How to Manage Talent During an Economic Downturn

A downturn is an opportunity to prepare for a brighter tomorrow.

The recession of 2008-09 was especially severe, and it created huge challenges for companies that were trying to stay afloat while still managing their talent. It can be difficult for an organization to think about talent management at the same time it is dealing with a loss of customers and the resulting losses in sales and revenues. However, organizations that manage talent effectively through a downturn will be at a competitive advantage once the economy recovers.

Instructions

1. Plan for downturns, because they are inevitable. You should have a plan for how you will deal with reductions in business volume of 10 percent to 20 percent reductions; that way, when a downturn hits you will be better prepared to manage through it. Josh Bersin of of the management firm Bersin & Associates believes that too often companies turn inward during a recession; instead, they should look outward and focus on customer needs. He gives the example of Intel in the 1980s when, faced with industry upheaval surrounding memory chip prices, the company motivated its employees to work harder for less. This led to the development of the very successful Pentium microprocessor. Effective management communications during a downturn is also important, according to Bersin.

2. Invest in your talent. Bersin says that the best-developed talent management strategies are in companies that have survived downturns. He believes that companies should use a downturn to stock up on available high-performing talent. However, Watson Wyatt cautions that hard data such as productivity gains and sales growth rather than gut instincts, should drive talent management decisions. In a 2010 study, Deloitte urges organizations not to use the recession to adjust compensation levels downward, because the talent might leave once the economy improves.

3. Retain pivotal talent. Losing individuals such as a surgical nurse at a medical center or a digital engineer at a telecommunications company could adversely impact performance. According to Richard Baird, co-leader of PricewaterhouseCoopers' People and Change Advisory Service, retaining pivotal talent is especially important during a downturn because economic uncertainty makes everyone nervous, and talented individuals are more likely than others to be picked up by competitors. Compensation, self-development and training are important retention strategies. Employees must feel that the company is meeting their developmental needs.

4. Implement talent swapping. According to management thinker Dr. John Sullivan, swapping, or replacing, under-performers with better outside candidates is easier during a downturn for two reasons: First, there might be a deeper and broader talent pool from which to choose, and second, the emphasis on cost control naturally leads to staff reductions. Watson Wyatt uses a different term: segmentation, meaning a company should concentrate resources on retaining and recruiting the high performers and let the under-performers go.

5. Manage executive talent. Another Deloitte study of approximately 1,800 global executives found that the stronger-performing firms retained and hired top talent effectively through downturns. The study found higher morale at firms that placed a greater emphasis on leadership development programs. Watson Wyatt suggests that strategic thinking and crisis management skills are just as important as results-based management and communications skills in developing future leadership talent.

References

• Bersin & Associates: Five Talent Management Strategies for a Business Downturn; Josh Bersin; Feb. 9, 2008
• Watson Wyatt Worldwide: 5 Rules for Talent Management in the New Economy; 2009 (PDF)
• PR Newswire: Deloitte Identifies Guideposts to Consider in Confronting the Talent Challenges of the New and Reset Economy; Apr. 19, 2010
• "Newsweek": 'Don't Panic': A Management Guru on Keeping Talent in a Downturn; Richard Smith; Oct. 9, 2009
• Dr. John Sullivan: Managing During an Economic Downturn Using a Talent Swapping Strategy; Nov. 23, 2008
• Knowledge @ Wharton: 'Talking the Talk': Jeff Schwartz on Building Talent During a Downturn; July 21, 2010

Resources

• Taleo Research: Talent Management in a Down Economy (PDF)
• "Harvard Business Review" Blogs: How the Recession Is Changing Talent Management: Tammy Erickson
• HEC School of Management, Paris: How Europeans Do Layoffs; Michael Segalla; June 9, 2009