In economics, a recession is a business cycle contraction, a general slowdown in economic activity. It is a period of general economic decline; which is typically defined as a decline in GDP for two or more consecutive quarters. Recession as a business cycle is generally considered less severe than a depression, and if it continues long enough, then sometimes it is classified as a depression. It is typically accompanied by a drop in the stock market and has many attributes that can occur simultaneously which includes decline in consumption, investment, government spending etc. During recessions, many macroeconomic indicators vary in a similar way. For example, production, as measured by Gross Domestic Product (GDP), employment, investment spending, household incomes, business profits and the unemployment rate rise. Interestingly, though there is no one obvious cause of a recession, but usually people blame the entire administration and criticize that it has happened due to wrong economic policy being followed by the government of the country. Historically, recessions have tremendous impact especially on managing man power of organizations all over the world. No doubt, the recession is a temporary phenomena but it has a cyclonic effect in the minds of employees working in the organization. Though tough times call for tough measures and particularly during the recession period it is very essential and significant to reflect on how to motivate and retain employees, while staying within budget of the company. It is a fact that always good employees are the driving force behind the success of any organization. Therefore the knee jerk reaction of some business houses is that human capital is not expendable in any recession is highly unprofessional and illogical. Rather tough economic conditions call for organizations to make difficult decisions.

As a result, human resources professionals are likely to find themselves being asked to manage rapid organizational change which can involve cost cutting, multi-skilling of employees and selecting employees for redundancy. It may also involve recruiting new consultants, who can help the organizations in order to survive the economic down turn. HR executives will have to ensure that the organization is doing the right thing and doing it right, while increasing emphasis on the Return on Investment(ROI), on productivity and efficiency. In the above backdrop, present article is a modest attempt to discuss:

i .Challenges in Managing People during recession; and

ii. Possible Measures to Cope with these Challenges

Challenges in Managing People

During the period of recession organizations cut costs, lay off even top performers and make efforts to increase every bit of productivity of employees, who survive after the survival measures are being taken by organizations in order to face the hardship of the time. It could be seen from the past experiences that the recession usually creates extraordinary challenges in workplaces around the globe. A recent Ceridian survey of employees in the United Kingdom revealed that one in ten respondents would take a pay cut in order to keep their job; nearly half were willing to compromise their work-life balance and work longer hours. Following could be some important challenges facing organizations in managing people in organizations during recession period:

1. Unemployment-

Recession creates unemployment. Interestingly, some economists prefer a definition of a 1.5% rise in unemployment within 12 months during the recession which further adds fuel to fire of increasing in unemployment. In fact ,downward swings in the economy are often accompanied by permanent reductions in the workforce, temporary layoffs, reduced pay, shorter work weeks and the like (Robbins,1996). Though there exist no completely reliable predictors of recession and full impact of a recession on employment may not be felt for several quarters but a path breaking research study in Britain shows that low-skilled, low-educated workers and the young are most vulnerable to unemployment in a downturn. After recessions in Britain in the 1980s and 1990s, it took five years for unemployment to fall back to its original levels(Romesh,2009). Many companies often expect employment discrimination claims to rise during a recession(Rampell,2011). While U.S. employers shed 63,000 jobs in February 2008, on October 1, the Bureau of Economic Analysis reported that an additional 156,000 jobs had been lost in September. On April 29, 2008, nine US states were declared by Moody's to be in a recession. In November 2008, employers eliminated 533,000 jobs, the largest single month loss in 34 years(Louis et al.2008). For 2008, an estimated 2.6 million U.S. jobs were eliminated.The unemployment rate in the US grew to 8.5 percent in March 2009, and there were 5.1 million job losses until March 2009 since the recession began in December 2007and around five million more people were unemployed compared to just a year before, which was the largest annual jump in the number of unemployed persons since the 1940s(David,2009).Thus the recession brings unemployment which subsequently become challenge for job holders and job seekers, management of organizations and society as a whole to manage this problem.

2. Social Problems-

In fact, unemployment brings a number of social problems into society. In this phase of economy, several social problems develop. Loss of jobs lends loss of income. The living standards of people depend on their wages and salaries which is more affected by recessions than those who rely on fixed incomes or welfare benefits. The loss of a job is known to have a negative impact on the stability of families, and individuals' health and well-being. Moreover, in several earlier cases of recession driven organizations in different parts of the world, because of the sudden and unexpected loss of jobs due to retrenchment and layoffs, employees have committed suicides; have suffered various stress related diseases. It was due to loss of income, there was substantial decline in societal status and importance of job lost people at home and society. As a result, many people have involved more in unsocial and criminal activities. According to Brenner (1973), unemployment due to job loss has been associated with higher level of social disorders, first admission into mental hospitals and suicides. Therefore, both unemployment and under employment have several social implications which a HR manager and its top management cannot ignore in recession hit economy.

