector considering their good quarter results are back on hiring front. Indian major IT companies i.e. Infosys, TCS and Wipro have set a large target for hiring. Infosys declared that it add 30,000 new employees in 2010. According to NASSCOM Indian IT sector will add 90,000 employees in 2010 and overall hiring for this sector is expected to be 1,50,000 in 2011. Labour intensive sector has also shown improvements and has registered a 1.2% growth in the number of employees being hired over a year. Real State sector has also gain the pace and with gradual increase in demand of houses the sector has registered growth especially in developing cou ntries (Aswathappa.K 2005). This has also resulted in the increased demand of labour as the companies like DLF and Sahara are coming up with various projects. The Common Wealth Games and now Asian games also generated a lot of demand of workers. Thus couple with economic growth these sectors have provided employment opportunity for low income group thus contributing to the growth in employment rate of the country. The general trend in hiring is that the companies are optimistic about the future and are taking the opportunity created by slowdown of hiring talents at cheaper rate and replacing low performance workers (Weil, 2003). Also they plan to provide greater flexibility in work arrangements like compressed work weeks, shared work, sabbaticals, alternate schedules etc. Rehiring of Laid-Off-Workers has also increased with 29% of companies to hire back the earlier laid of employees increasing the ratio of these employees to 9% from 5%. The percentage of hired or contract worker are also estimated to increase to 18%. Thus all this figures indicates the future trend in recruitment of employees (Dale, 2004). From the above analysis two things are very clear. First, recruitment plan of a company depends upon the economic condition of a country. The better the economy the higher the employment rate is. Second, the future aspect of the recruitment and hiring seems to be positive in view of the expected growth in the economy. However, the unemployment rate is still high in most of the countries and the gap between men and women employees in developing nations has increased in past three years according to International Labour Office. A lot of effort has to be made by government in order to bring the unemployment percentage down and reduce the gap in men and women. 2.0 E-Learning and its role in Human Resource Development: E-Learning can be defined as providing training, books, journals or any other material that will help the person to enhance his or her knowledge base with the help of computer base applications usually with internet as the major source of catalyst in the process. It is very important for an employee to continuously update himself with the current trends in the market and with the new technologies and methods being practiced so that he remains competitive and in turn increase his efficiency (Rosenberg, 2001). Also organization look upon the employees who have a good work experience and knowledge of the industry to take up more responsibility and thus contribute to the organization instead of hiring a new employee for the same position as the previous person is well known in the organisation and can be trusted more than the latter one. However, if the employee is not having sufficient skills then it would be difficult for him to justify with the new responsibility. Thus, it is the responsibility of the human resource department to identify potential leaders and train them so as to enhance their skills. Thus, learning is of great importance to any organization. Also, it is very difficult to provide library facility by each and every company at each and every branch and offices. The options are contract based trainings but often the training courses designed by the external party are very costly and lacked the direction required by the company and hence are not as per company and individual requirement. E-Learning comes as a cheap and convenient solution to the above problem for many companies who cannot afford to manage libraries and are struggling with properly training facilities. Most of the IT companies for example Cognizant Technology Solutions, Infosys and IBM have a good E-Learning facility available where the employees can select the modules as per their need and requirement and complete the course sitting on his desk. This not only prevents the cost associated with such training but also reduces the work load at the Human Resource department of arranging for training of these employees. Some of the companies that provide E-Learning are Safari online books, Books 24X7, Skill-soft Corporation, Educause, Centra Softwate Inc. etc. Though Wikipedia and other online encyclopaedia also provide a good source of learning but it is often difficult to find a particular requirement on these websites. It is observed that the quality of education in most of the developing nations do not match the requirement of the companies and thought the employee is educated but lack the skills required for job and for this it is essential that HR of the company provide trainings for these employees. Almost 70% of the fortune 1000 companies lack properly trained employees to execute the task and sustain the require growth rate. Most of the employees in companies are encouraged for distant education based on computer (Horton, 2001). These courses not only help organizations to build a talent pool in the organization but also fulfil the requirement and demand of the company for required talent. Indira Gandhi National Open University (IGNOU), India, is an open university that facilitate the distant learning in India incorporate in 1985 has keeping a close watch on the development of talent pool in India to satisfy the requirement of the nation to sustain the growth rate. They have also adopted the online training modules so as to reach more and more people in the country. According to Dr. Ashok Kumar Gaba, Senior Research Officer Staff Training and Research Institute of Distance Education at Indira Gandhi National Open University, the online training has reduced the cost to one-fifth and over a period to time it is expected to be the main source of learning. It is the responsibility of human resource department of the organization to identify the requirement of the company and accordingly select a proper course, promote it and bring into practice the E-Learning culture in the organization. The constraint associated with E-Learning is computer and internet facility at company and one might require investing a good amount initially to build the required infrastructure for this. 3.0 Bonuses in Financial Service Sector when the banks are being bailed out: The issue related to bonuses are usually very emotional to employees. They expect the bonuses and plans accordingly and if these bonuses are cut or complete removed then this can be a serious cause of dissatisfaction among employees which can affect their productivity and the output delivers (Geroski et.al 1997). If these issues are not seriously handled then it might lead to a major problem in the organization. Hence, it is very important to first understand the importance of the issue before discussing the topic. The bonuses of any company depends upon the performance of the country vis-a-vis its performance last year, the performance of the sector, the growth in the economy and the future prospects of the economy and industry. During the economic crisis in 2008-09 the financial condition of many banks and giant organizations was so crushed that they have to plea the government to bail them from the financial distress (Sameuls, 2001). After the bankruptcy of Lehman Brothers many banks