Downturns: The Acid Test of Leadership
Have most of your leaders ever had to manage during a serious downturn? If not, then they may need some help dealing with today's crisis of confidence in the economy, especially when it comes to talent management.
Avoid Knee-Jerk Responses
While the financial experts debate proper terminology for the U.S. economy's downturn, the nation's citizenry has been more decisive. A January poll of 1,000 U.S. adults conducted by Fortune magazine found 76% declaring the country to be either already in a recession or poised to be within the coming year (Easton, 2008). So, whether or not the economy slips into a true recession, today's business leaders have to cope with a general sense among employees that things already are bad and could get worse.
Difficult economic times often result in strategies such as hiring freezes and downsizings. Indeed, the U.S. unemployment rate is expected to rise to 5.5% by the end of the year, up from 4.8% today (Veiga, 2008). There also tend to be cuts in spending on new initiatives, training and other efforts that don't show immediate financial returns.
Few would argue that well-thought-out cost cuts aren't a logical starting point, but cost-cutting as a knee-jerk response can be self-defeating. A Perth Leadership Institute (2008) white paper notes that "short-term cost cuts often end up hurting long-term sustainability of profits and competitiveness … [and] morale and employee loyalty suffers" (p. 7). Therein lies an acid test for leaders to hone their expertise in talent management.
Look for Talent Opportunities
"Managing talent in this very different business environment is a challenge," observes business consultant Edie Goldberg. "Few companies are on top of this" (IOMA, 2008, p. 13). Consequently, executives who become true talent leaders by managing talent well during downturns just might parlay that skill into a competitive advantage for their firms.
How does one become a talent leader? For one thing, proactive talent leaders take pains to keep workers in the loop about their firms' situations, objectives and outlooks. Clear communication helps managers and employees on all company levels understand the actions their senior leaders are taking. It's the unknown that often causes fear … that leads to morale problems … that kills productivity. So it's a savvy leader who avoids that scenario, instead wielding communication as a powerful tool to connect workers organization-wide and support teamwork and engagement by encouraging everyone to pull together during difficult times.
With effective communication comes another opportunity, this one centering on employee engagement. PeopleMetrics executive Kate Feather explains that "creating emotional connections to employees is what truly matters because this is where organizations can dramatically boost employee productivity and business outcomes." A 2007 survey by her firm of 5,000-plus U.S. workers found positive links between engagement, high-performing employees and profitability. Employers should focus, Feather says, on building their relationships with employees and on communicating compelling visions of the business, along with a "sense of meaning and purpose" that workers can understand (Amble, 2007). What better prescription for businesses seeking remedies for downturns?
Invest in Customer Value
Business leader Linden R. Brown comments on another opportunity that communication can foster during a slowdown: the freedom to talk openly about challenges and to "share insights across the organization so everyone knows how to create superior customer value." This can be particularly advantageous because, as Brown points out, research has shown that the firms most likely not only to survive slow times but also to thrive during them are those that invest in enhancing the value they provide customers (Brown, 2008, p. 10).
Some experts suggest that employers use a slowdown to pick up outstanding salespeople and then aim their skills at the accounts of competitors. The idea is for firms to leverage whatever their edges in the business arena might be – lower prices, higher quality, or a unique position in the marketplace ("Managing," 2008).
Position HR as Business-Focused
Finding and keeping the best people when money for compensation and rewards programs is dwindling requires a lot of skill. To support the efforts of talent leaders, it's time for HR to flex its strategic muscles. The Perth Leadership Institute (2008) says, "HR needs a fresh and dynamic, recession-focused program." Perth's research suggests that HR programs focus on fast bottom-line results and that it encourage leaders and employees alike to develop their business savvy. It advises positioning HR as "business-focused innovators in their own area."
Here are some other tactics to maximize talent management during a downturn:
Slowdowns can provide the impetus companies need to get creative with the resources they have and to look at talent management from a fresh perspective. If leaders need a rallying call for these trying economic times, consider this Perth pronouncement: "View the recession as an unparalleled opportunity, not as a problem."
Documents referenced in this TrendWatcher include the following:
Avoid Knee-Jerk Responses
While the financial experts debate proper terminology for the U.S. economy's downturn, the nation's citizenry has been more decisive. A January poll of 1,000 U.S. adults conducted by Fortune magazine found 76% declaring the country to be either already in a recession or poised to be within the coming year (Easton, 2008). So, whether or not the economy slips into a true recession, today's business leaders have to cope with a general sense among employees that things already are bad and could get worse.
