It is of great significance for organizational managers to recognize the major challenges that come with the global downturn. The present global financial downturn has led to many organizations examining their approaches in light of the ever rising competition along with reduced consumer demand. Adjusting to fit within the new environment demands comprehensible strategic focus, speed as well as flexibility in order to prosper, survive and fit in within the new environment.
Every global crisis is in one way or another different but the current one has seemed extraordinary. On no account has government involvements in developed as well as developing nations of this extent and scope been observed in the past. And in no account again has economies, financial organizations, markets as well as supply chains been internationally incorporated to the level they are in the present, even making it difficult for the most self-sufficient firms to hide (Thomas, 2010).
The management challenge is frightening. However, the focus ought to shift from assumptions on how long the downturn will get to the improvement of strategies that will enable organizations survive as well as gain from the enormous transformations the recession period brings. The major challenges an organization in a crisis period goes through are often naturally linked to finance and marketing. Even though this is evidently a generalization, one would view marketing as the central issue with respect to revenues and finance as the prevailing issue with reverence to expenses and how to fund them.
Karina etal, (2009) highlight that many organizations naturally act in response to the financial crisis by downsizing its capacity through layoffs and salary reductions and choosing to reallocate resources towards the development of later on stage projects so as to increase the market share of perhaps the organization’s available products. And with the present global downturn throwing a bleak international outlook, various organizations have reacted variably. Future-oriented organizations believe that during such crisis it is more significant to maintain, motivate as well as develop talent. They recognize that it is their present employees, for instance who will make a difference in the organization’s long-term triumph. They also believe that the strength of an organization may be advanced during a recession as it moves on leading the drive for potential innovation and revitalize its product pipeline (Thomas, 2010).
On the contrary, organizations that are not future-oriented find themselves susceptible especially when the economy returns to normal. Furthermore, they’ll need to restart recruiting or retaining senior level executives to drive innovation and rebuild product pipelines which put them to a disadvantage. Successful organizations naturally bring into line their processes, structures, cultures, resolutions as well as self-image along with the market and competitive circumstances during normal business and boom times as well. This enables them to haul out efficiencies and to boost the efficiency of their strategies as well as initiatives. Throughout the final crisis period, it becomes difficult for various organizations to employ equity, huge bonuses and hefty pay increases to maintain their top executives as well as their employees. Many organizations are thus forced to come up with mechanisms to incentivise as well as to retain their respective staffs.
Constant as well as consistent communication from the top-level organization acts as a key retention mechanism, reminding them of the sighting and the staff of the significance they bring to the organization. This is mostly of great significance during periods when the focus of the organization shifts to future projects in addition to marketed products. In cases of lay-offs as well as pay reductions, employees might feel undervalued, demotivated in addition to being overstretched. Many organizations also find clear steps ahead during such crisis towards their employee career developments. Organizations therefore view this as an opportunity to recurrently develop their future organization leaders and employees. They do this through the employment of “stretch” roles as well as secondments to other sections within the organization. It is during these times, that many organizations are forced to work even harder in order to attract and recruit the best employees (Bowes, 2010).
While employees planning do consume time as well as resources, it acts as an important tool meant for management along with organizations to make excellent human resource decisions. It lets organizations to expect transformations other than merely react to them. Finally, it allows for the development of strategic methods for addressing workforce issues such as the anticipated retirement of the baby boomer generation. More importantly, staff planning allows organizations to ensure that they have the right staffing levels at the right time so that profitability can be maximized when boom periods resume. Consequently hiring organizations tend to distinguish themselves from competing organizations therefore putting in rigorous effort to sell the prospects presented by the organization as well as the role. Employers in this case make obvious a reliable and genuine interest in their employees, leaving no doubt about the aspiration of the top management team in bringing them on board.
When an organization enters through a phase of remarkable change, business convention developed during usual or boom periods can become an important obstacle to building the two vital success factors needed during such periods: flexibility and speed. The outcome is that even thriving companies may find it hard to adjust to the new working environment that financial downturn brings.
Throughout the down turn period, change is not just remarkable but, even more worrying, more or less impossible to foresee. Importantly, a downturn is not an occurrence but a process, which implies that transformations develop over time. The initiation of a product innovation, for instance by a competitor or the entry into a market by an unusual competitor may result in significant change. But these are just occurrences. A company can amend its strategies following the prediction of these occurrences and while amendments will be essential following predictions on early feedback, it is in a little while business as usual, even though with a somewhat adjusted strategy. Recessions vary. As consumers change their behaviors in often unpredictable ways, and which is motivated by fear more than necessity, markets in addition to competitive situations change and keeps on the trend as well. In précis, organizations merely deal with environment mainstream which are not set up to deal with effectively or easily.
