Training and HR During an Economic Slowdown 

It's common knowledge that the U.S. economy has been slowing down over the past year. Economic indicators show sales are declining and stock prices are falling.  At the same time, labor costs are rising. According to the U.S. Department of Labor's Bureau of Labor Statistics, the Employment Cost Index (ECI) for March 2001 increased 4.1 percent from March 2000. The ECI measures changes in compensation costs (wages, salaries, and employer costs for employee benefits). Labor costs and training When labor costs rise, the employer's knee jerk reaction is to cut back on hiring and to downsize the workforce. Historically, the training function is one of the first areas to get cut. Let's face it: when times get tough, the idea that training is an investment rather than an expense goes by the wayside. The CFO may look at the training department's budget and ask, "Why do we need all these trainers when there are fewer employees to train?" Instead of downsizing, some companies are beginning to retrain existing employees for different jobs. According to the 1999 profitability study conducted by The Institute of Profit Advisors (IPA), one of the keys to improving a company's profitability is to provide employee training rather than downsizing.  The Training Director can justify training expenses because existing employees need to be taught how  to carry out their new jobs. We all know what happens when an employee is moved into a new job or a supervisory or management role without proper training. The same problem can occur after a layoff as surviving employees are expected to take on new job responsibilities. Layoffs and labor shortage Statistics show that more new jobs are being created even as old jobs are being eliminated. According to the Bureau of Labor Statistics of the U.S. Department of Labor as of May 2001, employment gains in industries such as services, construction, finance, insurance and real estate offset the large loss of manufacturing jobs. The unemployment rate stood at 4.4%. Despite the increasing number of unemployed workers, today's tight labor market still doesn't provide enough skilled people to fill newly created jobs. This shortage of skilled workers will continue as the number of retiring baby boomers increases and the number of employees to replace them decreases. What can HR do? The latest Manpower Employment Outlook Survey shows that the slowdown in hiring will continue throughout the nation in the upcoming third quarter.  During this time, the Human Resources department's role is to ensure that senior management considers: The risks and costs involved in downsizing The benefits of clear, long-term staffing plans   The changing global economy  The demographics of the workforce in strategic planning  (e.g., baby boomer retirement)  Then perhaps employers will let their knee jerk reactions test  their reflexes in the doctor's office rather than using them to make staffing decisions.  References     Bergman, Becky. "Training More Vital as Economy Sags."  Silicon Valley/San Jose Business Journal (January 5, 2001)   Hadden, Richard. "Rule for managing through economic slowdown: be calm." The Business Journal  - Jacksonville  (March 30, 2001)   Laabs, Jennifer. "Has downsizing missed its mark?" Workforce, vol. 78 (Apr. 1999): 30   Leonhardt, David. "The Wave of Layoffs: Is it Bound to Get Bigger?"  New York Times (January 30, 2001)   Wells, Susan J. "Stepping Carefully."  HR Magazine, vol. 46 (Jan. 2001) :44-48 Like this article? Check out other Timely Topics. Timely Topics is written by Audrey Choden. Please send questions or comments to achoden@trainingbydesign.com.