3. Psychological Problems-

According to Robbins (1996), changes in business cycle creates economic uncertainties. When the economy is contracting, people become increasingly anxious about their security. He pointed out that the suicide rates skyrocketed during the Great depression of the 1930s and minor recessions, too, increases the stress level. Das and Das (2009) reported that like disaster, the downsizing, rightsizing creates despair, anger, bitterness, tears, distress, sorrow, sense of failure, feeling of rejection, humiliation and guilt at being with not a job. Thus, recessions have psychological and confidence aspects. For example, if the expectation develops that economic activity will be slow, firms may decide to reduce employment levels and save money rather than invest. In this circumstance, businesses houses do not want to make capital expenditures or hire people. Sometimes the recession has lasted so long that even the top performers are losing their jobs as entire departments are closed. The employees who survive are the ones who have cross-functional skill sets. In this new reality even employees are prepared to do a different job than the one that they were originally employed to perform. As a result, unfavorable organizational climate develops in the organization, which becomes a challenge for HR Manager to manage.

4. Unfavorable Organizational Climate-

It is usually seen that when people are laid off, friends and colleagues are given new job responsibilities, organization work goes on but it develops distant and people feel that their job security are being threatened. Thus, the concern of the organization becomes saving money than people and accordingly HR activities are practiced in organizations, which create distrust and unfavorable organizational climate. Organizational climate is simply defined as the existence of human environment, but with this Voluntary Retirement Scheme (VRS)and/ Compulsory Retirement Scheme(CRS) practices, an inhuman environment suddenly develops in the organization. As a result it leads to absenteeism, employee turnover, grievances among the existing employees of the organization. It creates dissatisfaction, de-motivation, and lack of organizational commitment among the employees which ultimately affect quality and quantity of products produced by them. So these are the challenges which HR Managers of the organizations can not overlook during the period of recession.

5. Downsizing/ and Rightsizing Manpower-

According to Smith(1994), for most managers , firing employees as a result of downsizing or reengineering is so traumatic that it leads to burnout. Instead of HR becoming proactive, it comes up with tough measures for organization to survive during recession ignoring its inhuman effect on people working in the organization. While they are suppose to retain its best people during these days, HR people sometimes even take the harsh decision of reducing the number of people employed and land up at downsizing. The word downsizing is even taken as rightsizing and optimizing but they may not know or ignore the fact that neither the bad situation nor the good conditions lasts long. Unfortunately, so far there exist no definite and objective criteria to determine who should be given VRS/CRS to downsize the manpower of the organization to achieve right-size but it is always a challenge and concern of HR Managers to decide who should be the victim of this decision, due to politics in organization. Moreover, as mentioned above once the downsizing process starts in the organization, it has tremendous psychological impact on the survivors who are not only confused about the criteria of downsizing but are worried about when the downsizing sword may fall upon them, so that they will be on the street with their begging bowls. Therefore, during recession the challenge before HR managers should not be reducing manpower rather how to retain them with various job redesign efforts so that they will be available for the better time which will come after recession.

6. Declining in Employee Engagement –

Employee engagement is the level of commitment and involvement an employee has in his/her job in the organization. Employee engagement, also called worker engagement, is today a business management concept. An "engaged employee" is one who is fully involved in, and enthusiastic about their work, and thus will act in a way that furthers their organization's interests. In fact employee engagement is a measurable degree of an employee's positive or negative emotional attachment to their job, colleagues and organization which profoundly influences their willingness to learn and perform at work. Thus engagement is distinctively different from employee satisfaction, motivation and organizational commitment. Especially during recession, it is a challenge before HR Managers to maintain the employee engagement at the highest level so that it does not affect their interest and initiative to produce the best in terms of quality and quantity. In a classic survey by City law firm Speechly Bircham has teamed up with King's College London HRM Learning Board to conduct a survey of senior HR managers. The survey paints a challenging picture for UK businesses; it reveals the damage caused by the economic downturn to employee engagement with stress and claims of bullying and harassment on the increase, while pay, bonuses and training budgets are being cut. The survey shows that, despite widespread workforce reductions continuing, 28% of organizations are still experiencing staff shortages. Interestingly when asked about the criteria for selecting people for redundancy, an employee’s absence record was cited as one of the top criteria. Maintaining employee engagement is cited as the biggest challenge facing HR Managers in the time of recession.

