Economic Recovery Gaining Traction

Implications for the Human Resource Management Function

Many economists and business commentators are beginning to agree that the latter part of 2010 will make it the “rebound year.”[1][2]

[powerpress: http://gsbm-med.pepperdine.edu/gbr/audio/summer2010/recovery.mp3]

Businesses Must Plan for Post-Recession Growth and Sustainability

Recession Recovery signpostIt is widely reported that the economic recovery from one of the most severe recessions in United States memory is beginning to gain traction. The authors firmly believe that it is crucial for business owners, executives, managers and Human Resource professionals to prepare for this imminent economic recovery. The Federal Reserve Chairman, Ben Bernanke, recently reported on June 7, 2010, through the Associated Press[3] that he sees signs that the economy will gain traction and not fall back into a “double-dip” recession. Bernanke reported that the economy grew at a rate of 3 percent during the first quarter of this year.

The current economic mindset, however, is resulting in employee layoffs, the termination of employee benefit programs, and the elimination of training programs and leadership development efforts. Businesses should therefore begin to transition to a system that facilitates stabilization and again allows for the kind of sustainable organizational growth that can ensure the viability of any organization. This article will address issues associated with employee training, employee benefits, management development, and litigation management.

The Mindset of the Post-Recession Workplace: Survival and Sustainability

The post-recession workplace will require a return to adequate talent management, competitive employee benefits, provisions for essential employee training programs, and continued leadership development in order to both develop and maintain important job core competencies. The pace and complexity of companies’ environmental, economic, and strategic planning changes will have to be hastened in the post-recession jobs marketplace.

The Human Resources (HR) function, in particular, must play a critical role in efforts to effectively align companies with the realities of recovery. HR must provide guidance to company leaders in their efforts to successfully respond to inevitable challenges.

There is no question that over the past few years, the economic downturn has caused companies to rethink their business strategies and HR practices. While the authors of this article believe that many of the organizational changes that have been implemented will likely remain intact after the economy rebounds, new mindsets, ways of thinking, and strategies will be essential.

Re-Doubling Communication Efforts

Keep in mind that “perceptions” among employees play a very significant role in a weak economy. It is extremely important for leaders and HR professionals to maintain and encourage frequent, candid, and proactive communication. Handling the “people side” of things is more important now than ever.

Equally important is maintaining esprit de corp, not only among the employees in an organization, but among all of the appropriate stakeholders (whose perceptions are also very important).

The Role of HR Leaders: Stepping Up in the Post-Recession Recovery Period

The current recession provides an excellent opportunity for HR professionals to be effectively proactive, stepping up and contributing to their organizations strategically. HR managers and directors in today’s business climate should be involved in every step of not only the strategic planning for their organization, but also in the actual strategic implementation process.

Litigation Management

HR professionals should consider consulting with legal counsel about new trends in compliance requirements and business regulations.

After two successive years (2008 and 2009) of reporting declines in the number of lawsuits and regulatory proceedings, in 2010, senior corporate counsel began to anticipate an increase in lawsuits and government problems. This is probably because employees are emboldened to pursue their grievances by a recovering economic climate.

In the midst of a recession, business organizations often find that the number of lawsuits decline. Even government probes will often be fewer in number. Repercussions from the recession are the most frequently cited reasons for expected increases in litigation and business regulation at the local, state, and federal levels.[4]

In one annual survey monitoring litigation trends, about 40 percent of the more than 400 participants who represented 276 U.S. companies and 125 companies in the U.K., experienced increases in the number of wage and hour, multi-plaintiff labor, and employment law cases brought to court during 2009.[5] Among the most numerous types of litigation were disputes predicated upon wage and hour laws.[6] Employees generally alleged underpayment for overtime, meals, and rest times.

Another absolutely critical area to examine is the appropriate classification of employees. Retailers who often rely on part-time and/or seasonal workers have the most significant risk of being named as defendants in these types of claims. As a practical litigation mitigation measure, it is therefore imperative that HR professionals revisit their compensation policies and practices, the appropriate classification of their employees, and all current local, state, and federal compliance laws circa the current year, 2010.

Other critical areas of complex legal compliance in the economic recovery period will pertain to general employment discrimination cases, right to privacy issues, possible ERISA (Employee Retirement Income Security Act of 1974) violations, as well as disability claims and age discrimination issues. Viable mitigation measures for these types of disputes include well-conceived, drafted policies that have been effectively communicated to all employees and incorporated into the employer’s employee development programs and training regimen. Other employment-based claims that will pose significant concern to companies in terms of their possible financial risk are claims predicated upon sexual orientation discrimination, sexual harassment issues, violations of the Family Medical Leave Act, and disputes deriving from non-compete agreements.[7]

It is also crucial that HR professionals and business owners carefully review and update all employee policy manuals and handbooks to be current with 2010 employment-related laws and regulations.

The current stages of the recession recovery period should spur HR professionals to closely monitor federal, state, and local legislative agendas. There will almost certainly be pending legislation that will directly impact companies’ new strategic plans. For example, the health care reform legislation may directly impact the cost of doing business in the future and may necessitate a careful review of employee benefits.

