Strategic HRM Decision Making

Strategic HRM Decision Making

University of Groningen, Faculty of Business and Economic,

MSc HRM& OB

August 2009

submitted by Chun Hsien Wu

from Taiwan

Supervisor: Dr. Frank Walter

Groningen, The Netherlands

CONTENT LIST

INTRODUCTION ……… 3

THEORETICAL BACKGROUND ……… 4

Crises as Threats or Opportunities ………..………... 4

Crises Perceptions ……….……….... 5

The Connection between Perceived Crises as Threats and Three Dimensions of Crisis Perceptions ……….... 6

Strategic HRM in crisis situations ……… 7

METHODS ……….... 8

Study Context ………..………..………... 8

Methods ……….………..……….... 10

RESULTS ………. 12

HR Managers’ Crises Perceptions ………….………...……….. 12

Strategic HRM Decisions in the Crisis ……….…….. 15

Summary of Results ……….……….…….. 17

DISCUSSION ……….. 19

REFERENCES ………...….. 24

TABLES ………....….. 27

APPENDIXES ………....…... 30

ABSTRACT

The aim of this study is to address the research gap by examining how HR managers perceive crisis

situations, and how HR managers’ crisis perceptions influence their decision making about strategic HRM

through conducting a qualitative research, using in-depth phone interviews with 5 senior HR managers and

their colleagues or subordinates in the Taiwanese high-tech companies, Confirming previous research (e.g.,

Dutton’s theory of processing crisis and non-crisis strategic issues, 1986; Dutton and Jackson’s theory of

linking organizational action to categorizing strategic issues, 1987; and Dutton, Sandelands, and Staw’s

theory of threat rigidity effects in organizational behaviors), results from these interviews suggest that

perceived degrees of importance, immediacy and uncertainty of an issue all contribute to how threatening an

issue is perceived to be. In short, this study contributes to the literature by building upon and examining

previous research on managerial crisis perceptions, advancing new insights for Strategic HRM research by

demonstrating how key decisions are made regarding HR managers’ perceptions of crisis situations.

INTRODUCTION

A body of research has recently emerged with an emphasis on the relationship between managers’ crisis perceptions and decision-making (e.g., Dutton, Sandelands and Staw, 1981; Dutton, 1986; Dutton and Jackson, 1987; Michael, 2006). At the same time, research has demonstrated the relevance of strategic HR management in crisis situations. In their review on strategic HR decision making in crisis situations, Lado and Wilson (1994) remarked that it is imperative for HR managers to understand the prevalence and undesirable consequences of false decision making in crisis situations (see also Huselid, Jackson and Schuler, 1997). As Boxall and Purcell (2003) suggested, there is a range of possible forms that strategic HR management in crisis situation might take, i.e., task (task design), people (recruitment strategy), and reward systems. For the present research purposes, strategic HR decisions are defined as the decisions made by a senior HR manager or decision maker that are intended to have influences on the company’s adaption to crisis situations through these three aspects (i.e., task design, recruitment strategy, and reward systems).

Interestingly, despite the relevance of strategic HR decisions in crisis situations, little is known about how such decisions are made and, more specifically, about how HR managers’ crisis perceptions influence the respective decisions. As Dutton (1986) described, individual crisis perception is a composite component of several different dimensions of an issue. What one perceives is a result of interplays between past experiences and the interpretation of the perceived future (Dutton, 1986). These different dimensions include the perceived importance, the immediacy, and the uncertainty of an issue that can all contribute to how threatening an issue is perceived to be. Whereas scholars have exerted considerable effort toward understanding the relevance of crisis perceptions in determining managers’ responses to crisis situations (e.g., Dutton, Sandelands and Staw, 1981; Dutton, 1986; Dutton and Jackson, 1987; Boin and Lagadec, 2000; Boin and McConnell, 2007;

Hutchins and Wang, 2008), they have not devoted much attention to apply the theory to strategic HR management. Even though there is mounting interest in identifying and categorizing SHRM responses that resulted from the managers’ crisis perceptions (e.g., Boin and Lagadec, 2000; Boin and McConnell, 2007;

Hutchins and Wang, 2008), these research findings are rather abstract and generally focus on the role of crisis

perceptions in Strategic Management in general instead of Strategic HRM in particular (e.g., Dutton,

Sandelands and Staw, 1981; Dutton, 1986; Dutton and Jackson, 1987). Thus, the connection between strategic HR management and crisis perception is deserving of more attention.

With this contention in mind, the aim of this research is to address the research gap by examining the following research questions: “How do HR managers perceive crisis situations?”, “How do HR managers’

crisis perceptions influence their decision making about strategic HRM?” I intend to explore connections among these issues by conducting a qualitative study, using in-depth phone interviews with 5 senior HR managers and their colleagues or subordinates, who work in major high-tech companies in Taiwan. Results from these interviews suggest that perceived degrees of importance, immediacy and uncertainty of an issue all contribute to how threatening an issue is perceived to be, confirming previous research (Dutton, 1986). In general, it uppers that the managers interviewed perceived the current crisis as a threat rather than an opportunity. In addition, HR managers’ crisis perceptions influence their decision–making about strategic HRM. More specifically, when HR managers perceived high importance and high uncertainty in the current financial crisis, they were observed to make SHRM decisions in respect of adjusting task design and recruitment strategy (e.g., increasing the work load for employees; lay-off people; stopping new recruitment).

In short, to help their companies to achieve the ultimate goal of survival in the current financial crisis, HR managers tended to make decisions to adjust the job contents to cope with the shortages of workforce resulted from the stop of new recruitment plans.

In sum, this study contributes to the literature by building upon and examining previous research on managerial crisis perceptions, advancing new insights for Strategic HRM research by demonstrating how key decisions are made regarding HR managers’ perceptions of crisis situations.

