Many organizations are preparing themselves for a period where large efforts are needed to sustain them at the current level, and where downsizing more than growth will be a reality. Based on the changes in the economic environment, HR must reassess its strategy and realign to company circumstances. We expect the following 7 factors to dominate the agenda; a combination of short and long term factors at the national and international level.
- Economic: the financial crisis led to a lack of confidence in the financial system. Economic growth stagnated in 2008 and brought a worldwide recession. Unemployment, which was at a low level in many countries, is rising, with the highest levels expected in 2010.
- Over the next years many baby boomers will retire. The demographic makeup of society is shifting: young people (generations X and Y) can in numbers and in experience not replace the retiring generation, meaning that after a temporary slow-down the “war for talent” will continue unabated.
- Compliance: Companies, in particular those listed on the stock market, must comply with an increasing amount of rules and regulations to be allowed to operate. As a result of recent scandals, regulations will come under scrutiny, since they have not prevented them.
- Globalization: New technological advances allow for work to be performed where knowledge is most readily available, or where the price is lowest. Terms such as nearshoring, offshoring and outsourcing describe this phenomenon.
- Business is changing from a capital-intensive to a knowledge-intensive economy. Capital belongs to the company, whereas knowledge belongs to the individual.
- Partnerships: Companies are creating partnerships with each other for the duration of a project (think of Philips and Sara Lee to create Senseo). This even occurs between competing companies. As a result, the borders between companies are fading.
- Individualization: Society no longer consists of groups of people, but of individuals, each with their own goals. These individuals belong to one or more ‘tribes’. They demand individual solutions, not only with respect to the place and type of work, but also to compensation and benefits, free time and work-life balance.
When assessing HR strategy, it is crucial to review these external factors in light of the current company context: if the company is downsizing, the fact that baby boomers are retiring might not pose much of a problem. A tight labor market has a different effect on a company that focuses on customer intimacy than it has on a company that prides itself on operational excellence. The role of HR is ultimately to focus on those factors that will have a large direct effect on the company and that support growth.