7. Declining Productivity and Performance –

In the face of layoff and retrenchment of employees within and outside the organizations, an unusual environment develops in industry and business environment which not only affect the performance but also the productivity of the employees surviving in the organizations. Due to social, psychological and economic pressure during this period, eemployers are hard-pressed to productivity drive. Though the requirement of time is to encourage productivity and maintain engagement to show appreciation in a way that's meaningful, unfortunately neither it comes from the sides of the top management or other corners of the organization. In this lean environment, experts suggest that the companies should encourage career development and learning strategies, which employees very much appreciate in order to improve their future. Unfortunately HR Managers used to focus on unpopular innovations during the recession because the role of HR during the recession is to save money to the organization, but it should never be at the cost of existing employees of the organization. No doubt, the senior management expects all the support functions to bring innovative ideas and solutions which will lead to stronger organization, when the next growth era comes, unfortunately to take these strategic initiatives to increase the productivity and efficiency and effectiveness of the entire organization is certainly difficult. Therefore, it is also a great challenge before HR managers during this crisis driven situation to stop declining in productivity and performance of employees.

8. Employee Turnover and Exit of Star employees- No doubt, while on the one hand management adopts VRS/CRS path to reduce manpower, on the other hand the best employees themselves leave on their own for a green pasture The top management of the organizations are busy in firefighting activities ignoring to identify the real key employees. They also fail to interact with them in the organization as well as to identify their real potentials, and strengthen the development program. It is always the wise men who jump out of ship before the ship sinks. As a result, the bigger challenge emerges, in which during recession driven economy, in organizations the best and the star employees’ switchover to the green pasture to save them from the crisis. Normally this development leads to bankruptcy in terms of pool of talented employees and executives during this period of crisis. Though the situation necessitates the creative Human Resources Management practices in the organization, unfortunately there is no innovative effort from the side of top management as well as HR department to stop the exit of these star performers by using various attractive mechanisms, which subsequently becomes a challenge for HR department.

9. Cost Cutting in HR Functions-In the period of crisis, always the biggest victims are the manpower of organizations and the HR related functions are worst affected during recession time. The management of the organizations not only reduce the manpower by offering VRS, the company owned facilities become worst to the employees when they are even asked to repair the quarter allotted to them on their own, company withdraw the facilities and privileges extended to even senior executives as cost cutting measures. In this circumstance, how the employees will expect their companies spend money on training and development, welfare, social security benefits and incentives. Though it sounds simple but in reality it is a great challenge for the HR managers to manage, motivate and retain employees during this period of recession and employee rationalization.

In fact the challenges to manage people during recession are many more. The list is too lengthy to be elaborated. More over the issues which pose challenge to an organization may not be the same for the other. Nevertheless, whatever may be the challenges, the organizations facing them are to evolve appropriate strategies to cope with them.

Possible Measures to Cope with the Challenges

If an organization has to survive the threats of recession, its HR department has to develop innovative ideas and solutions which will lead to stronger organization, when the next growth era comes. Managing Human Resources (HR) in a difficult economic environment is even more demanding than working in times of rapid growth. Therefore the task of HR Manager is very important to maintain equilibrium throughout the hierarchy. It is indeed a fact that recession or crisis is the part of the normal cycle of business and it is also certain that they will sooner or later occur but during this period HR department has to play an important role to make the organization to sustain the crisis and till the entire economy flourish. In fact, tough times call for tough measures but it is important to reflect on how to retain and motivate the employees, while staying on budget at the same time. Tough economic conditions call for organizations to make difficult decisions. As a result, human resources professionals are likely to find themselves being asked to manage rapid organizational change which can involve cost cutting, multi-skilling employees and selecting them for redundancy, as well as recruiting new consultants, to help the organization survive the economic down turn. HR executives will have to ensure that the organization is doing the right thing and doing it right, while increasing emphasis on the ROI, on productivity and efficiency. Therefore HR managers must be able to address the right kind of demands related to human resource functions during the recession by helping organization to enhance their abilities to learn and collaborates, manage ambiguity and complexity which develop in organization. Following are a few possible measures which may be adopted by organizations to overcome the recession challenges:

· During this period, communication should be from top to down so that it will develop confidence in employees about the security of employment without which it will be difficult to develop conducive atmosphere within the organization. It is high time for the HR Managers through collaborative and cooperative interactions and meetings with their employees so that it can develop a calm atmosphere which will ultimately leads to satisfaction, motivation and involvement of employees in their organizations.

· During the recession, leaders of top management and HR manager need to guide their organizations towards recognizing and remedying their trust deficiencies. All efforts need to be made to change the organization climate in which there is likelihood of increasing trust among employees which will ultimately enhance the potential for bettering the flow of communication, productivity, and the over-all quality of work life. It will also help the organization in retaining the star employees and enhance their productivity, satisfaction and organizational commitment. If required, arrange professional counselor to provide proper counseling to them.