THEORETICAL BACKGROUND

Crises as Threats or Opportunities

Crisis situation can be perceived as a threat or an opportunity (Dutton and Jackson, 1987). Dutton and

Jackson (1987) define opportunity as a positive situation in which gain is likely and over which the company

may have a fair amount of control; in contrast, threat is defined as a negative situation in which loss is likely

and over which the company has relatively little control. Dutton and Jackson (1987) also argue that manager’s cognitive categories are comprised of objects with similar perceived attributes and reflect the structure of the objects in the environment. An important nature of these perceived attributes is that they have a correlational structure (Dutton and Jackson, 1987), and each decision makers’ cognitive structures reflect these perceived correlations and are efficient for storing information. For example, when a crisis is perceived as threat, the HR manager’s cognitive attributes may trigger stress feelings and the need for gaining more control over the situation; in a contrary situation, when a crisis is perceived as opportunity, the HR manager may have more positive feelings and be more open to distribute power to the subordinates. As Dutton and Jackson (1987) noted, when an opportunity is perceived, three attributes with high cue validity are commonly generated as positive, gain, and controllable. On the other hand, attributes of negative, loss, and uncontrollable are

generated when a threat is perceived. In sum, different attributes of perceiving crisis as threat or opportunity can be seen as a determinate factor that can have strong influences in the HR manager’s decision making.

Crisis Perceptions

A crisis situation is often not a singular event but a composite perception based on various dimensions related to the particular issue. In particular, Dutton (1986) proposed three dimensions that may contribute to how a threatening issue is perceived to be and that can shape individuals’ responses to a crisis situation: the perceived importance, immediacy and uncertainty.

Perceived importance of crisis situations. For HR managers, making strategic decisions for a perceived

crisis situation requires an agenda of items which are prioritized in advance (Dutton, 1986). With limits of time and attention, it is for sure that not all the perceived crisis issues will be attended to equally. When facing crisis issues constitute high priority items due to the high organizational cost of not resolving them, HR managers would perceive them as more important ones that required more valuable resources, and managers’

time and attention.

Perceived immediacy of crisis situations. Before making judgements about strategic issues that, in turn,

may engage different types of decision processes for their resolution, managers characterize the crisis

situations in terms of their immediacies. The perceived immediacy of an issue may act as an initiating trigger for strategic decision making (Dutton, 1986). For instance, when under the pressure of coping with an immediate crisis issue, HR managers tend to feel constrained by the perceived immediacy of the crisis issue (Dutton, 1986). And as a result, this may lead to the concentration of power and authority to ensure the strategic decisions were properly processed within time and the immediate crisis situation can be promptly dealt with (Lilly, Gray and Virick, 2005).

Perceived uncertainty of crisis situations. Perceived uncertainty about the environment appears in the situation where the management of a firm feels little control about its external environment that is in a state of flux and, hence, largely unpredictably (Business dictionary, 2009). Dutton (1986) argues that in order to maintain the forecasting preciseness, managers tend to make strategic decisions that can help to centralize power, particularly when they feel concerned about the uncontrollable crisis situations.

The Connection between Perceived Crises as Threats and Three Dimensions of Crisis Perceptions As the research reviewed above suggests, how HR managers perceive the crisis situation is based on: (1) whether they perceive the crisis as threat or opportunity, and (2) the perceived importance, immediacy, and uncertainty of the crisis situation. When HR managers perceive the crisis situation as a threat, negative, loss and uncontrollable attributes are generated (Dutton, and Jackson, 1987) and in turn, may lead to behaviors like restriction in information processing, constriction of control, and conservation of resources (Dutton, Sandelands and Staw, 1981); on the other hand, these behaviors, in terms of gaining control and exhibiting relatively conservative actions, can also be triggered when importance, immediacy, and uncertainty are highly perceived in the crisis situation (Dutton, 1986). In sum, these two compositions of HR managers’ crisis perceptions are relatively linked to each other.

Their notions are in line with the threat-rigidity theory of Dutton, Sandelands and Staw (1981), which

argues for a general threat-rigidity effect in individual, group, and organizational behavior that manifests itself

in a restriction of information processing, constriction of control, and conservation of resources under threat

conditions. Findings of their research support the idea that there is a connection between perceiving crises as

threats and the perceived importance, immediacy, and uncertainty of one’s crisis perception; more specifically, similar reactions and attributes may be found in terms of strategic decision making. In the result section, this connection will also be examined.

Strategic HRM in crisis situations

Boxall and Purcell (2003) argue that Strategic HRM is much broader than strategic planning or personnel management. Much of the past research about SHRM has focused on the topic of HR planning and decision–making processes (Boxall and Purcell, 2003). Particularly in crisis situations, a primary role of SHRM is to find effective solutions to manage the company’s viability in the current context, to ensure the company’s capacity for change, and to keep sustained advantages by assuring the company’s human capital will contribute to the achievement of the company’s business goals (i.e., Lado and Wilson, 1994; Huselid, Jackson and Schuler, 1997). As suggested by Noe, Hollenbeck, Gerhart and Wright (2006), dimensions of Strategic HRM practices in crisis situation can be categorized into: task design, recruitment strategy, and reward systems.

The first SHRM practice refers to the task design, such as, job analysis and job design. Different task designs may alter the fundamental function of a position; as a result, making adjustments to facilitate adaptations to the crisis situation is generally the first thing comes to the HR manager’s mind. For HR managers, changing the task design is often an important signal that implies the need to make changes in the recruitment strategy and the reward systems (Noe, Hollenbeck, Gerhart and Wright, 2006).

The second SHRM practice refers to the recruitment strategy, including both new recruitment and layoff plans. In some companies, selection strategy and training system may also be included. Recruitment strategy is often a unique system among different companies, i.e., when HR managers foresee a crisis situation, there is often a set of protocols for them to follow. As it is often passing on from managers to managers, recruitment strategy can also be seen as the legacy of organizational cultures and traditions (Noe, Hollenbeck, Gerhart and Wright, 2006).

