The economic crisis for HR Managers during COVID-19
We often talk about using crisis as an opportunity and when Covid-19 struck and lockdown was announced, a crisis truly emerged for the Indian corporates. While there were some sectors which were impacted directly, like HORECA (Hotel, Restaurant, Civil Aviation) and Tourism but on many other sectors, the impact was not really clear. In fact, within a couple of weeks, some winners too emerged post the lockdown. But did the HR fraternity use this crisis as an opportunity? My personal opinion is No. The immediate response of most of the organizations was to freeze salary hikes, reduce variable payouts, opt for layoff and delay or cancel upcoming joining, this was true not only for sectors which were impacted directly but this was observed from across the industries like IT, E-commerce, Manufacturing, FMCG etc. While it is understandable that any uncertainty does not bode well for the business and you would not want to onboard new employees in the face of uncertainty, but it seems the organizations lacked the empathy to deal with their existing employees by freezing increments and reducing variable payouts. Such was the sentiment, that even news of a couple of companies giving out increments (which is a usual process) was applauded and celebrated. This ruptured the employer-employee relationship at a time when the outside environment was uncertain and employees needed economic and emotional support. What could have been an opportunity to create a lasting impact in the lives of the people was instead wasted in lieu of “uncertain business scenario”.
Fast forward a year, the business sentiment has been improving and pent up demand is driving up business activities. This has led to shortage of talent and now we are in a situation where firms are reporting 15-20% attrition for Q-2 and employees are bundled with multiple offers and organizations are not able to retain them even after giving 100% hikes. Organizations have gone for double wage hikes to offset the impact of labour shortage and to retain the talent but the demand is so high that it doesn’t seem to work. On top of this, metal price hike, crude price hike, energy shortage, coal shortage, shipping complexities has led to higher raw material prices and operating expense. The inability of many companies to pass on these prices to customers, has reduced the headspace available to compensation managers for the subsequent pay hikes. Add to it the startups and unicorns who are flush with funds and fresh vigor to attract and retain talent, the HR Managers are not left with a lot on their plate to incentivise their people.
While uncertainty still persists as the threat of third wave looms and the supply side challenges seem to only add up each month, organizations will have to relook at the compensation philosophies and will need to put up right incentive structures through a mix of short term and long term compensation. HR Managers will need to stick to basics to get through this tide, it will be interesting to note here that one tested way out of this economic crisis is to focus on hiring fresh talent and forming a stronger bond with the talent right from the beginning of its journey in the organization. Also, with offices expected to open up now and many people will be coming back from the harrowed experience of Covid-19, it will be a good idea to realign people with a purpose and vision of the organization and to change some restrictive work practices. Also, this will provide opportunity to organizations to foster communication across the teams and use office space as a melting pot for innovation. Offices need to be glamorized as an opportunity to meet people and perhaps this could be the opportunity in crisis.