Howgate Sable recently conducted a survey to identify some of the major implications of the recession.
Below, Brendan Keelan summarizes the major findings.
In terms of sector spread the breakdown is as follows:
FMCG (including food and drink) 16%
Healthcare & Pharmaceutical 16%
Transport & Logistics 13%
Telecoms, Media & Technology 13%
Professional Services 10%
Extractive Industry & Utilities 10%
Not for Profit 3%
Financial Services 3%
Unsurprisingly, right across the sectors pressure on margins was reported as was reduction in demand, though the impact on the bottom line was not so dramatic as might have been expected. Where figures were quoted revenue reductions ranged from -5% to an increase of 14% in one glorious example, the product of a very specific set of circumstances cocooned from the ravages of the general economy. So don't get too paranoid!
However, the ability to hold finances at par or only slightly below was almost universally attributable to the impact of concerted cost reduction initiatives, particularly in the area of restructuring.
For me, one of the most interesting features of the responses was that related to acquisition and divestment. It was by no means universal that restructuring was solely around divestment. In 20% of the companies surveyed, acquisition activity was reported and in a number of cases, when divestments were made, the resource generated was being spent on strategic acquisitions. These included opportunistic purchases of businesses in administration - Darwin's analysis still holds good!
For those businesses with a strongly branded proposition, there was some evidence that the branded nature contributed to maintaining prices and this was accompanied in the food and drink arena by a more accepting approach to the need for price rises attributed to commodity inflation. Paradoxically, this was not the case in utilities, probably related to the regulatory background being less sympathetic.
For the future, a couple of interesting threats were identified in regard to the impact of recessionary pressures leading to lower investment in research and new product development.
Responses showed surprising correlation across some aspects coupled with equally wide fluctuations both between sectors and individual companies within the same sector.
Where pay increases were reported, these tended to be of the order of 2-3%. Approximately 30% of organisations canvassed had delivered pay rises but even where this had occurred, it was notable that the top management layer had often not been included. Clearly, there has been a perception of the need to lead from the top and this has been accepted implicitly.
It was also noteworthy that pay freezes had occurred in both unionised and non-unionised environments.
The sectors which had fared worst in terms of remuneration were what I would describe as traditional manufacturing and transport and logistics. These were also the areas reporting the largest enforced redundancies varying between 5% and 20%, though there were oases of calm with no reductions in the size of work force in the same sector.
In instances with no redundancies reported, however, this tended to be accompanied by reductions in both the numbers employed and rates paid to agency and contractor staff. It was apparent that in many organisations, enforced redundancies had been avoided through the identification of additional operating efficiencies, removal of overtime and greater flexibility.
Where employee attitude surveys were in place and recently conducted, they were almost universally exhibiting enhanced results. My speculation would be that this is due to the increased levels of communication being undertaken by management and to a degree, a "gratitude quotient" emanating from those glad still to be in employment. On the positive side, it seems clear that enhanced communication has also played a part in winning union approval to pay freezes, working practice change and overtime reduction.
Voluntary reductions in pay rates or working hours or enforced holidays were very much a minority experience - no more that 10% of the sample.
Recruitment through the Recession
Disregarding the oxymoronic nature of mentioning these two words in the same headline, the picture as represented by respondents is not so dire as Robert Peston might have you believe.
I also think I may have missed a trick in asking for answers related to experience over the last six months and the next six months. My gut instinct is that if I had made the distinction related to the first 3 months of the year, the second quarter and the succeeding six months, some interesting (and more hopeful) nuances would have been exposed.
Turning to the results in the round; it is by no means universal that recruitment freezes have been or are in place. Just over 60% of contributors had no freeze and of the remaining 40%, 27% had instituted partial freezes with the residue - 13%, on total embargoes.
This, of course, is only part of the picture. It was apparent that where hiring was still taking place, the decision to go was invariably requiring approval at a higher level than normal and overall volumes were depressed. Partly, this is the result of reduced voluntary turnover which, in precise instances quoted, had diminished to below 10% across the board (virtually half of pre-recession levels).
It was also remarked in a number of cases, that vacancies which in the past would have been exposed to the external market were now being filled internally. It will be interesting to see if this development maintains when the market improves. In the mean time, it presumably fits well within the context of engagement which was a desirable aim specified by a number of organisations.
In terms of the cold spots for recruitment, these tallied as one might expect, with the worst exposed sectors mentioned under the section on background; 75% of manufacturing respondents were operating a recruitment freeze and 50% in transport and logistics. In FMCG the figure was 20%, 0% in pharmaceutical/healthcare and a 60% partial freeze in utilities and extractive industries.
My contributors in professional services all report no freeze but given anecdotal evidence from other organisations in the same sector, I don't believe my data should be regarded as typical.
One intriguing feature for me was that despite the gloomy prognosis for the graduate market, virtually all respondents were continuing to recruit at that level with at least two instances of increased volumes. An enlightening comment received was that the aim was to "have a better educated middle management level going forward", evidence of a longer-term perspective which wasn't universal!
Peering into the crystal ball, grounds for optimism were well hidden. By far the majority view was that the next six months would be similar - but no worse. More optimistic inputs heralded the last quarter this year as representing a potential recovery period or, possibly, the second quarter of next year.
If our experience is anything to go by, the summer period which we expected to be drought like has actually seen the emergence of a number of new assignments and we expect this to increase, albeit marginally, in the final quarter of this year.
I noted in a recent piece of reportage relating to the last recession, that the unemployment rate didn't fall till 1995. As a veteran of that campaign, I can claim confidently that the management and technical areas of recruitment were out of recession the previous year and I would expect that pattern to be maintained as we emerge from the current crisis.
Coming out of the Recession
There was an underlying current in this section of "won't it be nice when the pain stops", the impending sense of relief was almost palpable!
As a result, I didn't pick up any feeling that the future was uppermost in peoples' calculations. That being said, it was interesting that there was a surprising level of consensus in the threads discussed, even if - for obvious reasons - they appeared rather embryonic.
Talent was far and away the major obsession. There is a drive to eliminate mediocrity, recognition of the need to retain and nurture the talent that is available and an acceptance that that has to be accompanied by well managed succession plans.
In a small number of instances, a precursor stage related to profiling the top two levels of the organisations to target development, had already been initiated. However, this was the exception.
The danger signal to me was that only in a minority of cases was it recognised that to ease the path, more effort needed to be expended on building the employer brand. With everyone interested in talent when the upturn arrives, it is not going to be sufficient to rely on inertia maintaining individuals in their current environments.
An interesting background factor was identified by one respondent in relation to reward strategies. The impact of more intrusive governance, tax changes and depressed option values would all combine to make it necessary to revisit reward as a feature with the prospect, as yet unspecified, of some interesting new developments in this sphere.
Whatever the final shape of recovery is, from the comments received it was pretty obvious that HR is going to be in a strategically important place. This will manifest itself in terms of maximising the human capital of organisations, building loyalty and engagement and creating remuneration philosophies that attract and retain. This will fundamentally ensure that business strategies are delivered via an enhanced human dimension.