Likewise, HR professionals and managers should consider consulting with legal counsel about developing trends in litigation and business regulation. Specific areas of liability that have the potential to impact the cost of doing business and new strategic plans include products liability, employment law, and tax law. Specific areas of business regulation that have the potential to impact the cost of doing business and new strategic plans include wage and hour policies, workers compensation, and environmental rules and regulations.

Lastly, in an effort to reduce costs, a company’s long-term strategic planning should not overlook the need to review dispute resolution strategies. Perhaps adopting alternative dispute resolution policies, e.g., arbitration relative to employer/employee disputes, as well as standard form contracts, could dramatically reduce the costs associated with the resolution of such disputes.

Think Beyond Merely Being Defensive and Reactive: Lead

By identifying and planning post-recession strategies and HR-specific programs, sustainable organizations are more likely to succeed and even prosper, while those that adopt only a short-term reactive perspective are more likely to struggle or fail. Sustainability demands a balance between short- and long-term thinking.

In difficult times, sustainable businesses actually seek out opportunities for the future. They utilize best practices to appropriately manage and guide current resources, and they also prudently invest in longer-term human and capital resources.

Overly conservative companies that do not embrace a longer-term, sustainability-based perspective as a core value are more likely to run the risk of surviving only in the short run and thereby, from a weakened position.

Another appropriate role for leaders and HR professionals at this time is to enhance the current organizational culture with a sub-culture of “looking for new opportunities.” Against the backdrop of our current business climate, enhancing “effective leadership in a recession” is absolutely critical for organizational survival and sustainability.

Concluding Remarks: Survive and Thrive

Truly sustainable organizations do not fear the ups and downs of the economy. In fact, sustainable and progressive organizations prepare for just these highs and lows. They realize that the current economic challenges are certainly significant, but nevertheless temporary. They view the economy as resilient in the long run and they make sure that they are adequately positioned to prosper when the turnaround inevitably comes. By maintaining a longer-term focus on the organization’s critical factors for success, they are better positioned to survive and thrive.

Specific Recommendations for Human Resource Managers and Professionals

  • It is essential to be in on all strategic planning meetings.
  • Assume an active role in facilitating full discussions.
  • Keep the conversations grounded and positive.
  • Balance short-term with long-term perspectives (i.e., through scenario planning).
  • Be a driving force in shaping clear commitments to new strategic plans.
  • Give thorough attention not only to key planning strategies, but also to specific implementation strategies throughout the organization.
  • Be proactive: Take a significant and very active role in supporting all managers and leaders.

[1] Leonhardt, David, “Judging Stimulus by Job Data Beginning to Reveal Success,” The New York Times, February 18, 2010, OpEd.”

[2] David Wessels, “Business Recovery and Reorganization After an Economic Recession,” The Wall Street Journal, February 14, 2010, OpEd.”

[3] Ben S. Bernanke, The New York Times, Business News: Federal Reserve Statistical Release Data, June 7, 2010.

[4] http://www.fulbright.com/images/publications/6th.LitTrendsreport 2009.pdf. (link no longer accessible).

[5] Ibid.

[6] http://www.fulbright/com/images/publications/6th.LitTrendsReport 2008.pdf. (link no longer accessible).

[7] Ibid.

Authors of the article
Charles P. Leo, PhD
Charles P. Leo, PhD,

, earned his BS in psychology from the University of California at Berkeley and earned his MBA in labor economics at UCLA. He also earned his PhD degree in organizational psychology from UCLA. He has more than 30 years of executive-level business experience in the areas of human resource management, employment law, strategic planning, and organizational development. Leo has held significant consulting assignments with more than 250 organizations throughout the country in both the private and public sector. The majority of those assignments were multi-year engagements. He has simultaneously served as an adjunct professor of management at Pepperdine University for more than 25 years, and is currently a full-time practitioner faculty member in the Applied Behavioral Science department at the Graziadio School of Business and Management. Leo has published numerous articles in both academic and professional journals. He is a member of PIHRA (Professionals in Human Resources Association) and the APA (American Psychological Association) and has provided consulting advice to companies including TRW, Bank of America, the California Department of Transportation, Zenith Insurance Company, Warner Bros. Studios, Toyota Motor Company, and the U.S. Social Security Administration. For further information go to – www.lsconsultancy.com. His consulting practice provides his expertise to clients relative to a variety of issues.

Jeffrey Schieberl, JD
Jeffrey Schieberl, JD,

, has several years of senior management experience. He has served as president/CEO of a California corporation, vice president of Law/Government Relations of another California corporation, gubernatorial appointee to an Interstate Energy Commission and as executive director of an industry association. Dr. Schieberl has been a member of the Pepperdine University practitioner faculty for more than fifteen years. He earned his BA degree at the University of Southern California, received his MBA degree from Pepperdine University, and was granted a JD degree by Southwestern University School of Law. For further information go to www.lsconsultancy.com. His consulting practice provides his expertise to clients relative to a variety of issues.

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