Managing talent in these economic conditions

Talentmanagement_3As we reflect on enterprises’ strategies for this troubled economic climate, people seem to be thinking about the same old "routine" approaches for battening down the hatches and riding this out – i.e. mass layoffs and budget slashes across the board.  This may be the case if this recession is longer and deeper than we fear, but in the shorter term, I am seeing many companies taking a different approach when bracing themselves for this forthcoming downturn than many past recessionary experiences.

The Human Capitalist  blogs about the Talent Management software business and makes an interesting case for further growth in this industry, which got me thinking about the need for firms to protect their most prized people assets to ride out this this economic turbulence.  If firms are buying talent management software, it is further evidence they are putting their talent issues high on the agenda.   Why is this?

1) Firms remember well the dotcom bust and 9/11 nightmare, and are preparing themselves for this one well in advance. Many firms are stalling external hires and prioritizing filling vacancies with internal staff. They are hoping to minimize layoffs at all costs;

2) The aftermath of 9/11 instilled a cost-containment mentality into many companies and there is less fat to trim these days in a lot of companies (especially in HR, with that massive wave of HRO deals in 2001-2005);

3) IT and Business Process Outsourcing are increasingly becoming the logical cost-cutting measures with many enterprises focusing on farming out tactical / routine processes and placing increased emphasis on designing retained organizations (see earlier article).  Outsourcing evaluation increases firms’ self-awareness and recognition of the people who add value to the business – i.e. those who perform more than simple routine duties that can be done for lower costs by third party providers;   

4) The decline in young adult workers is driving increased concern regarding talent shortages – particularly among larger enterprises.  Letting talent go now is likely to result is costly re-hiring when we exit this downturn. 

Hence, the focus is more directed on developing and retaining talent than ever before.  Let’s hope this downturn isn’t so severe that even these talent issues get thrown out of the window.

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4 Comments

  1. Posted March 2, 2008 at 8:48 am | Permalink

    What I am seeing currently in the UK is a move away from the buying in of talent to the identification of talent and putting in place appropriate structures to nurture then obtain a ROI. It seems that (at least in) big business has woken up to the fact that it is actually cheaper to develop talent in house rather than buy it in at short notice when it becomes a critical item.

  2. Posted March 2, 2008 at 12:09 pm | Permalink

    Phil,

    Outsourcing and the use of advanced integrational technology is not the byproduct of a recessionary mindset. It is both a paradigm of global organizations and a reality that will expand as borders continue to disappear. Fundamental economic tenets must be revisited in concert with the redefinition of organizational, societal and political boundaries.

    Accelerated worldwide demand, and a shifting supply base, are the cause and effect that, combined, are moving cost-centers to increase efficiencies. Firms that fail to leverage technology to re-center their populations globally, as they also find new customer opportunities across geographic and cultural lines, will face increased challenges to their viability. The term “outsourcing” is “outdated”. Real-time asset movement is both an available advantage and an increased requirement or table-stake in a global economy.

    There is not a shortage of young workers. There is a shortage of young American workers. Just as there is not a shortage of jobs in the world, there is a shortage of the jobs that America (and to a large extent Old Europe) find aligned with traditional expectations.

    What is going on in IT and Business Process Outsourcing is akin to what has been going on in manufacturing, design and engineering. The world at work is finding an evolving competitive center. The gravitational effects of that reality on the basic US microeconomy, from a corporate staffing and expense management POV is forcing change at an unparalleled rate historically.

    When you read that IBM is moving purchasing functions to Shanghai, or GE Money is recentralizing opertations into Europe from America, or that Halliburton is incorporating in Dubai, you realize that the jobs go where the resources are least-cost, and where the value equation is more fully supported.

    Thank you for bearing with my wordiness on the subject. I have been engaged with corporate decision-makers for the past 25 years and this subject has been a favorite flight of intellectual provocation for some time.