came to plea United States government for bailing them for example Bank of America, Merrill Lynch and American International Group (AIG). In Britain, Northern Rock, a mid-sized British Bank, and Bank of England required government aid to continue their daily task. When these banks and financial institutions are being bailed out it means that the available liquidity in the market is very less and hence it will be very difficult for the companies to raise fund. In this situation the pressure on specially the financial service providers increases and they have to be very careful in investing the available cash. It is logical for these companies to either cut or completely remove the bonuses for that particular year so as not only to preserve the liquidity but also to avoid any firing of the employees. At this time it is very important for them to maintain the balance between the market condition and their financial condition. J.P. Morgan Chase, Fannie Mae, Freddie Mac, Washington Mutual, Wachovia and other financial service providers if they would have thought of bonuses at that time then they would have been shut down and any more damage after Lehman Brothers would have proved last nail in the coffin to already shattered economy and we would hav e been still struggling to recover from the crisis (Bewley, 1999). As a matter of fact, US president Mr. Barack Obama said that asking for bonuses at the time of crisis is a shameful act and he urged the citizen of United States of America to show some sense of responsibility after Wall Street firms distributed a bonus of $18.4 billion (Howell, 2007). Also at time a hefty bonus payment culture might lead to loss in liquidity of the firm and might result in potential threat to the company and banks to face a financial crisis. The company should avoid paying hefty bonuses in order to save some tax (Sameuls, 2001). In May 2009, Financial Services Authority (FSA) declared certain rules regarding this and took various measures in order to reduce this practice. According to them bonuses was the reason for banking crisis. Probably Deutsche Bank already understood this and the bank chief did not accept the bonuses in 2008 so as to minimize the effect of crisis. This was the personal sign of solidarity by Josef Ackermann, the chief executive of Deutsche Bank, toward the employees. This move not only helped the bank to fight the crisis but also encouraged the employees to take the move of not distributing bonuses in a right spirit and contribute to the organization at the time of difficulty. Later John Mack, chief executive of Morgan Stanle y, and James Cayne, the former chief executive of Bear Stearns, also went ahead declining the bonuses. From the above study it can be concluded that in state of financial crisis where even banks are been bailed out it is more important for the companies especially financial services to prevent any firing of employees for which if they have to sacrifice the bonuses then they should go ahead with this. Employees should also understand this and they should consider long term gains rather than short term profits. It is the duty of organization to be transparent in its dealing and should reward the loyal employees when the favourable time comes. Also, it is important for the leaders in the organization to set an example for the employees so that employees believe that the organization is with them and they do not feel cheated. This is a very sensitive issue especially during crisis and should be dealt carefully and with high importance. 4.0 Relevance of trade unions: The nature of business has changed drastically over past few decades with the advent of technology most of the work is done by machines and human intervention has reduced in most of the cases (Fernie, 2005). The work environment and conditions has improved resulting in lesser disputes (Somers, 1976). Technology has enabled the management and employee to communicate effectively. In this era of technology the question is whether the trade union culture is still relevant in present scenario? The trade union acts a channel to help the workers communicate their issues and concerns to the management. They also provide support and help to these workers in times of difficulty and ensure that the work environment is healthy and safe. They also help management to communicate major announcements to these workers and help them understand their point of view (Wrigley, 2002). In case of any dispute it becomes easier for management to talk to the representatives of workers in the form of trade unions rather than talking with each and every individual. The union also help in uniting the workers who are usually from different background. There are many unions who are still very active and fight for the cause of the worker and help them educate about their rights. One example is REACH which focuses upon educating workers about the hazards caused by chemicals and their rights in case of such hazards. In India Bhartiya Mazdoor Sangh (BMS) is the largest report trade union which was founded in 1955 and with such a reach and power the organization has been working in making the life of workers better. They have carried out various education programs like spreading awareness among labours about their rights, proper safety practices, health education, women empowerment, minimum base wage and movement against child labour. Other major trade union in India are Madras Labour Union, Textile Labour Association, National Trade Union Federation, Hind Mazdoor Panchayat and All India Trade Union Congress (R Jha, 2000). Still in nations like India the trade unions are active and have not lost its relevance. However often the leaders in the unions take advantage of their position and put unjustified demands in front of management and threat them by announcing strikes, lock downs etc. This has reduced the relevance of trade unions. Also, in most of the organization has adopted performance based incentive schemes that encourage the employees to perform better in order to get better compensation this has also reduced the issues related to pay as the person enters in to an agreement to accept the compensation scheme of the organization. Another major issues that employees face today are the work-life balance issues for which the human resource department of the company actively take steps in most of the organization and moreover trade unions have failed to tackle this issue thus the need of the trade unions are reduced (Aswathappa, 2005). The trade unions also failed to address the issues of cross nation al employee and women empowerment. The trade unions have lost on major three grounds (Trant, 2010).). First, they have been neglecting the poor and thus lost the moral ground as their major concern is maximizing the interest of few people and groups. They also lost on the political front due to shrinkage in the membership of the union and also due to the formation of many parties and unions. The third ground is the loss of intellectual high as their strategies are outdated and for most of their solutions they go on strike irrespective of the severity of problem. A trade union if lead by a intelligent and well educated person having a proper understanding of situation of employees and who is directed to work for people can prove to a problem solver else a problem creator and as the latter is often found the trade union seems to loss its relevance in todays scenario (Horton, 2001). Though the technology has solved many problems of the employer and employees but still in developing nations like India where technology is a constraint and workers still fight for basic rights, trade unions acts as a tool to voice their concerns and hence still in these nations they hold a relevance.