Effects of the Global Financial Crisis on Human Resource Management and Industrial Relations in Multinational Companies: South Africa and Ireland

Port Elizabeth, 13 October 2011 - University of Limerick professor Patrick Gunnigle presented research findings on the effects of the global financial crisis on human resource management, industrial relations and training expenditure in multinational companies in Ireland at the Nelson Mandela Metropolitan University (NMMU) Business School executive briefing. His research shows that training and development expenditure declined and was targeted much more systematically. Basic training expenditure fell with lower recruitment and selection activity, while management and leadership training remained strong.

According to Gunnigle, multinational organisations are reacting to the crisis by freezing or cutting pay. The few firms granting pay increases tend to be located in sectors less affected by the global financial crisis, especially healthcare and pharmaceutical. The global financial crisis depresses union influence and power within multi-national companies and impacts negatively on the industrial relations climate. Employees are more willing to accept changes in working conditions.

The results suggest that the HR Function acts as a principal delivery agent of changes in management practice wrought by the global financial crisis, as re-structuring activity falls in the HR court - downsizing, reductions in working time, lay-offs, concession bargaining and related changes in reward systems and working conditions. The value that HR professionals deliver to the company is also likely to come under greater scrutiny.

Reacting to the research NMMU Professor Paul Poisat said,"The trends experienced by South African multinational companies are similar to those outlined in the Gunnigle study, except for the power dynamic relating to union management relations. SA trade unions have shown little consideration for the global economic crisis and have continued their fight for a living wage throughout 2011, as was evidenced by the wave of mid-year strikes in various sectors."

"Judging by the amount of liquidations per sector, according to Stats SA, the wholesale and retail trade, catering and accommodation and the financing, insurance, real estate and business service sectors are the most affected/hardest hit areas," said Poisat.

"HR implications of the financial crisis for South African organisations may include further layoffs (primarily of contract and non-core employees), a moratorium on hiring, re-evaluation of bonuses and merit increases, and training budgets may be slashed. The challenge for employees during this time of financial crisis is to maintain employees' engagement and limit damage to the psychological contract."

NMMU Business School Director, Professor Steve Burgess noted that the results have special meaning for South Africa. "Fitting into global supply chains requires firms to build strong personal relations with overseas colleagues, so that local operations can craft innovative strategies to replace jobs that ultimately will be lost over time. Jobs will be lost to lower cost regions, but local managers and unions can work together to find ways to stem job loss."