The third SHRM practice refers to the disparities in pay structure and performance management. A

company’s reward system can directly make impacts on its employees’ motivations to contribute better performances or frustrations that lead to undesirable behaviors. As Noe, Hollenbeck, Gerhart and Wright (2006) suggest, reward system is by nature closely bound to the company’s business performance. In other words, when a crisis situation is tied to poor business performances or losses of the companies, it seems unlikely for the HR managers to consider either increase the rewards for motivating employees’ better performances or abolish the rewards that may cause employees’ frustrations which ultimately lead to undesirable behaviors.

In the following, I will use theoretical background outlined here to analyze and interpret data collected in a qualitative study of 5 senior HR managers in major high-tech companies based in Taiwan. Specifically, I will examine how HR managers in these companies perceive the current financial crisis situation in terms of its importance, immediacy, and uncertainty, to what extent they perceive this crisis situation as a threat or an opportunity, and how the respective crisis perceptions shape HR managers’ strategic decisions regarding task design, recruitment strategy, and reward systems. I will start by outlining the context in which the current study took place and describing the research methods used, before elaborating on the findings from my study.

METHODS

Study Context

Crisis situation. There are two major features of the current financial crisis that seem relevant for the present study. The first one is linked to the global economic crisis. This so called “new” global economic crisis has been associated with banking panics, market recessions and credit crunch since the bankruptcy of Lehman Brothers Bank in the U.S., July 2008 (Kindleberger and Aliber, 2005). Focusing on the study region of this research, Taiwan, like most of the East Asian countries, participated in the supply chain of consumer goods to the U.S. market. It has suffered a huge decline in exports in the first season of 2009 as its exports dropped more than 35%, which was less severe than Japan’s drop, but more than those in Korea and China (Global Views Monthly, April 2009).

The second feature is linked to the rising new opponents in the global economics. In this research, it is

specifically referring to the rise of the Chinese economy and the changing relation between China and Taiwan (Global Views Monthly, May 2009). The rise of the Chinese economy has been appealing to many major entrepreneurs to invest in the gigantic eastern market. From the previous textile fabrication industry to the recent electronic device productions, many of these major investments were used to be placed in Taiwan but now shifted to China. The comparatively lower production cost and the promising consumption power in China has caused a high unemployment rate in the low skilled workforce in Taiwan that, in turn, lead to the extremely unbalanced labor supply and demand chain (Taiwan News Reports, 2009). On the other hand, the changing relation between China and Taiwan has released much political tensions that used to block the economic communications across the Taiwan Strait. Economic growth for both sides was meant to be stimulated by the unleashed mutual investments and the opportunities of employment increase; however, instead of gaining benefits, severe competition among companies seems to have caused more crisis situations (Global Views Monthly, March 2009).

The new global economic crisis and the rising competition with the Chinese economy have caused great

impacts on all of the companies in this study. These impacts are particularly significant in respect of losing

customers, particularly from the U.S. and European companies, or being forced to shift their product

distributions to the unknown markets. As providers for global high-tech industry, these companies have been

heavily relying on exporting products to the foreign markets. When the global economic crisis occurred since

July 2008, many orders from the U.S. and European clients were either postponed or canceled due to the

retrenchments of these company purchasing budgets. On the other hand, some foreign companies are

changing orders to the lower cost providers in China. As result, these Taiwanese high-tech companies have

suffered from the loss of orders, e.g., as a major high-tech devices provider, one of the study companies has

been losing 40% orders from U.S. and European companies since the 3

season of 2008 until the 2

season of

2009, which, in turn, leads to great loss of company’s fortunes and poor performance in the stock market

(Global Views Monthly, July 2009). This company has also suffered from legal disputes with the internal

labor unions and the laid off employees. In result of companies’ fortune losses, the company was forced to

choose from laying off some people or to make great cuts in all of the employees paychecks. Certainly, angers

and unsatisfactions are expected from both decisions. And once the situation has got out of hand, disputes are inevitable to occur between the company and those who were chosed to be laid off.

After the previous Asian economic crisis, from 2002-2007, Taiwan's economic growth has ranged from 3.5% to 6.2% per year. With the current global economic downturn, Taiwan's economy has slumped into recessions since the second half of 2008. Its GDP, following growth of 5.7% in 2007, rose only 0.12% in 2008 and has been expected to contract in 2009 (U.S. Department of States, April 2009). The official forecast has anticipated a downturn of 2.97% in 2009 (The Republic of China Year book, 2008), but private forecasters expected the situation would more severe, in the range of -5% and -11% (Reuters, January 2009).Taiwan official statistics indicate that Taiwan firms had invested about U.S. $75.6 billion in China for pursuing the lower labor cost and potentially growing market needs through 2008, which is more than half of Taiwan's stock of direct foreign investment (The Republic of China Year book, 2008). According to official estimations (U.S. Department of States, 2009), more than one million Taiwanese are estimated to be residing in China, and more than 70,000 Taiwan companies have operations there. To cope with the new crisis issues, Taiwan companies are increasingly transformed to management centers that take in orders, produce them in Taiwan, the mainland China, or Southeast Asia and then sell the final products to the U.S. and other markets.

Methods

Procedures. This research is conducted via individual depth interviews (IDI). As Cooper and Shindler (2006) suggested, these interviews focused on the interactions with the interview participant. With the help of recordings, conversations are repeatedly listened and transcribed into manual scripts for interpretations. Each interview approximately took about 30 minutes (telephone interviews). A list of questions was prepared beforehand to ask in each interview under three main topics: crises perceived as threats or opportunities, the perceived importance, immediacy, and uncertainty of the perceived crisis situations, and the recent SHRM reactions in respect of task design, recruitment strategy, and reward systems. (See also Appendix 1)

During the interview process, conversations are recorded and afterwards transcribed verbatim in

Mandarin. After repeated readings, the texts are carefully translated into English and analyzed in line with the

theoretical background outlined before. Next, the preliminary interpretations are shortly sent back to the participants to request their comments for appropriate adjustments. At the final step, comments retrieved from the participants are modified into the results. Considering the fact that sensitivity of the retrieved information and interpersonal conflicts were potential concerns in this research, results were presented anonymously with symbolic numbers of both names of the companies and the participants. Participants are given promises that no information would be showed to the third party or used in different purposes.

