Getting the Fundamentals Right: HR Best Practices In Tough Economic Times

What is clear—from our vantage point as a provider of employee health and productivity solutions—is that our customer organizations are asking the same questions as ever before, albeit with perhaps even more urgency. How do I inspire top performance and engagement, especially now when I need it most? How do I address escalating sources of stress and conflict in the workplace before they take a toll on productivity?

With lay-offs, plant closures, project cancellations and downsizing on the horizon, how can I take a prevention-oriented approach to instill confidence and resiliency before, during and after these tough times? How am I going to manage escalating benefits costs and employee health challenges as older workers choose—or are forced—to remain in the workplace longer? What can I expect in the way of employee behaviour as individuals and families cope with the economic crisis, and how do I strategically deploy my limited HR resources to best manage these challenges?

Employee behaviour in an economic crisis

First, let’s look at what you can expect in the way of employee behaviour during a downturn. While the current economic climate is by all reports more significant and serious than any we’ve faced in recent memory, there are some relevant experiences to draw upon from both individual organizations’ responses to downturns, as well as societal ones.

Generally, research indicates that the factors at play during a downturn, such as fear of job loss, increased workload and stress, cause casual absence rates to go down and disability claims to go up.

For example, a 2003 survey of over 1,300 HR practitioners conducted by the U.K.’s Chartered Institute of Personnel and Development demonstrated that employee absence actually decreased during economic downturns. However, while casual absence declined 10%, longer-term disability, especially as a result of stress, increased.

The survey also found that rates of stress-based disability were twice as high in the public sector as in the private, where job security was reported as less of a factor. Conversely, in the IT, professional services, law and media sectors, absence rates were less than half the national average, and fears of job insecurity twice as high.

An important U.S. study in the aftermath of the last recession in the 80s shows a similar trend. Steven Markham studied national, state and local unemployment levels and correlated them with organizations’ absenteeism rates, and found that when the national jobless rate goes up, individual organizational absence levels go up.

Our work with a number of organizations that have experienced individual economic downturns confirms the correlation between perception of potential job loss and increased disability rates, at least in the early onset of the downturn. We have noted a marked increase in disability claims, especially due to mental/nervous disorders. This finding is robust across the organizations, benefits consultants and insurer communities with which we work, demonstrating that the two patterns—initial decreases in casual absence and increases in disability during economic downturns—are neither contradictory nor mutually exclusive.

Understanding absence patterns during a downturn

Where casual absence declines as concerns of job security increase, short-term disability rises. There are two reasons for this: first, as the stress of ‘doing more with less’ sets in, so too does employee burn-out. Although in the immediate weeks after a company downsizing, one might expect the individual stress of those who remain at work to decline, due to the alleviation of their concerns about their own job security, stress levels actually rise.

Part of this is ‘survivor guilt,’ but a greater part is related to work overload: the increased burden placed on those left behind to manage with fewer resources. Add to that the fact that families and entire communities are affected, with stress in employees’ personal lives compounding that in the workplace, and the impact of economic strife on workplace stress is exponential. The result is seen in rising rates of stress-based disability leave.

The second reason that disability rates climb as the economy falls is related to the income protection features of the organization’s disability plan. In good times, as in bad, employers need effective ways to ensure that disability claims are supported and validated. This remains critical when there is even greater temptation to use the programs inappropriately.

But even more than sharpening the focus on disability adjudication, we encourage employers to seek methods to intervene even earlier and more effectively before the claim is made. This means incorporating enhanced manager training, conflict resolution, stress management, and attendance support programs to get at the root causes of potential disability as a result of either valid or perhaps invalid stress-based claims.

Addressing escalating sources of stress and conflict in the workplace

With increased stress overall comes increased potential for conflict. “Grace under pressure,” while a noble ideal, is typically sorely tested during sustained periods of financial and workplace stress. Manager-employee and employee-employee conflict is known to be a key driver of disability, not to mention a disrupter to productivity. Many workplace violence experts have noted that the incidence of conflict, even violence, in the workplace rises when economies take a turn for the worse.

According to a September 2008 analysis conducted by Dale Carnegie Training, a rise in demand for conflict resolution correlated with rising gas prices, the U.S. mortgage crisis and the weak dollar. This perfect storm—made up of social, family, economic and workplace factors—produced significant insecurity within the workplace leading to a dramatic effect on team camaraderie, performance and organizational loyalty.

When times are tough, providing employees and managers with the skills and tools to recognize and better manage stress-based conflict is critical to reduce the potential for skyrocketing disability rates or violence in the workplace. Getting ahead of the storm with effective people leader strategies also can yield a strengthening of resilience and engagement throughout the organization by instilling best practices that will benefit the organization well after the skies clear.

Look for part II of Karen’s article tomorrow on BenefitsCanada.com.

Karen Seward is senior vice-president, business development and marketing with Shepell.fgi.

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