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Insight: Human Resources

Redundancies are widespread across the automotive industry at the moment, with car plants on slowdown or temporary closure, franchised dealers laying off people and suppliers under pressure to cut costs.

The industry is close to crisis – but it is at these times that leadership can make all the difference. Crucial to the success of the business is the quality of its people; however, for many automotive businesses, a lack of leadership is a cause of concern.

Take the view of Sergio Marchionne, Fiat Group chief executive: “A prevailing problem in our industry today is too much management and not enough leadership.”

Senior HR directors in the UK automotive sector agree, according to research carried out by automotive recruitment and development consultancy Magma People.

A lack of sufficient leadership across all key disciplines with their organisation is a source of anxiety.

Just 4% of HR directors interviewed by Magma had confidence in all areas of their business, while two-thirds had confidence in only a few or some areas.

They are also not confident that their company has sufficiently experienced management to undergo effective restructuring. 

Just 28% believe they have enough people with change management and restructuring skills.

More than half (57%) are worried that there is a lack of willingness to embrace change.

Yet while they are of the firm belief that change is essential for survival, 83% are concerned that restructuring programmes will divert resource and attention away from the immediate short-term needs of the business.

Company leaders must be sure to focus on the immediate business issues, such as cash flow and people motivation, at the same time as they rephase their strategies to take into account the market downturn.

Quality of people will be the most important factor in determining the success of the business over the next 18-24 months. However, headcount reduction is one of the top two
priorities for 89% of the HR directors surveyed.

They are considering a number of tactics to minimise the impact of redundancies, including voluntary programmes, early retirement programmes, severance packages in excess of the statutory minimum and provision of external outplacement support for leavers.

The most damaging impact of redundancies is seen as “lower morale and job security concerns amongst remaining staff”, followed by “pressures of increased workloads for remaining staff”.

Given these concerns, it is surprising that almost half of HR directors (45%) do not intend to implement specific internal communication programmes for remaining staff.

If they did, there would be a positive message to give. There is a greater focus on return on investment in human capital with that investment taking the form of training and development. Few companies indicate that budgets are being cut, despite the recession.

In fact, 62% of respondents say they intend to increase their use of external partners for sales/dealer training, while three-quarters will either maintain or increase levels of executive coaching and mentoring. 

A further 36% plan to increase training in aftersales and customer service support, but almost half intend to cut the use of external parts and/or contract staff in vehicle fleet management and logistics.

Sixty per cent also plan to decrease the use of marketing services.

Several in-house services are under consideration for outsourcing according to 34% of respondents. The main areas are financial support services (23%) and HR support services (11%).

However, 55% say they are considering bringing back in-house some services that are currently outsourced. Customer service support (28%), contract manufacturing (15%) and marketing services (11%) figure most highly.

Despite the economic downturn, very few companies (6%) are looking to reduce base salary levels and increase performance-based compensation as a way of bringing down fixed costs. A quarter said they intended to keep base salary levels constant but increase performance-related bonus opportunities as a way of incentivising staff.

Almost four in 10 (38%) HR directors are looking to reduce the overall cost to the business of benefits packages, although in most cases this means a renegotiation of contract costs with external providers, rather than a lowering of the level of benefits provided.

A significant minority of those surveyed (19%) said they would be looking at longer average contractual notice periods for any new recruits to lock in newly acquired talent.

“Some of the most forward thinking companies are even offering new, longer notice period contracts to existing high-calibre staff as a demonstration of their commitment to the remaining talent,” says Chris Donkin, Magma People chief executive.

“This has the added benefit of implicitly signalling that the company has no concerns regarding its long-term viability.”

Magma surveyed 47 HR directors from mid-January to mid-February 2009 from Tier 1 suppliers, manufacturers, retailers, contract hire and leasing and the aftermarket.

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