Participants (The companies). This research is conducted by interviews with five companies that fit the profile of: (1) major high-tech corporations that were founded in Taiwan (2) listed on the Taiwanese stock exchange market, (3) non family business or state-operated corporations, (4) having well developed HR departments. The aim of this profile is to make sure that first, the company has to have over 500 employees for the need of a HR department to exist. Second, being listed on the stock exchange market means that the company has a large economic scale that may worth to be observed. Third, to avoid having participated companies with relatively less needs for full HR functions (which is commonly seen in family owned businesses or state-operated corporations in Taiwan). Forth, to have the participated company that is listed on the stock exchange market means that the company has to hold responsible for their shareholders in respect of maintaining well functioning departments and providing their performance evaluations in the annual report (see also Table 1).

Participants (The interview partners). In this research, interviews were taken with two types of

participants. The aim of interviewing these two different types of participants is to compare their given results

in order to obtain a more realistic picture of companies’ actual SHRM decisions in practice. Specifically, I

conducted interviews with the HR practitioners who serve as HR senior managers or HR strategic decision

makers in the target companies. By title, these five participants were personnel manager, senior manager,

senior HR staff and HR supervisor (see also Table 2). In addition, I conducted interviews with their colleagues

or subordinates. The purpose of these interviews is to cross-validate the information obtained from the

participating HR managers. These participants were selected based on the amount of time and their

experiences they have spent with those HR managers.

RESULTS

HR Managers’ Crises Perceptions A Threat or an Opportunity?

All of the five HR managers have claimed to perceive the current financial crises as opportunities rather than threats when liked directly for their respective evaluation. As one HR manager noted, for example:

“It’s for sure that we would perceive the current financial crisis as the opportunity happened once in a life time. We embraced all the possibilities, whether they were positives or negatives. We encourage changes… In conclusion, I would say that we, as the entire HRM department and the company, perceive the current situation as opportunity for our company.” (HR manager B, Company B)

Similarly, another HR manager noted:

“There was no such thing as threat existed in our company. We do not feel the need to centralize the power in order to cope with the current situation. As a matter of fact, our company even encourages us to distribute the HR manager’s authorities of strategic decision making to the subordinates in order to let them feel involved and be creative.” (HR manager D, Company D)

However, when cross-validating these HR managers’ given answers in interviews with their subordinates or colleagues, contradicting opinions were surprisingly found. These participants’ answers were found to be sharply criticizing when they commented on the given answers from their HR managers. For example, one subordinate noted:

“Our HR manager has always ruled the HR department like an emperor. Since the credit crisis occurred last year, all that we do is to satisfy our boss for saving our company’s ass from the increasing number of threats that perceived to harm our company. To describe the current situation as full of opportunities is just a propaganda strategy to conceal the ugly truth that the company is actually aimed at centralization in order to avoid the complications when making strategic decisions, especially under the financial crisis situation.” (Subordinate B, Company B)

A colleague of another HR manager noted in a similar vein:

“In our office, there is a hidden bureaucratic system that stands before all the company regulations.

After the crisis last year, we have been told to follow our HR manager’s orders more carefully than

before. Even though the HR manager did not say the words in person, we were all aware of the fact

that it’s what he meant. Perhaps he did not mean to create a tension in the office, but words have been widely spread among colleagues. ” (Colleague D, Company D)

As comparing these HR managers’ perspectives to those of their colleagues or subordinates, a contradiction was surprisingly found. While HR managers generally claim to regard the crisis as a threat, their colleagues and subordinates sharply dismiss their claims. It seems possible, therefore, that HR managers’

direct assertions indeed do not fully reflect their actual perceptions. Or perhaps, they have not yet succeeded to deliver their intentions as they claimed. Before being able to resolve this contradiction, it might be necessary to take a closer look into these different perspectives. Thus, I probed in more detail to uncover how HR managers perceive the crisis in terms of importance, immediacy, and uncertainty.

Importance, Immediacy, and Uncertainty

The HR managers’ perspectives concerning the issues of perceived importance, immediacy, and uncertainty of the current crisis situation were examined and organized into categories (see details in Table 3).

Based on the interview results, most of them have claimed to perceive the current financial crisis as highly important, immediate and uncertain. To exemplary quotes from the interview illustrate this:

“About the current situation, I would describe the crisis as highly importance that requires highly immediate resolutions to solve the rising problems caused by the highly existed uncertainties…”

(HR manager A, Company A)

“I see the current crisis situation as important but not that much as being the top priority issue; it is because that our company did not suffer much from the direct impact of market recessions.

However, personally I would describe the crisis situation as highly immediate that should always be taken care of at once when serious problems occur. About uncertainty, I can not say that I have confidences to solve most of the uncertainties raised from the environment, but it is not quite the same as having no clues about what’s going on out there!” (HR manager C, Company C)

These HR managers’ perspectives were confirmed by their subordinates and colleagues. One example of a colleague’s perspective is:

“Based on my observations on my HR manager’s behaviors in the past few months, I think that I

would agree with her views. The reason is simple. First of all, she has been working late with most of us more frequently than before. Secondly, we were asked to increase our work process efficiency by her. And thirdly, she has asked us to include more information in our analysis reports. In other words, she may have seen the crisis as important to be worth spending more time; secondly, she probably would not ask us to increase work process efficiency if she does not consider the crisis as highly immediate; and at last, her wanting for more information in our analysis reports might be able to explain her views in perceiving high uncertainty in the current crisis.” (Colleague A, Company A)

Another example of the subordinates is:

“I mostly agree with my HR managers based on his recent behaviors. He has described the current financial crisis as very important and very complicated many times in the weekly meetings. Those who were close to him have also found that he has become more nervous about the uncertain future than before… ” (Subordinate D, Company D)

The left column of Table 3 further corroborates these findings. This column refers to the answers given by the HR managers for an overall view of the crisis situation (i.e., high/medium/low level of perceived importance, immediacy, and uncertainty of the current crisis situation). In line with the above example all managers evaluated the current crisis as importance, immediacy, and uncertainty as moderate to high.

