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The Impact of the Economic Crisis on our Organization's Human Resources
by Laura Littlecott, PHR
and Patti Dunham, MBA, MA, SPHR

In light of recent major events in the economy and financial markets, your employees may not be gathering around the water cooler to talk about the latest episode of "30 Rock" or what's on their holiday gift lists, but instead may be speculating about the future of their holiday bonuses, raises, or even job security. Looking at recent survey data, their fears are not unfounded.

In an October 2008 survey, Watson Wyatt reported that 86% of surveyed companies expect the current economic crisis to have at least some impact on their business and many have already made changes that impact employees. The survey noted that 34% of employers have already made changes to their travel policies and 30% have entered into a hiring freeze. In addition, the survey reported some of the following potential actions within the next twelve months:

    Expected layoffs or reduction in force (26%)
  • Expected hiring freezes (25%)
  • Expected increases in the amount of employee contributions to the health insurance (25%)
  • Re-visiting" merit increase budgets (28%)
According to a recent article on MSNBC, small businesses may be making the most dramatic changes within the month - reconsidering holiday bonuses and gifts. Some are doing away with gifts altogether this holiday season, while others are scaling back end-of-year bonuses. Of course, cutting out bonuses and holiday gifts altogether can have a negative impact, so some employers are getting creative while reducing costs. According to MSNBC, one employer is replacing bonuses with extra time off between Christmas and the New Year, while another is giving an allowance to be spent on wellness items such as gym memberships or toward the employee's contribution of health insurance premiums. Some employers are still giving end-of-year bonuses, although the amounts are smaller than in previous years. The big blowout holiday party may be going the way of the dinosaur as well - employers are planning events such as on-premises luncheons as a less expensive option to show their employees that even in the current economy, they are still appreciated. Other options employers are considering include: reducing the workweek, mandatory holiday shut down, benefit program freezes, and training reductions. Obviously…not one size fits all and organizations must research the impact of such changes as deeply as possible prior to implementing such drastic economic measures. The overall challenge for employers, as it has been for awhile now, is to do more with less. We are all looking for creative ways to make this happen while still engaging our workforce, reinforcing productive and positive behavior, retaining staff, all while allaying their fears. No problem…right?!?

Tough decisions such as those noted above must be implemented in a compassionate and considerate way and human resources must lead this charge. There is a lot to consider when we are trying to make the right business decisions, determine how to do it, AND do it without adding to employee fears. So, what can employers do to stem the tide of worry among their ranks? According to Workplace Options, many employers are finding that work-life options are boosting employee's morale. To help ease fears some employers are offering financial management resources like debt management, budgeting or foreclosure prevention as well as counseling resources. If your company has an employee assistance program (EAP), now is the time to remind your employees of your program and encourage them to use it, as many EAPs offer a wide range of services. Similarly, Jay Seifert, founder of Lonestar Wellness, states that "Tumultuous times call for stabilizing influences, and wellness is such an influence." He urges employers not to cut wellness programs during tough economic times, but instead should bring wellness initiatives to the forefront. Seifert states that "…where workplace wellness programs are concerned, what starts out as a moderate up-front expense quickly becomes an investment with a demonstrable ROI." A good wellness program can result in improved morale and productivity, as well as lower health care costs and reduced absenteeism.

Another way human resources can support employees and the business during these difficult times is to maintain communications. Watson Wyatt, Workplace Options, as well as a survey conducted by Weber Shandwick Worldwide reported by Business Week, have all found that employees believe that their companies are not communicating enough regarding the economy's direct impact on their organization's financial health. Company communication is absolutely crucial during tough economic times. The Weber Shandwick Worldwide (WSW) survey found that most employees are not receiving information from senior leadership regarding the impact of the financial crisis. Harris Diamond, CEO of WSW states that "…colleagues and coworkers talk about the economic issues, which feeds the rumor mill. Some of the rumors might be accurate, but most are false. The result? A demotivated workforce. People freeze up waiting for bad news." Many companies incorrectly believe that saying nothing in such a climate is better than giving vague information. According to Carmine Gallo in BusinessWeek, simply acknowledging to your employees that you don't know what the future holds gives employees the confidence that management is at least thinking about the issue. Discuss the specific issues facing your company, and increase your normal modes of communication - your staff wants to know what the financial crisis means to the future of the business.

While the full fallout of the U.S. financial crisis may not be known for some time, it is apparent that companies have made and will continue to make reductions in spending through revisiting merit budgets, bonuses, increasing employee benefit contributions; and in more far-reaching actions such as hiring freezes and layoffs. Employers can ease the concerns of their staff in these times by not forgoing bonuses and holiday gifts, instead making them smaller and tied to performance, offering supportive resources such as debt management and counseling, and by stepping up wellness initiatives to aid in morale and productivity. Lastly, don't neglect the importance of keeping an open line of communication with your employees regarding the impact of the current economic times on your business. Human Resource professionals can take this opportunity to support the business to ensure that the most appropriate economic actions are taken while supporting employees through increased communication and actions that are in support of the organization's vision/mission.

Laura Littlecott, PHR and Patti Dunham, MBA, MA, SPHR are Sr. Human Resources Consultants with Strategic Human Resources, Inc. ( If you have any questions or would like to share your thoughts with either of these consultants, contact either of them respectively at or

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