HR in Flux:
The Role of Human Resources in 2002

HR in Good Times and Bad

"It wasn't that long ago that companies were outbidding each other for workers, offering stock options, bonuses, even cars to entice and keep top talent. It wasn't a question of whether you could find a job, it was a question of choosing the best offer. Not anymore," laments M. Corey Goldman in his recent ABCNews.com article, Payrolls Plummet.

So what happened to change the job market so dramatically? With a total of 1.37 million announced job cuts in 2001, "September [has been] the largest job-cut month so far," according to a report recently released from the outplacement firm Challenger, Gray & Christmas. This is an increase of 77 percent since August. The September 11 terrorist attacks at the World Trade Center, Pentagon, and a field in Pennsylvania both complicate the situation and contribute to the problem. Although many of the lay-offs occurred before the attacks, eighty-one percent of the September job cut announcements took place after the highjackings and analysts predict that the job market has not yet seen the full effects of the disasters.

The Cutting Blow

Companies undertake layoffs for a variety of reasons that ultimately reflect their struggle to maintain or increase their bottom-line by cutting costs or raising stock values. Among the hardest hit industries during the recent layoffs are the travel/transportation, technology, and telecommunications sectors, to name a few.

In response to our slowing economy we can expect that, "Companies will continue to review their employment and make cuts. Those will be more strategic cuts than large-scale reductions. We will see more elimination of jobs that are found to be inconsistent with core competencies. Well-managed companies will out-source more functions that are performed as well, or better, by others enabling them to focus their resources where they actually make money," predicts Vincent J. Messina, President of Messina Management Systems.

Mr. Messina also anticipates that, "We will also continue to see corporations, especially larger ones, shed divisions, products, and lines of business that are either not sufficiently profitable or not consistent with their primary focus." He offers Procter and Gamble's recent sale of the Comet cleanser business to Prestige Brands International, Inc. as an example. "The net effect on employment of these moves will not be so great as the effects on individuals. While some people at the divesting company may be released, employment will probably increase at the acquiring company. The acquiring company will, in many instances, have their employment continue to grow because they will become larger, more dynamic, and successful."

Downsizing While Actively Recruiting?

Although unemployment rates are rapidly increasing, the current rate of five percent is considered low and the labor pool available to fill open positions remains in short supply. The result? Some companies will continue to experience difficulties when trying to fill certain positions while also eliminating those that are no longer considered "profitable."

According to a recent industry trends report by Dr. John Sullivan, layoffs are often seen as a way to get rid of employees who lead to a decreased bottom line because there are:

- More employees than current sales demand requires
- More employees than future forecasted sales require
- More employees in a particular division or product line that could add better value if they were redeployed to another division
- Excess employees in a particular job category
- Excess employees in high unemployment areas or job categories where there is no reason to "carry" surplus employees because new hiring can be ramped up rapidly when more employees are needed
- Excess employees who are highly paid (and can be easily be replaced later with lower cost employees)
- Excess employees in 'overhead' departments

In stark contrast to the problem of "excess" employees, "The low unemployment rate, combined with retiring baby boomers and the dearth of replacement workers, means that recruitment and retention will remain on top of HR's agenda for quite some time, despite the slowing economy. Sure, layoffs will be necessary in some sectors of the economy and in certain divisions of some companies, but employers will only be harming themselves if they eliminate their strategic staffing functions and revert to wholesale layoff strategies," reports Shari Caudron, in her recent article HR Takes on Tough Times. (Workforce articles and archives can be seen in whole, but requires a free registration first.)

Further, "More and more HR professionals are being asked to focus on downsizing and recruitment." A difficult situation for HR, to say the least.

The Out-Sourcing and In-sourcing of HR and Recruiting Personnel

Although companies will continue to need human resources personnel and their expertise, they may not use as many as they do today. During the coming year, HR will continue to evolve into a highly specialized and essential department in the successful operation of organizations. Less time will be spent performing "traditional" functions and more time will be spent engaging in strategic employee interactions such as employee relations, labor relations, and training and development - an absolute necessity in today's job market.

Maintaining employment records and ensuring that companies comply with employment and welfare oriented regulation will remain an important role of HR, according to Mr. Messina. However, "Recruiting, payroll, and employee benefit administration are human resource areas where we will probably continue to see staff reductions and outsourcing." These changes are aimed at improving the company's bottom line and will contribute to the evolution of HR duties.

Recruiting has also become increasingly specialized. "In most instances internal corporate recruiting personnel are, by definition, generalists. There are recruiters who specialize in very narrow niches and do a great job. Few companies have sufficient ongoing needs in these narrow niches to employ full-time, in house, recruiters expert in these areas. Companies are already finding it much more cost-effective to form relationships with these outside providers to be used when needed and not paid when not needed. That is a trend that will continue," says Mr. Messina.

Leslie Burling is a Texas-based freelance writer who works with WordsWork Consulting Incorporated on a variety of Web projects.

LESLIE BURLING / www.ecruiter.com October 15th, 2001