Resolving the Contradictions

A possible way to resolve the contradiction between the perspectives of HR managers and their

subordinates or colleagues in terms of threat vs. opportunity perceptions, is to compare their different

perspectives with the findings in Table 3. In Table 3, it is clear that most of the HR managers have perceived

the current crisis situation as highly important, immediate, and uncertain. As Dutton, Sanderlands and Staw

(1981) argued, when importance, immediacy, and uncertainty are highly perceived in the crisis situation, it can

lead to anxiety and fear of loosing control which may in turn, result in power concentrations and information

constrictions (see also Dutton, 1986). Also in the research of Dutton and Jackson (1987), when crisis is

perceived to be an opportunity, it often triggers positive, gain and controllable attributes, on the contrary,

negative, loss, and uncontrollable attributes are found when threat is perceived to be. In short, even though the

HR managers have claimed to perceive the crises as opportunities instead of threats, it is not convincing to believe these claims, as most of them have all perceived medium to high importance, immediacy, and uncertainty in the crisis. And thus, the perspectives of subordinates and colleagues seem to be more reasonable in revealing the truth than those of the HR managers. One possible explanation of retrieving such contradicted perspectives is that these HR managers were intentionally giving the impressions of strong leaderships to avoid creating weak images. In su, it seems reasonable to conclude that the HR managers interviewed generally perceive the current financial crisis as a threatening issue with high importance, immediacy, and uncertainty implications for their companies.

Strategic HRM Decisions in the Crisis

In the right column of Table 3, the interview results concerning the Strategic HRM decisions in the current crisis are organized into three particular aspects: task design, recruitment strategy, and reward system.

In general, it seems that the most important SHRM decisions resulting from the crisis refer to the areas of task design and recruitment strategy. In Company A, for example, adjustments in task design referred to the increase of work loads and the extension of working hours, and in recruitment strategy, the decisions referred to the gradually lay off plans in some parts of the company. Some examples provided by HR manager A:

“Most of the employees have been asked to take over responsibilities of those lay-off ones.

Naturally, the working hours have to be prolonged if they can’t finish the jobs in the regular time limits…. About the recruitment strategy, so far, I have not received any information from the head management team about the new recruitments. However, we did have let go some replacements in the production lines and in the near future, we might begin to evaluate the high skilled work force.

And based on the evaluations, some people would have to go.” (HR manager A, Company A)

In Company B, SHRM decisions were also made mainly in the aspects of task design and recruitment strategy. Adjustment in task design referred to the small changes in production lines for producing different manual scripts for the new customers. And in recruitment strategy, the decision referred to the stop of new recruitments. Some examples provided by HR manager B:

“For our new customers in China, we need to produce new products that can adapt to the new

market. For example, new labels for manual scripts, new pricing strategy for new customers’

purchasing ability, and new packing to please their tastes… About recruitment strategy, there are certainly no plans for the near future… And our company’s reward system has always followed the tradition of giving bonus for the monthly sales, thus, it seems not relevant for the current crisis situation.” (HR manager B, Company B)

In Company C, adjustment in task design referred to the increasing pace of releasing new products in the R&D department. And in recruitment strategy, the decision referred to the stop of new recruitments, as in Company B. Some examples provided by HR manager C:

“Our company has always relied on R&D. As a result, when markets became tight and customers became less desirable for new products, our strategy is to present new products for more fashionable design and multiple functions in the market to capture the customers’ eyes. In other words, R&D department has to speed up their working pace…. About recruitment strategy, like all the other companies in this industry, we have no plans for hiring new people. .. I am afraid that I have no ideas about the reward system; it is the accounting department’s responsibility to make those decisions. ” (HR manager C, Company C)

In Company D, adjustments in task design referred to combining similarly functioning manufacturing lines and ask them to learn multiple working processes when taking shifts to run. And in recruitment strategy, the decision was only referred, again, to the stop of new recruitments. Some examples provided by HR manager D:

“One way to cut down expenses in our company is to merge the similar manufacturing lines. By doing this, the company would only pay 1/3 than before. But of course, employees of those lines have to learn how to make other lines’ products and increase the producing pace… I don’t think that most of our board members or stockholders would agree to new recruitments. Personally, I can’t agree with them. But unfortunately, I am not the one to make the decision.” (HR manager D, Company D)

In Company E, unlike the other companies, the SHRM decisions were made in the aspects of recruitment

strategy and reward system. Adjustment in recruitment strategy referred to the stop of new recruitments. And

in reward system, the decision referred to the year-end bonus of 2008 that was announced at the year-end

banquet by the CEO himself to stop the annual increase for the first time. Some examples provided by HR

manager E:

“All the decisions in our company would have to go through the senior management board and the CEO before they are final. As senior HR staff, I can only make small SHRM decisions when executing the assigned duties. Based on my observations, our company has ceased the recruitment plans to cope with the tightening budgets. And as you know, the surprising news of not increasing the annual bonus of the employees last year could certainly be seen as the adjustment in reward system of our company.” (HR manager E, Company E)

Briefly overview the above findings, three aspects of strategic HRM decision making are essential: (1) to stop new recruitment strategy is the most frequently made strategic HRM decision; (2) when the work force stops increasing, task design in respect of job content and job fulfillment will be adjusted to cope with the changes; (3) strategic HRM decisions concerning reward system are least frequently made by the HR managers when threats are perceived in the crisis situations.

