Introduction
Christopher Johnson is a senior partner at Mercer, a leading international provider of HR and related financial advice, products, and services. He is responsible for developing Mercer’s reputation for human capital services and the provision of human capital strategy, talent, and reward services in the UK market. He has been in consulting for nearly 25 years, supporting private and public-sector organizations in managing human resource issues. Before joining Mercer in 2008, he worked for the UK government’s Cabinet Office, where he was responsible for employee relations and rewards across the Civil Service. Prior to that, he was with the Hay Group, Kinsley Lord, and Towers Perrin.
There are many facets to human resources (HR), but the economic context in which HR management takes place is clearly a critical determining factor. What do you make of the current business environment and its impact on corporate decision-making?
By late 2011 developed markets, particularly in Europe, were going through a time of intense political uncertainty. What emerged strongly in our conversations with clients in the second half of 2011 was their feeling of unease and frustration at the lack of political leadership in resolving the sovereign debt crisis. If you go back a few months before that, confidence about growth was an issue, but companies felt that they knew how to take investment decisions in difficult markets and they knew how to mitigate the risks of things turning out differently from whatever was envisaged in their “plan A.” However, as political uncertainty has come to the fore, it has become very difficult for business to take big decisions. Merger and acquisition activity shrank through the second half of 2011 as companies opted to wait to see how things developed. Similarly, there has been a falling off in recruitment and expansionary projects of all kinds.
Companies are looking to the politicians to improve the climate for enterprise, which means tackling public debt and creating a climate for growth. Meanwhile, in developing and emerging economies there is growth, investments and being made, and talent is in short supply. Many multinationals are not investing in the developed markets, where the economic crisis has been most marked; rather, they are focused on growth markets in Asia, Africa, and eastern Europe.
The crisis is exacerbated by the fact that through the boom years many governments invested in public services and drove up public-sector debt. It is now clear that a number of governments were quite highly leveraged when the 2008 downturn took hold. Without the banking crash that followed, many of these ills might not have come home to roost, but the crash happened and getting fiscal and public sector deficits back on to an even keel is going to take hard work. This is the backdrop to what is going on internally in companies as far as recruitment, retention, and staff rewards and benefits are concerned.
Through the crash and the subsequent emergence from recession, companies were confident in their ability to navigate economic uncertainty. They were investing in their people, and that continued to drive business for HR consultancies such as ours. However, with the emergence of political uncertainty a more disabling state of affairs has arisen. Companies have to mitigate risk, and one of the most obvious ways of mitigating it is to be very cautious about investments and about increasing staff numbers. This is why many companies have loads of cash and, at the same time, are keeping people costs tightly under control.
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