Linda Holbeche, CIPD Research and Practice Director
Brendan Barber, TUC General Secretary
Gerwyn Davies, CIPD Public Policy Adviser
Duncan Brown, Institute for Employment Studies
CIPD Research and Practice Director Linda Holbeche gives her views …
Let’s face it – prospects for UK plc are not looking good at the start of 2009 as the economy teeters into recession. Business prospects across the retail and hospitality sectors look bleak this spring. Woolworths is only one high profile retailer to bite the bullet. Even Marks & Spencer is closing stores and laying off staff. The only good news seems to be from Sainsbury’s who enjoyed bumper sales pre-Christmas!
People just aren’t spending as they did a year ago. The era of major credit use is coming to an end and the ‘New Thrift’ era means that people will be cautious about making purchases that they would not have thought twice about only a year ago. Suppliers of luxury goods, such as Wedgewood, and even popular non-essentials, such as Zavvi, have gone into administration.
Attempts to get the banking system and the broader economy moving again are meeting with mixed results. Plunging house price values and a depressed housing market mean that many people are already in negative equity. Even the Bank of England reducing the interest rate to its lowest level ever seems to be having little effect on consumer confidence, except for people on certain kinds of tracker mortgage who find themselves with a bit more to spend than before. Savers on the other hand find themselves with reduced incomes. The billions being pumped into the banking system by the Government seem to be bringing little relief to business or the ailing housing market. Benefits are generally not being passed on companies in the form of loans and business leaders are calling for more to be done to help business.
On the employment front things are looking bleak too. Pundit predictions vary about the numbers of people who will be laid off in 2009. Our very own John Philpott estimates redundancies numbering 600,000 by mid-year. Companies are attempting to soften the impact by coming up with many variations of contract which essentially keep people employed but on different or reduced terms. Recruitment and pay freezes are becoming the order of the day in most sectors. Many people who might have been ready for a job move are now hanging on to the jobs they’ve got. A combination of job insecurity, lack of opportunity and more bad news to come seems unlikely to inspire people to high levels of engagement and performance.
So against this gloomy backdrop, we’re interested in how organisations will be able to sustain and even improve high performance. Is your take on what is happening? Is the bad news being exaggerated and in your organisation or your clients’ organisations things are a good deal rosier? What do you think will be the impact of the current environment on achieving and sustaining high performance?
TUC General Secretary Brendan Barber comments on 2009 economy ...
2009 is going to be grim. No one really knows how high unemployment will go, but as it often peaks after a recession has bottomed out, it will climb every month. The best Government can do is make sure that the recession is as short and shallow as possible, and that means taking bold action to boost the economy and save jobs.
Unlike previous recessions, its effects will not be concentrated in some sectors and some regions, but pretty universal. Manufacturing and services will be hit. The public sector, particularly local government, will not be immune.
The roots of this recession lie in the finance and banking sectors and we still do not have a banking system that works. Ministers need to consider taking toxic debt out of the system, injecting more money into the banks and lending directly to sound companies that have every chance of coming through the recession.
The budget should have a carefully targeted stimulus package. Tax cuts and benefit increases for the poor will be spent, not saved, and paying for at least some of this by rebalancing the tax system so that those who did so well out of the boom and often avoid paying a fair tax share would be popular.
Government needs to move on from the welfare reform rhetoric that treats the unemployed as potential scroungers. They need support through training, job search and for the long term unemployed direct job creation. Better benefits, higher statutory redundancy pay and a bigger tax allowance for redundancy pay should be in the budget.
But while this is going to be a tough year, the collapse of the economic consensus that has brought us the downturn does provide an opportunity to create a different kind of economy. Now that hands-off deregulation and free market dogma are discredited, we can start to think about a better kind of economy. One that is better balanced so that the needs of financial services do not always predominate, one that is fairer with a smaller gap between rich and poor and one that is sustainable so that we can reap the full environmental and jobs benefits of a low carbon economy.
It is going to be horrible, but we can also make it a turning point.
CIPD Public Policy Adviser Gerwyn Davies adds his views ...
