Global Financial Crisis Case Study

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The Global Financial Crisis (GFC) led to the collapse of many leading financial institutions in the USA and Europe in 2007 and 2008. This was caused mainly due to subprime lending, which in simpler terms mean that many of these financial institutions were unable to repay their creditors and depositors due to reduction in the value of their assets they were holding. Without getting into the details of how the financial crisis occurred due to some other factors such as subprime mortgages and property price appreciation, we can say that during this period there was a massive loss of confidence in the financial system globally, which not only affected the foundations of the economy of a country but also harmed the social and political structures of many of those countries affected directly or indirectly (Zagelmeyer and Gollan, 2012). This lead to the increase in demand, rise in unemployment, more debts and whole lot of other social and economic concerns for companies and governments. The relation of this crisis with human resource management (HRM) is relevant because it ultimately affects the way people are managed within organizations. As mentioned by many authors like Gunnigle et al (2013); Edwards & Rees (2011), the key functions of a human resource manager (HR) role is understood to be managing employees, such as recruitment, selection, pay and benefits, industrial relations and the HR function. The approach they take, the policies they implement and the practices they employ are what contribute to employment and unemployment figures. There are a number of factors that affect how the HR department acts, whether they change or implement new practices, as a result of the global financial crisis. Another issues at hand is that, it ha... ... middle of paper ... ...g employees and keep them committed to the job can be a tough job for organizations and the HR function. Retaining talented individuals that are familiar with their work culture and practices, than making them redundant and recruit them later in future also benefits organizations. As an example we can look at the measures taken by Aer Lingus, who implemented a “leave and return” policy, where they gave employees a lump sum severance payment and made them rejoin on a reduced wage (Gunnigle et al, 2013). This policy is quite important for an organization because rather than taking a more short term approach of cutting jobs and losing on talent and recruiting them again in future, companies should keep long term strategy in mind and look for ways to retain talent within their organization and try adjusting them into different roles, while keeping them motivated enough.

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