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Recessionary trends in corporations

March 29, 2009

Back in early 2005 I, along with my friend Vivek Kaul wrote an article in Business World on how the MBA was nothing but a fast moving consumer good. We interviewed a lot of MBA pass-outs in therecession1experience bracket of 0-5 years and put forth our learning on why they move jobs so often and what is really the attitude of these young generation-X &Y corporate employees. We found these employees extremely confident yet confused about what they really want in life, quite aggressive, materialistic and rational, very optimistic.

Some even went ahead to say it’s payback time for the companies for the hardships that employees had to go through since the rise of the corporation. There was little loyalty and employees felt it was not only justified but also a wise thing to move jobs every few years if not months.

GDP was growing at 8-9% a year; economy was booming, colleges kept increasing their seats to feed the corporations with their never ending hunger for hands legs and minds. Executive teams meetings in companies deliberated on the best talent strategies on keeping these young employees happy. Retention plans, stock option plans, performance bonuses, increments, promotions – if companies figured out how to buy these hands, legs and minds, the next question on their minds was how to buy their souls?

Amidst all this attention the well educated 20 something employee felt pampered and this further fuelled his materialistic and rational mind. Basking in this glory the 20 something employee would spend lavishly on comforts and all symbols of financial and material progression. It was the age of instant gratification. Why wait for 5 years to think of buying a house? Why buy a hatchback when you really want to be in a sedan? Consumer spending peaked. This economic spiral kept pulling things up – the stock market, the real estate prices, salary bills of companies etc etc. Optimism, optimism, optimism!

Somewhere in the second half of 2008 this boat lost its steam and we find ourselves in troubled waters. News headlines moved from stories of boom to gloom. Layoffs, pay cuts, job losses, bonus cuts etc have become daily conversation topics today and replaced the stock market lunch room discussions during the boom time. Optimism is sinking. Some economies are effected badly some severely and some extremely adversely.

A lot has been written about the reasons for this slowdown as an explanation. We do not yet know exactly how long this slowdown will last. However certain trends will continue to remain with us for the next couple of years inside the corporation. Here are the 5 broad trends that I think will be prominent in the near future.

1. From tomorrow to today: Companies will become more careful about investing in tomorrow. Opera-tional efficiency of today will become paramount. Obviously perks and travel will see a squeeze. New projects will get delayed and will go through never ending rounds of evaluation and iterations.

2. Power shift in board rooms: The enterprising visionary CEO will give way to the financially astute CFOs. Marketing heads and HR heads job roles will change and will find themselves with dwindling powers.

3. Functional visibility and jobs: Sales, logistics, supply chain, Quality etc will retain their visibility at the same levels in the organization. Marketing, HR, corporate communications might find their visibility going down from what is was earlier. Functions like audit, finance, administration will gain more visibility than earlier and accordingly jobs in these functions may become more rewarding.

4. Talent management to staff management: Since there is a broad shift in thinking from tomorrow to today, lead indicators may take a beating and lag indicators might get short term preference, human capital which is a futuristic way of looking at manpower, will undergo a change. It will go back to management of personnel as yet another resource. Employees will become easier to manage as the lack of opportunities outside keep their expectations low.

5. Entrepreneurial freedom to bureaucracy: Overall spirit in the organization will move from that promot-ing entrepreneurial spirit to multiple levels of control and restrictions leading to a bureaucratic set up.

The above trends may be reactive and I personally do not prescribe these. Nevertheless these are trends which will be there for us to cope with. Some of us in our professions will be able to manage these trends well and not go overboard.

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5 Comments leave one →
  1. Arun Seshadri permalink
    March 31, 2009 12:19 pm

    Think the bigger challenges would also be

    1. Keeping the employees motivated and greater communication top down in times of these crisis.
    2. Greater challenges for the HR to enhance/ promote team building activites and training in times of limited budgets
    3. Though employees will be easier to manage, it also should be noted that for critical activites recruitments are always on so there is no place for complacency. Focus needs to be on making the workplace more vibrant. Once again the HR role is critical
    4. Finally, recession or no recession,maybe we can also look at it this way that the Indian salary is catching up with the standards abroad. It is not about companies pampering employees, but the fact that companies can afford to pamper them and the reason- ROI will be high on the person. No company is foolish to pay people w/o expecting adequate returns. I guess it is the free market dynamics at play wherein you bid for what you want!

  2. March 31, 2009 9:50 pm

    Functionally speaking I dont diagree with you. For one this is a proactive stance and secondly any other route would only mean regressing in corporate progression. Organisations are a going concern and adopting a myopic view is not something I would recommend. The trends mentioned above are fairly broad and is the immediate reactions of the organisations. The challenge as you have mentioned above is indeed for the leadership, including the HR function to understand the importance of these interventions and continue to invest in these processes.

  3. Arun Seshadri permalink
    April 1, 2009 10:14 am

    Please go through today’s ET front page. Article on HR activities during these times of crisis by various corps.

  4. April 1, 2009 2:08 pm

    Hi Hasan,

    Thanx for visiting my blog and leaving words of appreciation on my post. This encourages me.

    I read your post. It’s a crisp presentation of the kind of adjustment organisations perforce make in their functioning, say giving auditing function the importance it begs in competion with marketing, HR and the like. Or say giving Finance guy the upper hand, as if they have something like unused potential to use for the recovery of the corporation.

    I for myself has a view and I’m going to share here: Don’t they say, when everything goes on well something is going wrong somewhere? And that’s how over-investment, over-capitalisation, over-recruitment lead to glut. We know them in the offing but ignore them…ignore at our cost. Like ignoring the early symptoms of a disease in our body. Marketing Department would bask in the warm sunshine of perks and commission whereas production department would slog. This discrepancy is seen but ignored. Result: low quality, high cost. People in the marketing Department think, with a hefty ad budget, they can sell even merchandise of low quality. Again it leads to higher cost.

    The examples may be legion. But they underscore the same point: know your limits…in investment, production, marketing, even in R&D. And respect that. Know where’s that optimum…and achieve that. Even Moores Law has one!

    Thanks

    Nanda

  5. April 17, 2009 4:55 am

    great site this hasanahmed.wordpress.com brill to see you have what I am actually looking for here and this this post is exactly what I am interested in. I shall be pleased to become a regular visitor 🙂

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