Talent management is today a critical people process, and an issue that remains very high on the CEO agenda despite the current economic conditions.
In times of economic turmoil the issue of talent management does not subside. The challenge for companies is to manage costs but at the same time capture opportunities for growth and maintain service standards by having the right people in the right place at the right time. Furthermore employees may feel less secure in their jobs, fearing the potential outfall that economic circumstances could bring and issues such as reduced bonuses, staff and spending cuts may affect engagement levels.
Without effective talent management strategies, you see leakage, as people decide to move on – and in troubled times such as these organisations need to make sure they keep the best people and the right people. This means making sure that talent pools, including future leaders, high potentials and key resources are being focused on as much as the top team.
As the financial crisis plays out and we modify our behaviour to cope with the situation, it is critical that we continue to invest in skills and talent. Mercer looks at some areas of leadership and talent management that CEO’s should be consider.
Plan now to get the workforce you’ll need when the economy recovers
The economic downturn will only deliver limited respite, if at all, to Australia’s critical skills shortage. If organisations expect to cope with the increasing drain on talent out of the workforce they should undertake analysis and research now to understand the demographics of their workforce – for example, what might the impact be three or four years down the track if you were to freeze hiring on engineering or accounting graduates – skills that are currently in short supply? It’s important to identify what skills your organisation will need and what skills are in short supply.
We do recognise that in the current economic situation organisations are increasingly concerned about conservatively managing costs or maintaining growth without over-committing. The bleak side effect of this economy is lay-offs and effective ways to handle this, for both the employees being let go and those who remain, must be addressed in the current environment.
Mercer believes the most important consideration for managing those lay-offs is around selection criteria.
In the past, organisations have addressed downsizing by blanket cuts across all departments, for example by 10 per cent or 20 per cent. This is a very blunt way of addressing the issue.
While it may seem fair to make blanket cuts across all departments, it may not be the best solution for the future of the organisation. Rather than make blanket cuts, organisations needs to recognise that there are some departments where cuts should not be made because they may hold critical resources for developing growth strategy in the future, or may be areas of high innovation that will set the strategy for when good times come around again – because we all know the situation will turn up again eventually.
Employers need to be sure that every manager is aware of the process and why it’s been asked.
The other significant aspect of lay-offs is that a lot of attention is paid to those people being let go, through the provision of support and outplacement services, however, one of the areas that are often neglected are those people who remain in the organisation. These people find themselves in the same job, but are asked to do twice as much. Often organisations forget to counsel, or ensure adequate support for those who ‘survive’ the lay-offs.
Managing those people left behind could be the key to ensuring your workforce maintains the productivity needed to remain viable and grow.
Tailor your reward strategy
In troubled times, the ability to pay bonuses will decrease rapidly as the pools are going to be smaller, so there needs to be much stronger differentiation in compensation schemes.
Investing in non-financial benefits and adopting a total rewards strategy, is an effective way to assess and manage payroll costs as well as build a compelling employee value proposition that can be tailored to the individual while being aligned with the organisation’s employment brand.
Employees, regardless of age, are turning to their employers for support in a range of areas and in tough economic times benefits such as access to financial advice, insurance or even discounted movie tickets or internet plans are highly valued.
Now is an opportune time to review your benefits program not only from a cost perspective but to ensure you are providing benefits that your employees actually want and value.
Career development is a critical component of the reward strategy but an area which can be harder to manage in troubled times. In boom times organisations are able to create more opportunities for high potentials so that they are able to move them around the organisation to get the experience needed in order to make it to the next level. In troubled times those opportunities may be less achievable, or promises can fail. It is important to continue investing and skills and career development for high potential and high performing staff, but be realistic and communicate openly and honestly about what the company can offer.
Ensure your workplace superannuation scheme does not become a liability
The volatility in equity and bond markets is having a profound impact on the investment returns of pension and superannuation funds. For employers who have had defined benefit schemes in place (a superannuation fund where the retirement benefit is pre-determined on the basis of salary and length of service) the issue is particularly pertinent as the employer generally bears the investment risk, not the member – even if they have left the organisation.
The cost of funding these schemes is increasing due to declining member numbers coupled with a fall in investment earnings; furthermore this could have a tangible impact on the organisation’s balance sheet. Mercer believes that it is now critical that administrators of these schemes consider the risk reduction interventions available such as reviewing the investment strategies or asset allocation of the funds or reviewing benefit design or future benefits for new employees.
Keep the lines of communication open
Now is not the time to cut back on communication with employees. Constant and open dialogue between organisation leaders and employees is essential during times of uncertainty.
But communication should not be only about providing reassurance or explaining difficult decisions. It is equally important to communicate effectively the positive changes or investments that your organisation is making in the workforce. For example, Mercer’s research shows that if an employee benefits program is communicated effectively not only will they understand it better; they are more likely to value it more highly.
While the economic circumstances are difficult at the present moment, it is apparent that the skills shortage will not be alleviated in the near future and it is absolutely essential that as an employer you don’t lose sight of tomorrow’s challenges and opportunities in the hast to deal with today’s issues. It is the organisations who invest wisely and use this time to get the key issues relating to talent management in order who will be best positioned to survive the current situation and benefit when the economic cycle inevitably turns upward again.
Mercer has launched a new global website - Leading through unprecedented times – to help businesses through the economic challenges ahead. The site is a global ‘information hub’ that offers free online access to meaningful investment and human capital management advice. www.mercer.com/unprecedentedtimes
