Old playbook tactics unlikely to work

As companies stand at the intersection between recession and recovery, many executives have begun evaluating their business plans and revising their strategies with an eye towards a future that remains uncertain, according to a new report by Deloitte, titled "Has the great recession changed the talent game".

In its report, the company puts forth six guideposts for executives to managing talent out of a turbulent economy. "We believe these guideposts can help companies better position themselves for the economic upturn and beyond as they implement strategies to retain their talent and develop the leaders necessary to drive their success," it says in the report.

The report is based on inputs of more than 350 employees and collected over 1,600 responses from top executives and talent managers, representing industries across the world's three major economic regions (the Americas; Asia Pacific; and Europe, the Middle East and Africa).

The problem may look familiar, but the solutions are not. As per the findings of Deloitte, many surveyed executives seem intent on returning to pre-recession strategies and talent programmes – an approach some believe served them well following the 2001-2002 recession.

However, the Deloitte analysis may not suggest the same. The results of company's survey series, along with an analysis of demographic trends in the workforce and technology advances, suggest that relying on old approaches to address new issues may be inadequate for the talent challenges companies face in today's global economy, it believes.

But that doesn't change the policy of many firms as they "seem to be playing from their old playbooks".

On the other hand, the report suggests that "today, competition is international, and a company's product development and manufacturing may take place across the globe, meaning companies that do not constantly innovate could be overtaken by competitors."

But the findings of the survey show that innovation is not high on the list for many companies. "Only 39 per cent of executives surveyed report their companies have a talent plan aimed at driving innovation."

The current problems look familiar to those of the previous recession (2001-2002) but it is still a lot different. The talent market has changed significantly since then and advances in technology have led to the development of ever-more sophisticated and robust workforce planning and analytic tools, believes Deloitte. "Yet two out of three executives surveyed acknowledge that workforce planning is not being integrated at both the corporate and business unit levels when it comes to their annual business planning (69 per cent), their contingency planning (69 per cent), or even being updated as a result of shifting economic conditions (67 per cent)."

"Demographic trends, including the impending retirement of growing segments of the Baby Boom generation, are making it more crucial than ever for companies to develop high-potential talent and cultivate future leaders.

While the recession may have put retention planning on hold, a significant 20 per cent of executives surveyed acknowledge their companies have not updated their retention plans to take into account a changing economy.

The findings clearly show that while some companies are revising their talent strategies coming out of this recession, many are not. "Those that continue to look to the pre-recession playbook are failing to use new tools, including the extensive use of workforce planning and modeling. These companies are also missing opportunities to leverage talent to drive innovation and are not investing in leadership programmes to build robust pipelines of emerging and senior leaders. The bottom line: what got you here won't get you there," affirms the report findings.

There is a paradox of scarcity amidst plenty.

Secondly, one of the key questions for talent leaders should be about the availability of talent that they may need in the future.

There is going to be a dearth of talent as Baby Boomer retirements rise and due to a looming resume tsunami, believes Deloitte. In such a situation, the question about the healthy levels of talent pipeline is bound to arise.

"Throughout 2009, global unemployment rates rose, dramatically and even reached historic highs, according to the United Nations. Given the significant number of people out of work, executives may be tempted to think the talent they need will be readily available when they need it. But Deloitte believes executives who are counting on a 'jobless' recovery to fill their talent gaps risk being caught without the skills and leadership they will need to take full advantage of an improving economy," the report states.

Besides the issue of retirements plaguing companies, according to a previous Deloitte survey, 65 per cent executives expressed concern about losing high potential employees and critical talent to competitors in the year following the recession.

This sentiment clearly follows what happened in the previous recession. As per the same survey, nearly half (46 per cent) recall that voluntary turnover increased following the 2001-2002 recession. Nevertheless, only 35 per cent have an updated retention plan in place to keep hold of talent as the recovery strengthens.

"Over the last decade companies facing a skills shortage have been able to tap into the vast global talent markets such as China and India. But as Baby Boomers retire and skills grow scarce, there will be no additional Chinas or Indias coming online."

Companies using the recession as their retention strategy do so at their own risk. The recession has no doubt changed the bargaining power of employers but there are certain limitations to the growing clout as the economy recovers.

Employers who believe their employees have nowhere else to go may lose out in the talent marketplace as the economy improves. "Many companies seem to believe their employees have few options in a weak economy – and may implicitly or explicitly communicate that employees should feel lucky to have a job. Rather than implementing a meaningful retention plan aimed at identifying, developing, and retaining key talent, some companies continue to use the recession as their primary retention strategy.