· In fact there should be human face of all HR related decisions which will have long term effect on the image and goodwill of the organization. The HR managers need to be very creative while implementing new ideas, to change the HRM processes and to change the procedures. This has to be done in a way that it reduces costs and motivates people in the organisation. If companies should provide outplacement facilities to their employees. According to Bernardin (2007), the outplacement facility consists of job coaching, resume preparation, placement services and interview training. It also covers using the company telephone to call potential employers, letter of introduction, payment of placement fees etc. In fact, HR managers have to be concerned to increase productivity and efficiency of the employees by redesigning their compensation structure. All HR functions such as staffing, training, development and welfare activities need to be managed but with care so that it develops commitment and confidence in employees.

· The HR mangers also need to ensure that accurate communication happens on time in full, instead of employees hearing things with details from the grapevine first. During this period all measures should be taken to keep up the high motivation levels of employees. If the corporate plans to retrench the workforce, it is not only essential for the employees who will be staying back but also the employees’ packages and identifying the non-value added activities and resources. In the absence of all these efforts, it is not only going to damage the image and good will of the organization for the people who are going to be the victims of this programme but also for the survivors who will count their days for the sword to fall upon them and may spread rumour. Moreover without an objective, transparent and well planned scheme, there is possibility that the best people will be leaving the organization during this crisis moment of the organization. Employers need to realize that although their immediate reaction may be to cut bonuses and pay pools, they do still need to invest in safeguarding of their talent in the long-run.

· Redundancies, more assertive management, and cuts in pay and training are all likely to impact on levels of employee engagement. Especially for employee engagement a list of actions being practiced by the organizations are: offsite parties and picnics, birthdays and anniversaries cricket matches, quizzes and painting competitions, cultural festivals. Employee engagement may seem like a frill in a downturn economy.

· This recession is a double-edged sword. There are top performers out there -- but it's harder to find them in the avalanche of resumes." The experienced HR professionals can better meet organizational expectations they can post a position to multiple job boards without doing it manually, screen candidates with automated tools, and create a database of solid candidates. Since many star performers of the competitors organization might have been thrown out are job seekers, so they might send their resumes to the organization and are ready to join the company at a very short notice. Thus the cost savings accrue quickly and it eliminate their fixed costs for recruiting and reduce cost-per-hire and time-to-fill. Eventually, the dark cloud of the recession will lift. In the meantime, help company should help its employees to cope with it keeps costs low and prepare for the future.

· Fear of difficulties during the recession and the aftermath keep the drive up and running in this state of attitude can unify an organization and become a great motivational tool for employees. A shared challenge enables employees to set aside their individual concerns and rally around a super ordinate goal. Employees should be motivated enough to stick with their leaders during tough times and put in the extra effort required for the business to come out of the storm unscathed. To achieve this level of motivation, employees need to trust their leaders and the organization. They should be shown the long term vision of the organization. The above steps will enable the employer to hold its team together during a recession, and will even make bond between all of them stronger. Employees should be motivated enough to stick to the employer during tough times and put in the extra effort required for the organization growth.

· During this period of crisis, instead of going for retrenchment or layoff of people, it will be healthy HR practices to share either the existing jobs among the employees working in the organization on the basis of their extraordinary ability and competency or go for work sharing. In work sharing depending upon the demand for the products/services of the organization, entire works will be divided among the existing workforce who will not only be saved from the retrenchment or layoff but will continue to earn some salary(which is normally not the full packages) from their work till the recession is over. This HR practice will not only help the organization to retain the exit of the best talents from the company but will develop organizational commitment, job satisfaction and loyalty to the organization among the employees. It will also lead to produce the best quality products/services with strong determination and commitment.

CONCLUSION:

To conclude, when the organizations are in crisis during recession, HR departments of organizations can put its best in ensuring that they guide the corporate affairs, especially HR matters successfully in a balanced manner. The most important responsibility, especially during this period is revolutionizing the entire Human Resource system to identify, maintain, develop and utilize talents across the organization to their fullest capacities. In fact, for HR departments, these crisis moments are testing period and it is an opportunity to prove their value creation role if HR people understand what it needs to do during the period of crisis. Some of the basic strategies should be followed by the HR managers with the collaboration of top management to reduce administrative and establishment costs, hold large bonuses and reward payments, create participative forums for dealing with the difficult times ahead while retaining top talents. HR managers need to network with fellow managers to find out how best to visualize the problems and try to solve them. During this uncertain and critical moment of the economy, they should be involved in corporate reorganization, sustaining company’s position and growth, changing the mindset of workforce and as matter corporate responsibility all HR actions should have a human face in order to be ever regarded as the best place to work.

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Received on 02.12.2012 Modified on 19.12.2012

Asian J. Management 3(4): Oct.-Dec., 2012 page 243-247