    As a very sage person once told me, “Death, Taxes and Change…The only 3 constants”. Or as Confucious said “May you live in interesting times.” Be careful what you ask for…

    Rick Pulito

  3. Dr Vikram Venkateswaran
    Posted March 3, 2008 at 1:51 am | Permalink

    This is an intresting observation. Let me bring in the Indian perspective on this issue. For one, the tax holiday on the IT Services companies has been waived off. So from now on they will have to pay corporate tax, which is upwards of about 30%. Add to this the original issue of the strong Rupee and the imminnent slow down in the United States economy. Most companies have started talking the line of capacity utilisation, which essentially means that they can’t carry any bench strength. Not carrying a bench is a critical human resource management issue as the bench provides an organsation with the flexibility to scale up or ramp down as per the business requirements. Also, utilising the employees effectively is getting tougher as the companies try to walk a thin line between reducing costs and trying to retain employees and motivate them. Training and Development activities which are a bench mark for most employees moving up the value chain in their respective organisations take a back seat. Currently only the SWITCH (Satyam, wipro, Infosys, TCS, Cognizant and HCL) have the necessary infrastructure(both physical and human) for these activities and hopefully retain their employees.

  4. Posted March 7, 2008 at 8:05 am | Permalink

    Phil,

    The current recession could well be the reason for organizations to introspect – a deep dive to check where is the’ rust’ setting in.

    Ideally it is always better to look for talent within for upward movement for reasons such as
    - Long tenure in the organization would give a better overall understanding
    - Learning curve for an outsider could be long & difficult
    - Acceptance of an outside again could be a long process
    - Cost of internal movement Vs external hire could be significantly lower
    - Internal movements could well have other desirable effects such as
    o More number of top performers
    o Lower attrition rate
    o Indirect cost savings

    The point however is that how is organizations geared up for this activity which is an IMPORTANT one
    Some focus on pushing internal resources into the next levels doing the same jobs
    Some even push others who are excellent rates in the current role / process but do not have the skills to do the next level job – there is always a danger of pushing someone into a new area without adequate training – as the resource is set up for FAILURE

    Development in most organizations is limited to soft skills training which lacks imagination and therefore does not tie to the objective of promoting talent
    In a market situation where there is talent shortage or more appropriately resource shortage these ideas are not the top priority – the churn continues of swap in and swap out of 20-40% of resources every year.

    In global organizations this is more prominent – I may not be very accurate – the annual plans and budgets actually centre around top line revenue and profit before tax – whereas important factors could How is the service delivered to the customer today – are we meeting their needs – what are the new areas of value add to the customers – how do we motivate, train, assess and redeploy our talent pool
    When it comes to resources the difficult question to answer here is who leads / drives this – Business or HR
    To answer my question it has to be in partnership – it is after all poor planning in terms of retention & rewards which is a cause of high attrition rates (while headhunting and resource stealing is rampant in the business – definitely in the IT industry).

    Some points which some to my mind which can be useful are:

    - HR networks should conclude that no hiring happens unless the tenure in the last job was 24 months or more
    - Managers in the organization should have very clear targets and accountability in nurturing talent through regular training & assessment
    - Organizations should be very clear in their Resource plan – hire at the most junior level and a percentage of all senior openings should be through internal movements – we must be sure to bring in resources from other organizations too as they bring in different perspectives
    - Regular checks and balances on performace
    - This program should have the support from the management
    - Necessary infrastructure for training such as
    o Training facilties
    o Subject matter experts should be indentified-external & internal
    o Train the trainer programs
    o Regular interaction and feedback mechanismo Assessment and reward systems
    o Communication plan

    I am sure many organizations are doing some of these effectively while – It is important to sustain these programs and not give up – many times I have seen that the moment the person responsible for an activity quits or is moved then program then just stops.

    Another important thing is that the support functions in a corporation should be given equal weight age as the line functions

    To conclude we should practice hiring resources from campus and train them to perform their role – communicate to them that they have a good chance to more up based on overall understanding of the organization ‘s business model
    Limit the intake of resources from the market and pin responsibilities onto managers to hire internal resources.

    Suresh

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