Initial HR Financial Analysis in Recession

When the recession hits the organization, Human Resources has to be ready to provide necessary data to the team solving the initial problems with the recession. The recession usually does not hit the organization slowly, but it comes immediately. Within several weeks, the organization can lose a lot from its sales volumes and cash flow. HR has to be ready to propose the necessary steps to bring costs of the organization down to the sustainable levels.

HR Departments with the HR Controlling have a huge advantage. They have data about their employees, personnel costs and cost of benefits. HR Controlling measures the usage of the benefits provided and the overall satisfaction with the benefits.

The financial analysis of the current HR practice is essential, when the recession comes. The HR Employees has to provide all the basic data about the personnel costs of the organization. This information is usually available quickly, but HR should also provide the dependencies on other costs and how they are driven by the performance of the employees.

Generally, the compensation costs should be directly linked with the performance of the organization, but two decades of the constant growth could break the direct link and the total salaries of employees can be completely unlinked from the net profit of the organization and they can depend on much softer aspects. HR has to report such a disconnection as the project team can bring a quick fix, which is not popular, but it can help to protect the cash-flow of the organization.

The impact of the cost cuts is the next quick information provided by Human Resources. HR has to monitor the usage of the compensation components and it has to provide tips to cancel some of them. Mainly, the benefits are the first items to be cut and the employees should generally feel no significant impact on their personal income. Just few employees in the organization have a significant part of their personal income in benefits provided and HR can propose a plan for them.

Very important part of the initial HR Financial Analysis in Recession is about sending the message to employees about cost cuts as they can adapt their behavior to the new situation on the market. HR has to support the general feeling of the urgency to save money and cut costs, even with a very minor items in the financial budget.