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HR Budgets & the Economy

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The economy is in the tank, and while predictions are that things will get better in 2009, many HR leaders are doing budgets right now.  The problem with recessions and HR is that HR budgets often take longer to come back than other budgets.  Take 2001 as an example.  The “bubble” burst with such ferocity that when the economy did get better, budgets went to core business critical functions first – they had to catch up.  It was possibly 2-3 years later before HR budgets started looking up again, and by 2004, HR spending on technology was on the rise again.  But this is after 3-4 years of deferred maintenance.

If budgets are happening right now, there may not be a whole lot we can do about getting increases.  However, talent management is still a critical strategic focus for the executive team.  Regardless of the state of the economy, the idea that there is a shortage of senior talent and a glut of retirements on the horizon has not changed.

Last time around, HR had to defer a few upgrades on ERP systems.  Perhaps some redesign of benefits went undone for a couple of years.  But this time, if we defer our spending on talent management for 2, 3 or even 4 years?  That’s disastrous.  After all, when we talk about those retirees, we are talking about them retiring in the 5-15 year time frame (or even right now).

Last time around, we had Gen X in the workforce, they had it tough in the 90’s not finding great jobs.  They were the latch-key kids, having to find ways to do everything themselves.  This time around,  we have Gen Y.  The ones we need to find new ways to work for.  These are the guys who can help us innovate our organizations.  But these are also the guys who are a bit high maintenance.  They want the learning opportunities.  They want to have new challenges and increased responsibility.

There is more on the line with this turn of recession budgets than a few upgrades.  If we defer talent management initiatives and spending because we just don’t have the money, we’re going to find ourselves not a couple years behind, but perhaps irrecoverably behind.

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2 responses to “HR Budgets & the Economy”

  1. enough leads and visibility and that they should cool their jets in order to close some new business. But then they decided to invest in local yellow page advertising and nothing else for awhile. Really? What the –? And when it comes to HR budgets,SystematicHR commented nicely that topic: The problem with recessions and HR is that HR budgets often take longer to come back than other budgets. Take 2001 as an example. The “bubble” burst with such ferocity that when the economy did get better, budgets went to core business critical

  2. s about the importance of talent management as a longer-term initiative — if you defer talent investments, you could be at a material disadvantage when the (inevitable) recovery arrives.  SystematicHR highlights that nicelyhere

  3. Meg Bear Avatar

    While I agree the needs are great I would hope that HR groups would use this time to make sure that they have a plan for where they want to go before they invest in any software solutions. The software can’t give you a talent strategy and if you implement software without one you are not likely to get the benefits you need anyway.