"However, when the economy heats up, these companies risk a resume tsunami – where employees with a desire to switch jobs take increased confidence from better times and seek out new opportunities in the talent marketplace."

This belief is further substantiated by the findings of Deloitte's special report on employee attitudes. Among employees surveyed, nearly one-in-three (30 per cent) are actively working the job market and nearly half (49 per cent) are at least considering leaving their current jobs.

Academic research indicates 44 per cent of these employees will act on these turnover intentions. Employers hardly see what may be coming. For example, only nine per cent of surveyed executives expected voluntary turnover to increase significantly among Generation X employees in the 12 months following the recession, says the report.

Low motivation

In fact, according to Deloitte's survey results, about one-in-five surveyed Generation X employees (22 per cent) have been job hunting over the past year and only 37 per cent plan to remain with their current employers. Members of Generation Y also have their sights set on better opportunities, with less than half of those surveyed (44 per cent) reporting they plan to stick with their jobs, it adds.

Low motivation levels due to layoffs and cost-cutting measures should serve as early warning signs of a potential resume tsunami, show Deloitte's findings.

"Of the employees surveyed, 62 per cent said morale had decreased due to cost-cutting measures. More than three out of four (76 per cent) of surveyed employees who intend to leave their current jobs reported lower morale at their companies.

"Employee turnover intentions often lead to lost productivity with employees looking for new jobs, resulting in lower profitability. Voluntary turnover leads to turnover costs, which represent a significant but poorly understood burden for companies."

"Moreover, the departure of key employees can create a cascading effect as others follow their lead, compounding costs and the loss of skills.

Mindset change

"To counter this, employers must turn from a recession mindset focused on headcount reduction and stretching the current workforce to a proactive retention and strategic recruitment mindset. Employers need to examine how attractive they are to experienced hires as well as to new employees entering the workforce and ensure they are proactively enhancing their employer brand. Failure to do so risks losing critical talent to competitors."

Understanding your people is as critical as understanding your customers.

According to the report, understanding your employees' wants and needs is just half the battle. Employers also need to create an effective two-way communication pipeline between themselves and their employees. The survey results suggest many companies still have room for improvement. "Engaging in an ongoing dialogue with their workforce can help employers determine which strategies and tools are most effective when it comes to retaining personnel.

"Nearly half (48 per cent) of employees surveyed complained that their companies had not communicated effectively about belt-tightening measures during the downturn. Among surveyed employees who intend to leave their job, these grievances were even more pronounced, with 62 per cent citing a lack of communication from executives during the recession. By the end of the survey series, only 35 per cent of surveyed executives felt the need to increase the frequency of employee communication."

As far as the issue of communication is concerned, Deloitte suggests that "companies must understand what their employees really want, realign their retention strategies, tactics and priorities to match those goals, and then communicate effectively with their workforce. Companies that can do this effectively will be much better positioned to retain their high-potential employees and future leaders to help them to hit the ground running as the economy continues to recover."

Show me the money – but show me the love, too!

Money is an important part of any retention strategy, but non-financial incentives are critical to employees and offer opportunities for companies to differentiate themselves in the talent marketplace, as per the report. In a September 2009 survey, Deloitte asked employees what top three retention initiatives would persuade them to stay with their current employers. "Sure enough, financial factors led the way by a significant 15-point margin, with additional compensation at 43 per cent, additional bonuses or financial incentives at 41 per cent, followed by strong leadership and job advancement expectations at 28 per cent."

Non-financial factors

However, when respondents were questioned on factors that would prompt them to leave their current employers, employees opted to say two non-financial factors among the top three. "Lack of job security (36 per cent) was cited as the primary factor that might induce employees to seek new opportunities, followed by lack of career progress (27 per cent) and lack of compensation increases (27 per cent). Several other factors that employees cited as most effective were non-financial, including leadership strength / trust (22 per cent) and support / recognition from supervisors / managers (20 per cent).

"At first glance, this data may appear contradictory, but we believe what employees are saying is quite simple: Money is important, but greater compensation alone is not enough to keep them satisfied in their jobs."

Companies surveyed that described their leadership programmes as "world class" are searching the market for the best talent available, with 69 per cent reporting plans to step up recruitment of critical talent.

Companies surveyed that lead the pack on leadership are experiencing higher morale: 59 per cent report an increase in morale compared to 21 per cent at competing firms. Trust and confidence in corporate leadership is also rising faster 53 per cent to 21 per cent.

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