Summary of Results

Based on these research findings, I conclude that all of the HR managers interviewed generally viewed the current financial crisis as a threat with high levels of importance, immediacy, and uncertainty. Further, some connections between HR managers’ crisis perceptions and SHRM decision-making seem likely. A shown in Table 3, the most important connection is found between the recruitment strategy and the perceived dimensions of the current crisis situation. More specifically, when HR managers perceived importance, immediacy, and uncertainty in the crisis situation, they tend to make SHRM decisions to stop new recruitment plans. If the situation got worse, i.e., the loss of 40% orders of Company A, then the company would begin to take more aggressive approach to lay off employees.

The second important connection is between the change of task design and the perceived importance and

uncertainty of the current crisis situation. In this study, four out of five companies have made changes in

respect of task design. (Company E is the only exception as its task design responsibility is assigned to

divisional line managers.) This connection is particularly seen in the cases of Company A and D, as HR

managers have perceived high level of importance and uncertainty of the current crisis situation and as a result,

they have made decisions to increase the work load in order to adjust the potential problems in the current

crisis.

In sum, the key findings in this study are: (1) HR managers say they perceive the crisis as an opportunity, but subordinates and colleagues disagree; (2) When closely analyzing how HR managers rate importance, immediacy, and uncertainty of the perceived performance, the results were found to support the subordinates and colleagues’ observations that crisis seemed to be perceived as more of a threat by HR managers in all companies; (3) The results of analyzing the participants’ strategic HRM decision makings seem to support Dutton and Jackson’s (1987) prediction that strategic HRM decisions would reflect a “tightening”, very careful moves, attempts to maintain or regain control, and no additional investments. On the contrary, if crises were perceived as opportunity, managers would be expected to be more open, explanatory, and risk taking (Dutton, Sandelands and Staw, 1981). As none of these behaviors were found in this study, it is more certain that the participated HR managers have all perceived the current crises as threats, with perspectives of high importance, immediacy, and uncertainty, and baring these crisis perceptions in mind, they would most often make strategic HRM decisions in terms of task design, and recruitment strategy for the crisis situations.

DISCUSSION

Findings

The goal of this study is to examine the relationships between HR managers’ crisis perceptions and

strategic HRM decision making for building up an understanding of HR managers reactions in the

current crisis situation. Broadly speaking, my results suggest that threat perceptions and perceived

importance, immediacy, and uncertainty of a crisis will ultimately influence HR managers’ strategic

decision making. Together, these perspectives of perceiving crises as threats, and the perceived high

importance, immediacy, and uncertainty of the crisis (Dutton and Jackson, 1987) seem to generally result

in the stopping of new recruitment or even initiating lay-off plan, adjusting task design concerning work

content and work load, and in some cases, stop to increase year-end bonus in the reward system.

Theoretical Implications

This study extends prior research by considering HR managers’ perspectives in perceiving crises as threats or opportunities as a trigger of their respondent attributes and reactions in decision making. My results show that when HR managers perceive high importance, immediacy, and uncertainty in the crisis situations, they tend to perceive the crises as threats rather than opportunities (Dutton, 1986) which may trigger negative, loss, and uncertain attributes (Dutton and Jackson, 1987) that will contribute to behaviors for constricting information and gaining control (Dutton, Sandelands and Staw, 1981). However, for pursuing strong leadership images, all of the HR managers were found to be deceiving either subconsciously or not as they claimed to perceive the crises as opportunities.

Further exploring the link between the above described crisis perceptions and strategic HRM decision making, this study took a forward step to examine the actual examples of strategic HRM decision of the participating companies and their relationships with HR managers’ crisis perceptions. My results show that important connections are found at first, between the recruitment strategy and the perceived importance, immediacy, and uncertainty of the current crisis situation, and secondly, between the change of task design and the perceived importance and uncertainty of the current crisis situation. These results are once again support the prior research findings (e.g., Dutton, Sandelands and Staw, 1981; Dutton, 1986; Dutton and Jackson, 1987) that when threats and high importance, immediacy, and uncertainty are perceived in the crisis situations, HR managers may react in a more careful, and conservative way in making strategic HRM decisions that can help to gain control and prevent losses, i.e., the stop of new recruitment, lay-off plan, changing task design and withhold the bonus raise.

This study supports key assertion of threat-rigidity theory, as Dutton, Staw and Sandelands suggest

(1981), a threat may result in changes in both information and control processes of a system, and because of

these changes, a system’s behavior may become less varied or flexible. In addition, findings of this study also

support Dutton’s argument that crises can be a “catalyst for actions” (Dutton and Jackson, 1987), as in this

study, participated HR managers have perceived the crises in a quite similar way and as a result, their

reactions in terms of HR decision making processes have followed a similar pattern towards the crisis issues.

In other words, how they perceive the crises can be a catalyst for predicting their reactions. And in addition, this study has also applied the threat-rigidity theory from a general management aspect to a new interesting area, SHRM.

Strengths and Limitations

The strength of conducting a qualitative study, sometimes labeled as interpretive study, can help for obtaining a more deepened understanding about the study context. Through more involvements, and direct conversations, qualitative methodologies can help to generate deeper understanding for interpreting participants’ crisis perceptions and the process of strategic HRM decision making. Another strength of this study is that the awareness of how one’s subconscious may influence one’s perceptions towards the crisis issue and the decision making. As in this research, subordinates and colleagues recognized discrepancies between their HR managers’ words and actions which were seen by the negative tones in the interviews. It is inconclusive whether the HR managers were deliberately deceiving in the interviews by saying that they have perceived the crises as opportunities. However, based on their ratings of perceiving current crisis situation as high importance, immediacy, and uncertainty, one thing can be certain that they have subconsciously perceived the crisis as a threat.

