Recent economic crisis which effects are still strongly influencing enterprises but most importantly people around the world has brought about discussion on the difficulties that Human Recourses departments have been facing. However in this whole debate on whether or not employees’ number and money for stuff’s development should be cut one important point is missing; namely the questions of what was the role of HR in causing the financial crisis in the first place and if HR executives are to be blamed did the learn the lesson? In my opinion an interesting starting point for this discussion is included in CIPD’s report ‘Next Generation HR’ from 2010 which authors write:
“The perils of HR simply supporting organizations to deliver their short-term strategies were clearly demonstrated by the excesses that fuelled the global financial crisis. Many a commentator asked ‘where was HR?’ when unsustainable business strategies supported by unsustainable reward strategies were being advocated by executives who stood to gain. As one HR director said off the record in response to this question: ‘We were doing what we were told as well as we could.’”
It is remarkable that the collapse of Lehman Brothers was a starting point in reveling deep problems of USA’s and UK’s economies. Why and how is this related to the Human Recourses? In these countries, characterized by Anglo-Saxan, laissez-faire economies the role of state in regulating Employment Relation is far less significant that the role played by internal companies’ departments, in this respect HR. Nevertheless the question arises to what extent HR is actually fulfilling its function given the scope of responsibilities? I quoted the CIPD report because I find extremely significant the comment given by the HR director: ‘We were doing what we were told as well as we could.’” Such approach means that either this person was not interested in taking any responsibility for the problem caused (which surprisingly in this context would be more optimistic scenario) or that in spite of high executive position the HR director was not actually having any significant influence on what was going on in the company. It is difficult to determine which scenario is the real one, however whichever we choose there is no doubt that it were HR practices in financial institutions of remunerations and incentives that created an incentive for management to go one step too far in financial risk management. Having said that let’s have a look of what happened after 2008; according to Guardian (January 2010):
“The world's biggest investment banks are expected to pay out more than $65bn (£40bn) in salaries and bonuses in the next two weeks, reinforcing the view that it is business as usual on Wall Street and in the City barely a year since the taxpayer bailout of the banking system”.
This makes me wonder if:
1. HR still plays barely support function in financial institutions and the HR Directors do not determine the bonuses-culture? If so how and why this should be changed?
2. If the HR has an active part in determining this culture of greedy what are the possible consequences of sustaining such model? Have we not learnt anything? Why and how this has to be changed?
I am interesting what are your opinions about that and I will try to address these questions in next posts. J
