Today, organizations operate in an increasingly volatile, uncertain, complex and ambiguous (or VUCA) business environment. A combination of negative macroeconomic sentiment and an increase in geopolitical risks has caused great uncertainty for corporations across the world. Hong Kong is faced with ever-increasing geopolitical risk due to the ongoing US-China trade war, while sections of the population are embroiled in ongoing protests. The combined effect is hitting certain sectors harder than others, and the overall impact is trickling down the economy. Economists have a pessimistic outlook and predict that the city is heading toward a technical recession.
As the Chinese saying goes, in every crisis there is opportunity. Adverse and uncertain business conditions provide an excellent platform for the HR function to demonstrate its strategic role, its adaptive mindset and its ability to build core organizational capability for the future. The key is to keep doing what all good HR functions should be doing anyway: focusing on core business and strategies, improving areas that need improving, articulating what is important, aligning everyone behind the organization, and establishing priorities to ensure organizational success during this troubled period.
In the recent Hong Kong Employee Health and Benefits Survey conducted by Mercer in Hong Kong, one in four HR professionals identified “workforce changes as a result of economic uncertainty” as their major challenge when managing employee benefits programs. This is only half the story, however, as economic uncertainty is just one of the many drivers that are intensifying the disruption of the labor market. Many other factors — such as the growing challenges of globalization, accelerating technological advancement and an aging population — are intertwined and morphing in unexpected ways to have an even greater impact in shaping the future of work. Ultimately, these conditions are affecting the most valuable asset and the heart of all organizations — people.
A mental shift is needed, as businesses cannot afford to continue operating in a business-as-usual manner in a recessionary period. Processes and practices that worked during growth periods need to be reviewed or revamped during a downturn. Organizations that adopt a balanced approach, with the right organization structure and engaged employees, are best positioned to capitalize on the upswing when it comes. In facing up to human capital issues, HR professionals should cultivate a change mindset; there is considerable opportunity to radically rethink how they can support and manage employees through turbulent times.
During a time of economic downturn, organizations often seek to address excess — “cost-cutting” is often the first term that comes to leaders’ minds, with the aim of driving operational efficiency. However, an outright reduction in workforce could be risky, as it would create gaps that the remaining employees would have to fill.
A less disruptive way to optimize resource reallocation is to consider alternative working arrangements. One of the most important and widespread shifts in employee working conditions is the rise of flexible working. Recessionary periods are cyclical in nature, so to counter temporary shifts in market demand, flexible working arrangements could offer desirable long-term outcomes, such as retaining valuable top performers.
Regardless of how resource reallocation issues are resolved, HR policies should be reviewed as employees embrace new ways of working. A challenging business environment often serves as the most effective catalyst for accelerating change. Having a robust framework supported by revamped company policies will produce short- and long-term benefits for employees and the organization.
Beyond focusing on efficient allocation of “resources,” HR’s role is only fulfilled when it prioritizes the human aspect of the organization. Keeping employees motivated and healthy is essential, but physical well-being is only part of the equation. Organizations and HR professionals should not overlook the importance of the mental, social and financial aspects of health and well-being. Proactively designing and implementing holistic wellness programs not only improves employees’ general health, it could also have the knock-on effect of improving engagement, leading to a rise in productivity across the organization.
The Hong Kong marketplace evolves, and the general population is becoming more health conscious. An increasing number of providers are entering in the market with tailored employee wellness programs, offering activities ranging from educational workshops to onsite events. Organizations that are smart about investing in their employees during turbulent times can often reap significant benefits, as such investment generates a strong competitive advantage in the talent market.
Before and after implementing any policy changes or investment in health and wellness programs, organizations need to take the pulse of employee engagement through surveys. Technological advances have made taking and storing such measurements easier, yet it is becoming more and more challenging to understand the drivers of employee engagement. Engagement drivers are often intangible in nature and are becoming ever more interconnected.
Management guru Peter Drucker once said, “What gets measured gets managed.” Conducting employee engagement surveys seems to be an attempt to quantify the unquantifiable, but the act itself serves two purposes: first, it ensures the organization and its people are aligned behind a strategic focus, which helps drive effective strategic changes; and second, it encourages organizations to strive to improve the engagement “score” and the elements being measured.
The time dimension is often neglected in the corporate world, where snap decisions are made and instant impacts are expected. Prior to making any major organizational changes, careful planning and robust assessments should be conducted with the aim of improving employee engagement. By turning engagement metrics into meaningful insights, organizations can engage in a data-driven transformation in which employee sentiment is properly tracked and improved over time.
Unlike one-off revamp projects, people development is an ongoing HR activity that aims to drive an engaged workforce. HR professionals can help employees build compelling career paths that adapt to changing work environments. The task of inspiring employees should fall to all levels of the organization, and targeted managerial upskilling is becoming ever more important to ensure people managers are equipped with the necessary soft and hard skills to steer the employees through turbulent times.
Making effective talent investment decisions is more of an art than a science, especially during recessionary periods when budgets are tight. A good talent development strategy must be agile and able to adapt to changes in corporate strategy. The level of leadership skill developed and displayed during turbulent times can be an important indicator of long-term organizational success.
From the Global Talent Trend Study, employees shared that creative thinking and learning about technology are the top two skills that would help them stay competitive. Fifty-six percent of survey respondents expect their company to provide training based on their level and career aspirations. Inspiring a growth mindset by redesigning the people development strategy enables leaders to deliver talent-led changes that ultimately shape the future of the organization.
As a market average, wages account for 70% of total employee expenses, with the remaining 30% allocated to benefits. Health insurance premiums constitute the lion’s share of benefits spend for most organizations. The challenge of designing benefits programs that offer equitable and appealing compensation and incentives to employees escalates in times of uncertainty.
With medical inflation running at 8%–9% in Hong Kong, active plan-management strategies should be put in place to optimize benefits spend. Assessing the adequacy of coverage during turbulent times is essential, as claims might increase due to an increase in stress-related illness. Leveraging employee claims data and analytics can help uncover valuable insights — careful examination of anomalies in claims patterns can help organizations understand changes in general workforce health and develop suitable benefits programs that are valued by employees.
The healthcare industry is undergoing significant technological advancement and digital disruption. Organizations can partner with providers in the market to adopt innovative, cost-saving solutions, such as telemedicine and virtual consultation. With a growing interest in wearable technologies, companies can also encourage healthy behavior in employees by creatively designing reward programs.
An organization’s ability to survive and thrive during this period of volatility depends on HR proactively addressing the challenges faced by employees. Organizations can ride the current turbulence by intelligently managing, supporting and communicating with their employees. In the long run, by establishing the right organization structure and effectively motivating employees, organizations will be best positioned to capitalize on the inevitable upswing.