In spite of the strength in finding results that support previous theory (e.g., Dutton’s theory of processing crisis and non-crisis strategic issues, 1986; Dutton and Jackson’s theory of linking organizational action to categorizing strategic issues, 1987; and Dutton, Sandelands, and Staw’s theory of threat rigidity effects in organizational behaviors), there are several limitations that call for attention in interpreting results.

One aspect of limitations is concerned with the study context. First, the interview participants are

relatively few (i.e., five companies, five HR managers and their colleagues or subordinates), the generalization

of this study will require verifications from more various studies. Second, this study is restricted in the type

and size of study participant (i.e., high tech industry, the size of the company is over 500 employees), the

generalization of my findings to the companies in other industries or in the similar industries but with different

sizes will require verifications from companies in more different types and sizes. Third, this study is restricted

in one geographical region (Taiwan), the generalization of this study is limited considering the cultural, and political influences (e.g., Hofstead, 1980; Yang, 1986; Hsu, 1987; Farh1995). Forth, there is little variability found in the participated HR managers’ crisis perceptions, which suggests that this study has only reveled one type of interpreting the link between crisis perceptions and decision making processes. To obtain a full scale of understanding may require more participants with different crisis perceptions (e.g., little uncertainty/

immediacy but high importance may perceive the crises as opportunities). In short, the generalization of my findings will need more various verifications.

The other aspect of limitations is concerned with the research method. As Cooper and Schindler (2006) suggest, qualitative research is bound by its nature to contain more biases and less control of the research process. In addition, its results are less likely to be generalized in different situations with concise predictions.

Even with the help of recording and careful interpretations, misinterpretations of participants’ words through phone interviews and uncontrollable interruptions, such as, time limits, technical interferences are still inevitable. In addition, confidentiality of data is also a critical limitation in this study, as not very much detail on some strategic issues was provided by the participants.

Practical Implications

The findings presented in this study can help the readers to begin to understand of how HR managers

who must deal daily with recognizing, diagnosing, and responding to strategic issues to use their crisis

perceptions in the strategic HRM decision making. The management of one’s crisis perceptions and in

particular threats versus opportunity perceptions and perceived importance, immediacy, and uncertainty of a

crisis has symbolic as well as instrumental value (Dutton, and Jackson, 1987). As Wu argued (1990), HR

managers can actively manipulate the meaning of strategic HRM decisions and subsequent organizational

responses by making certain strategic decisions’ attributes salient. By understanding how one forms

perceptions towards the crisis situation and how crisis perceptions can have influences over the strategic

decision making not only help HR managers to make more affective responses towards crises, but also it sets

into place predictable, cognitive, and motivational processes that move decisions and organizations in more

predictable directions during and after the crisis occurred (Dutton and Jackson, 1987).

Future Research Directions

Beyond addressing these limitations, future research could further explore the relationship between strategic HRM decision making and crisis perceptions in a much broader sense other than focusing on the elements used in this study. Such research could for instance examine strategic HRM decision making in facilitating organizational learning when coping with crisis situations, or explore other elements that might also influence one’s crisis perceptions, i.e., prior experience of similar crisis situations, or personal traits, etc.

Some studies have investigated the connection between management’s behaviors or reactions in crisis vs. non crisis situations, or threats vs. opportunities situations (e.g., Dutton, 1986; Dutton and Jackson, 1987; Dutton, et al., 1981; Hutchins and Wang, 2008). It would be interesting to extend these investigations to different roles of managers with a much broader view.

Moreover, as this study has found to be concentrated on HR managers’ crisis perceptions as threats, scholars might also examine HR managers’ opportunity perceptions and the perceived importance, immediacy, and uncertainty of the crisis situations in their strategic decision making. As Dutton and Jackson (1987) argued, when crises are perceived as opportunities, positive, gain, and controllable attributes may be triggered.

The crisis perceptions as opportunities may lead to different or perhaps the same results in terms of perceived importance, immediacy, and uncertainty of crises, which will lead to more various possibilities in interpreting strategic HRM decision making.

Other possibilities for future study can be the discussions of finding what factors may influence crisis

perceptions. And also, do all HR managers perceive the same crisis situation in the same way or perhaps more

possible ways are expected? Furthermore, the future study can include more factors that may influence the

interpretation of the results, which are moderators between one’s perceptions and reactions, e.g., individual

difference. As Cunningham and Debrah argued (1995), it is every manager’s dream to make the most

effective and efficient decision in a complicated crisis situation, however, one must understand how

the decision is made before knowing how to make a successful one. Thus, this study has opened a

gate for the future research to explore the further issue of understanding how HR managers’ crisis

perceptions may influence their strategic HRM decision making, and further on to explore the issue

of making successful SHRM decisions when the future crises occur.

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TABLES

Table 1. The profiles of participated companies

Category Company profile Suffering impacts from the economic

crisis

Company A Established in 1987, company A is the world's largest dedicated semiconductor foundry. As the founder and leader of this industry, its headquarters is located in the Hsinchu Science Park, with account management and engineering service offices in China, India, Japan, Korea, the Netherlands, Taiwan and the United States.

Current employee numbers: 20,000 people.

- 40% loss in foreign orders, particularly from U.S. and European regions.

- Major legal dispute with internal labor union in 2008 and the dispute ended up with settlement of 20,000 euro per lay-off employee.

- Stock price fell down 15 % last year, but has been gradually rising in 2009.

Company B Established in 1988, Company B today is the largest notebook computer ODM company in the world. With leading technology and strong R&D, Company B has become a leader in hi-tech markets. Current employee numbers: 5000 people.

- To even the decrease of notebook purchasing from the U.S. and the local markets, Company B started to launch a new marketing strategy in China since March, 2009.

- No lay-off plans or the new recruitment have been reported since 2008.

- Stock price fell down -6 % last two seasons in 2008, but went up 15% in March.