Have organizations acted quickly enough to respond to the effects of the Global Financial Crisis?
The financial downturn prompted mainly by the liquidity deficit in the banking system has led to the fall of huge financial organizations, the rescuing of various banks by their respective national governments as well as declines in the various stock markets globally. In the United States, for instance, the housing market has experienced difficulties, leading to frequent evictions in addition to prolonged vacancies. More over, the crisis has been described by several economists as the worst financial downturn ever since the Great Depression of 1930s.Its role in the failure of major businesses; fall in consumer wealth approximated at trillions of U.S. dollars, considerable financial commitments acquired by the governments in addition to a significant fall in economic activities cannot be ruled out (Eltham, 2010).
In my opinion, I feel that many organizations have acted quickly in response to the effects of the financial global downturn. Both market-related as well as regulatory solutions have been put into operation or are still under deliberations; even though there are still significant risks remaining for the global economy over the coming periods. Policy responses especially in the developing nations have become more and more healthy. This is after a period of hesitation. Governments along with their central banks are coming in vigorously to assure debt, enhance interbank liquidity as well as recapitalize strained but still healthy banks to whatever limit they can. Even though, these efforts have relieved credit conditions to some extent, credit flows has stayed weak leading to various commercial banks cautious of lending anymore. Stock markets globally remained highly unstable after going through huge losses, and are recording enormous daily changes in their valuations as a result of the many response efforts put by many organizations (World Bank Group G20 Summit, 2008).
Many governments have also been able to offer fiscal stimulus as well as rescue packages. The reliability of their advances in addition to the efficiency of their interventions has proved to be of great importance especially in preserving the integrity of the various public sectors capability to deal with the crisis as well as moving on to act as a lender of the last option in situations like these. Of great significance is the rescue plans adjusted to assist troubled banks as well as recovering the taxpayers’ investments.
This need for cautious calibration of the various reforms and help has been applied by several organizations following the design of global rescue packages. They have therefore designed the fiscal stimulus in order to produce the greatest impact on the significant growth constraint, which include mortgage support for instance in some countries like in the United States. In general, the reactions of the United States Federal Reserve, European Central Bank, as well as other central banks instant and remarkable. For example, in the last quarter of 2008, both central banks bought US dollars2.5 trillion of the government debt as well as strained private assets belonging to banks. This was perhaps the largest liquidity injection into the credit market, as well as the largest monetary policy accomplishment, in the globe history. Up till now, different U.S. government agencies have dedicated trillions of dollars in form of loans, asset purchases, guarantees, and direct spending (Global Research, 2008).
Even as organizations put their focus on short-term goals, they ought to carry on with their long-term goals and targets in mind. Strategic organizations arrangements, their hiring needs as well as focus on forecasting requirements for their future ought to be highly considered. These organizations should carry out internal talent assessment as well as external benchmarking activities, to make certain that they have the suitable staff on board to move the organization to the next level. Organizations that keep on to focus on recruiting and holding on to talent for the duration of a financial downturn tend to emerge with a stronger organizational leadership, competent teams in place along with their product pipelines intact, placing them well to gain quickly once the economy gets back to normal.
Bowes, B, J, 2010, Working World – Organizational: Cutting Payroll Doesn’t Always Pay Off, Management Journal .
Retrieved on August 25 <http://www.legacybowesgroup.com/resources/articles/252-cutting-payroll-doesnt-always-pay-off.html?catid=36%3Aworking-world-organizational>
Eltham, B, 2010, How Does Our Economy Compare? Retrieved on August 25 from http://newmatilda.com/2010/06/01/ben-eltham-interviews-david-wessel
Global Research, 2008, Causes and Solutions to the Global Financial Crisis, United Nations general Assembly, Retrieved on August 25 from http://www.globalresearch.ca/index.php?context=va&aid=10792
Karina etal, 2009,’’Predicting business unit performance using employee surveys: monitoring HRM-related changes’’ Human Resource Management Journal.
Thomas, L, 2010, Managing Talent When Things Get Tough, BioSpectrum Bureau Journal. Retrieved on August 25 from http://www.biospectrumasia.com/content/040810SGP13330.asp
World Bank Group G20 Summit, 2008, Financial Markets and the World Economy. Global Financial Crisis: Responding Today: Securing Tomorrow, Retrieved on August 25 from http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:21972885~pagePK:64257043~piPK:437376~theSitePK:4607,00.html