A dilemma for HR ; especially when industry growth goes into dip or remains stagnant. staffing needs are seen as a short term liability rather than a long term asset. While one can understand the need for exercising constraints on operating expenses side, eg on perquisites and other employee related costs, viewing 'employees' themselves as costs, in short term, carry longer term opex risk. To list: talent search, attraction and development costs nowadays far outweigh basic salary costs during recession; especially during growth/revival phase. One cannot escape from those costs, at higher rates, once the revival mode sets in. Research studies show that attrition rate falls when industry growth stagnates or product price margins falls. eg FMCG companies. The inverse correlation with salary growth does not happen when industry is not competitive. Hence reducing operating costs during a recession by tightening wage bills will not increase attrition levels. On the other hand the advantages are manifold for long term operating cost controls. It will help avoid altogether the excessive hiring costs later. Recession phase is a great opportunity to review internal policies and practices, without compromising basic welfare facilities for employees and assuring them job security. That will well turn out to a small price for the huge gains later when industry turn cycles. HR need to be farsighted when Industry faces a rough patch especially in industries where talent needs remain stable over long periods of business cycles. Exception is in case of IT companies where companies use lay-off as a strategy to enrich talent mix during recession, keeping an eye on future talent needs.