Company C Company C produces powerful handsets that

continually push the boundaries of innovation in mobile industry. It has pioneered the smart phone market through partnerships with Microsoft and key mobile operators. Additional strategic partnerships include:

Intel, Texas Instruments and Qualcomm; some of the largest mobile operators including Orange, 02,

T-Mobile, Vodafone, Cingular, Verizon, Sprint and NTT DoCoMo. Current employee numbers: 3000 people, total of 25% are R&D specialists.

- No lay-off plans or the new recruitment have been reported since 2008. However, some financial magazines have speculated a new recruitment plan for R&D design specialists in the 3

season, 2009 (Global Views Monthly, July 2009).

- Stock price has not been influenced by the financial crisis in 2008. In 2009, the company stock price continued to raise 1.5 % in each quarter.

Company D Company D is the foremost provider of joint-design, joint-development, manufacturing, assembly and after-sales services to global Computer, Communication and Consumer-electronics ("3C") leaders. Guided by a belief that the electronics products would be an integral

- No lay-off plans or the new recruitment have been reported since 2008.

- The company has announced expected

recessions in the shareholder meeting

November 2008.

part of everyday life in every office and in every home, Company D was founded in 1974. Current employee numbers: 12,000 people.

Company E Established in 1976 with US$25,000 in capital and 11 employees, Company E today focuses on marketing its brand-name IT products around the globe. Wielding a profitable and sustainable Channel Business Model (CBM) Company E has been able to achieve sustainable growth worldwide. Current employee numbers: 400,000 people.

- All related information of HRM were either deleted or sealed for the publics.

- The employees’ year-end bonus in 2008 remained the same from the previous year, and it’s the first time since Company launched stocks selling in the market.

Table 2. The profiles of HR managers

Category Current job title Age Year of HR experiences at the current position

Ms. A HR supervisor 35+ 6

Mr. B Senior HR staff 42 10

Miss. C Personnel manager 30+ 5

Mr. D Senior manager 51 18

Mr. E Senior HR staff 53 20

Table 3. HR managers’ perceived importance, immediacy and uncertainty of the current crisis situation and the related SHRM decision makings

Categories The perceived importance, immediacy and uncertainty of the current crisis situation

Strategic HRM decision makings in terms of task design, recruitment strategy and reward system (Yes/No changes)

HR manager A Highly important that requires highly immediate reactions to resolve the problems caused by tremendous amounts of uncertainty

( High importance/ High immediacy/ High uncertainty)

Task Design: Increasing the load of responsibilities on duty and increasing the working hours without additional pays.

Recruitment Strategy: Gradually layoff plan in parts of the company. No plan for new

recruitment. Reward Systems: No changes.

HR manager B Highly important that requires medium level of immediacy in reactions to resolve the problems caused by tremendous amounts of uncertainty ( High importance/ Medium immediacy/

High uncertainty)

Task Design: Job description remained the same but some details were slightly adjusted to adopt the new orders from the Chinese market. (i.e., product manual script has to be in simple Chinese instead of English)

Recruitment Strategy: New recruitment plans are stopped.

Reward Systems: No changes, but bonus is given when the monthly orders increase.

HR manager C Medium level of importance but requires highly immediate reactions to resolve the problems caused by medium amounts of uncertainty ( Medium importance/ High immediacy/

Medium uncertainty)

Task Design: Most job descriptions remained the same except those in R& D department; R&D employees had to increase the pace of releasing new product from seasonal to monthly.

Recruitment Strategy: New recruitment plans are stop.

Reward Systems: The accounting department is in charged of giving rewards.

HR manager D Highly important that requires medium level of immediacy in reactions to resolve the problems caused by tremendous amounts of uncertainty ( High importance/ Medium immediacy/

High uncertainty)

Task Design: Similar manufacturing lines were asked to be more multifunctional and effective, i.e., lines (line A, line B and line C) which were producing the similar devices were asked to take turns to run, and each time the running line has to produce product A, B and C at the required time frame. In other words, they need to learn how to make similar products of the other lines and be three times effective than before.

Recruitment Strategy: New recruitment plans are stopped.

Reward Systems: No changes.

HR manager E Highly important that requires highly immediate reactions to resolve the problems caused by tremendous amounts of uncertainty (High importance/ High immediacy/

Medium-High uncertainty)

Task Design: Task design is in assigned to divisional line managers.

Recruitment Strategy: New recruitment plans are stop.

Reward Systems: The year-end bonus was not

annually increased for the first time last year.

APPENDIXES

Appendix 1

(1) In respect of crises perceived as threats or opportunities:

a. Considering the current economic crisis situation, how would you describe its impacts to your company?

b. Would you describe the crisis situation as a threat or an opportunity to your company? And why?

(2) In respect of the perceived importance, immediacy, and uncertainty of the current crisis situations:

a. How would you perceive the importance of the current crisis situations? (High/Medium/Low) Please give some examples to specify your answers.

b. How would you perceive the immediacy of the current crisis situations? (High/Medium/Low) Please give some examples to specify your answers.

c. How would you perceive the uncertainty of the current crisis situations? (High/Medium/Low) Please give some examples to specify your answers.

(3) In respect of the recent SHRM reactions in task design, recruitment strategy, and reward systems:

a. In the crisis situation discussed earlier, were there any influences to your SHRM decision making in respect of task design?

Please give some examples to describe your recent reactions.

b. In the crisis situation discussed earlier, were there any influences to your SHRM decision making in respect of recruitment strategy?

Please give some examples to describe your recent reactions.

c. In the crisis situation discussed earlier, were there any influences to your SHRM decision making in respect of reward system?

Please give some examples to describe your recent reactions.

Note: For HR manager participants, questions were concerned with their personal experiences and knowledge, as

for their subordinates or colleagues; questions were proposed to be related to their observations to their HR

managers’ behaviors in the situations.