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Capitalism in disarray – is HR ready for the challenge?

07 June 2016 #Employment


No wonder employees feel unhappy. The Organisation for Economic Co-operation and Development (OECD) recognised last year that the share of UK economic growth enjoyed by workers is at its lowest since the Second World War. Amazing, given all that has occurred and the evident progress over the past couple of decades, let alone the last 70 years.

The Chief Economist of the OECD remarked recently that uncertainty caused by the UK EU referendum has come at a time when the global economy is caught in a low-growth trap. She sees a Brexit depressing growth substantially in Europe and elsewhere. The OECD Secretary-General also says the global economy has failed to break out of its low-growth pattern of the past 5 years. Indeed, it seems rising levels of inequality may be contributing to productivity slowdown.

The reality seems that despite globalisation, technology advances, benefits of EU membership and increased individual employment protection, UK employees are not gaining proportionately. Most may say they feel they are going backwards.

Writing in the Guardian on the 31st May, Aditya Chakrabortty discerningly commented how the economic system off the world actually has still not recovered from the banking crisis and economic growth remains anaemic, despite everything done to try and put things back on track.

This is the challenging landscape for business planning, and the seemingly endless search for cost reduction.  This is generally of course at the expense of the workforce of the relevant business, or of its suppliers, as overall labour costs are always under scrutiny.

It also sadly limits scope to make significant improvements in pay rates through global supply chains to significantly improve individual earnings in developing countries.  There simply appears not to be enough growth to go round. Developing countries badly need the multinationals themselves to do well enough to invest globally and increase trade flows.

This certainly creates the impression that for the foreseeable future the primary task of human resources will be to manage implementation of efficiencies and cost reduction.  Not exactly what all HR professionals join up to do as the main objective of their career.

Yet against this troubling background it is the vocation of human resources to try and improve job satisfaction and motivation of employees; to work for that all important mutual trust and confidence between the employer and its people.

Not easy when re-organising for survival.

Also on 31 May, Abdallah Nauphal writing in the Financial Times reflected some similar observations on the world economic order.  He remarked that monetary policy is providing the shovels for the global economy to carry on digging an ever deeper hole.  An interesting picture that allows little room for optimism.  He commented that a new monetary order will emerge but it is still hard to discern its outlines. So not sure where that leaves business plans.

The background described above is simply not conducive to forward planning. The working assumption has to be that, apart from the few booming global technology based businesses who for now seem to go from strength to strength, the more normal scenario in established businesses will be about watching pennies and cutting costs.  This then affects most UK corporates and their supply chains, and accordingly their hard pressed HR professionals responsible for implementing new efficiencies.

That leaves HR very much holding an unhappy baby that it cannot do much to comfort. 

The issue above all is that there seems no quick way to raise productivity.  That is the real need of most western businesses. Prospects of growth surely must turn mainly on improvement of business models by the progressive introduction and effective use of new technologies, and the significant recruitment and development of people who fit that model. So that is where HR probably ought to be spending more time.

It is a point of caution, however, that innovation may not automatically enhance productivity.  Technology may be good for its stakeholders, but the wider economy might not obviously benefit through improved productivity or individual benefit. This seems to be true even in that land of opportunity and entrepreneurs, the U.S.A.

Recent information suggests even U.S. productivity may be set to fall despite the immense technological innovation we associate with the U.S.

The HR community is going to continue to be faced with streamlining workforces and changing employment terms, reflecting overall lack of economic growth and how that feeds through to most businesses one way or another.

Businesses best able to translate new technologies into real improved productivity must surely emerge as the winners, and HR needs to be instrumental in enabling transition to this sustainable growth pattern.

Forbury People sees familiarity with new technologies conducive to productivity improvement, and how to engage employees in the transformation process, as increasingly critical elements in the role of HR and the acknowledgement of HR’s corporate value in the difficult days ahead.

Technological innovation is not a typical HR professional skill set, but Forbury People is increasing its focus on what is coming down the track to change our lives at work, more in the next 5 years than the last 20 probably, and how we can live with and even appreciate the new ways of working soon to become crucial to corporate competitiveness.

Michael Sippitt

Director

Forbury People Ltd

Clarkslegal, specialist Employment lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Employment matter please contact Clarkslegal's employment team by email at employmentunit@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

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