Barely a day goes by without mention of job losses or worse still companies going under. However, what has gone unnoticed beneath these headlines is that the number of migrant workers working in the UK continued to increase in 2008 according to official figures and those from the CIPD/KPMG’s Labour Market Outlook. This is somewhat surprising given that the number of jobless in the UK started to increase at the turn of 2008, which begs the question as to whether this trend will continue in the next year or two.
A closer look at the said official figures gives us a few clues as to what might happen to migrant worker flows in the next couple of years. The only regions which have seen falls during the past year include the original group of 14 European Union countries (that includes the likes of France and Germany) and the USA. In contrast, we have seen sizeable increases in the number of migrant workers employed in the UK from South Africa, the EU Accession countries (that is made of those countries from Eastern Europe that joined the EU more recently, such as Poland), and India among others.
Yet, despite this increase from Eastern European countries, the EU Accession countries still lag behind the EU 14 and Africa as a source of migrant labour for the UK. So, does this suggest that too much is made of the much publicised impact of the Polish worker returning home?
Given the gradual introduction of the new immigration rules last year and the depressing economic outlook, I believe this to be the case. As we know, UK employers now have to apply to become a sponsor before they can recruit from overseas outside the European Economic Area and Switzerland. According to Government estimates, this will mean a twelve per cent reduction in the numbers coming here. However, with job vacancies falling very sharply month by month, such a reduction is surely overstated; not least because only a fraction of those vacancies appear on the Government’s shortage occupation list in accordance with the rules of the new system.
Employers also have to show that the job could not have been filled from the existing "resident labour market" before employing migrant workers outside the EEA and Switzerland. With so many higher-skilled people how losing their jobs, the job opportunities for migrant workers outside Europe looks set to fall dramatically.
HR professionals have benefitted hugely from the wider pool of talent that migrant workers have helped stock in the past decade. According to CIPD research, migrant workers are said to be more reliable and show a greater work ethic. Such a ready supply of migrant talent is about to dry up however, which will challenge HR professionals’ ability to recruit and manage indigenous talent, particularly once the economic recovery gets underway.
Is the supply slowdown of migrant workers having an impact on your organisation? And how are you responding to this?
Duncan Brown of Institute for Employment Studies looks at emerging trends ...
In a recession with mounting redundancies, the future for employee engagement and HR initiatives to support it might not appear to be positive. In those now distant, halcyon days of economic and employment growth up to but 12 months ago, many employers had jumped on the employee engagement bandwagon. Google references to the term doubled between 2001 and 2006. But they have since declined by 25% in 2008.
Can you talk about engagement of your staff when their colleagues are losing their jobs? According to The Economist's influential World in 2009, "a more elitist shift (in management) will occur: companies will worry about the performance of those at the top of the pyramid, while everyone else will be managed like a commodity".
Wrong. In tough times, management rhetoric, it's true, is exposed. Companies focus on what works in the struggle to survive. US reward experts Jay Schuster and Patricia Zingheim have criticised the best-place-to-work movement that saw fringe employment costs increase, with little business return. Those employers where employee engagement doesn't extend beyond attractive recruitment waffle and directorspeak will be found out.
But our research at the Institute for Employment Studies shows that employee engagement is not a growth-fuelled fad. Whatever the economic climate, it provides scope for HR professionals to impact on their organisation's performance. Supported by a genuine management commitment and appropriate HR practices it lies at the heart of organisational performance in our post-industrial age. In challenging conditions, it becomes even more vital to counter the worries and pressures that many employees will be experiencing.
Research demonstrates that in our service-based economy, engagement of the majority of employees is a major driver of organisational performance. Engaged employees deliver improved customer service. They are more productive and they are less likely to leave or be absent. And research also shows that HR practices have a major influence on employee engagement. Brown and West found that employee engagement and customer service in 25 UK organisations were strongly influenced by a range of HR practices and the way line managers implemented them, including pay, recognition, career development and training, employee involvement and work-life balance.
Recession or not, employee engagement today, and in the future as a new generation enters the workforce, is a critical driver of organisational performance, and what we do in HR has a major influence on it. But an organisation's commitment to engaging employees can't just be on the surface, at the top, or even just in the HR department, with the odd flexible benefits plan here, or recognition programme or executive incentive there. The recession doesn't lessen but will magnify the importance of engaging all our employees, but it will also show just how engaged organisations really are with the concept.