Difficult economic times often result in strategies such as hiring freezes and downsizings. Indeed, the U.S. unemployment rate is expected to rise to 5.5% by the end of the year, up from 4.8% today (Veiga, 2008). There also tend to be cuts in spending on new initiatives, training and other efforts that don't show immediate financial returns.
Few would argue that well-thought-out cost cuts aren't a logical starting point, but cost-cutting as a knee-jerk response can be self-defeating. A Perth Leadership Institute (2008) white paper notes that "short-term cost cuts often end up hurting long-term sustainability of profits and competitiveness … [and] morale and employee loyalty suffers" (p. 7). Therein lies an acid test for leaders to hone their expertise in talent management.
Look for Talent Opportunities
"Managing talent in this very different business environment is a challenge," observes business consultant Edie Goldberg. "Few companies are on top of this" (IOMA, 2008, p. 13). Consequently, executives who become true talent leaders by managing talent well during downturns just might parlay that skill into a competitive advantage for their firms.
How does one become a talent leader? For one thing, proactive talent leaders take pains to keep workers in the loop about their firms' situations, objectives and outlooks. Clear communication helps managers and employees on all company levels understand the actions their senior leaders are taking. It's the unknown that often causes fear … that leads to morale problems … that kills productivity. So it's a savvy leader who avoids that scenario, instead wielding communication as a powerful tool to connect workers organization-wide and support teamwork and engagement by encouraging everyone to pull together during difficult times.
With effective communication comes another opportunity, this one centering on employee engagement. PeopleMetrics executive Kate Feather explains that "creating emotional connections to employees is what truly matters because this is where organizations can dramatically boost employee productivity and business outcomes." A 2007 survey by her firm of 5,000-plus U.S. workers found positive links between engagement, high-performing employees and profitability. Employers should focus, Feather says, on building their relationships with employees and on communicating compelling visions of the business, along with a "sense of meaning and purpose" that workers can understand (Amble, 2007). What better prescription for businesses seeking remedies for downturns?
Invest in Customer Value
Business leader Linden R. Brown comments on another opportunity that communication can foster during a slowdown: the freedom to talk openly about challenges and to "share insights across the organization so everyone knows how to create superior customer value." This can be particularly advantageous because, as Brown points out, research has shown that the firms most likely not only to survive slow times but also to thrive during them are those that invest in enhancing the value they provide customers (Brown, 2008, p. 10).
Some experts suggest that employers use a slowdown to pick up outstanding salespeople and then aim their skills at the accounts of competitors. The idea is for firms to leverage whatever their edges in the business arena might be – lower prices, higher quality, or a unique position in the marketplace ("Managing," 2008).
Position HR as Business-Focused
Finding and keeping the best people when money for compensation and rewards programs is dwindling requires a lot of skill. To support the efforts of talent leaders, it's time for HR to flex its strategic muscles. The Perth Leadership Institute (2008) says, "HR needs a fresh and dynamic, recession-focused program." Perth's research suggests that HR programs focus on fast bottom-line results and that it encourage leaders and employees alike to develop their business savvy. It advises positioning HR as "business-focused innovators in their own area."
Here are some other tactics to maximize talent management during a downturn:
- Account for costs associated with people programs by tying them to financial returns
- Direct rewards program resources to reinforce the efforts of the firm's most valuable talent.
- Encourage an organizational culture that embraces learning and holds managers and employees alike accountable for the results their actions produce.
- Confirm compliance with legal and contractual obligations – especially if layoffs occur.
Slowdowns can provide the impetus companies need to get creative with the resources they have and to look at talent management from a fresh perspective. If leaders need a rallying call for these trying economic times, consider this Perth pronouncement: "View the recession as an unparalleled opportunity, not as a problem."
Documents referenced in this TrendWatcher include the following:
- Amble, B. (2007, May 25). Passion builds profits. Retrieved from www.management-issues.com
- Brown, L. (2008, February 11). Seven winning tactics during a downturn. B to B, 93(2), 10.
- Easton, N. (2008, February 4). Make the world go away. Fortune, 105-108.
- IOMA. (2008, March). Recession threat, health-care costs to affect HR decisions. Managing Benefits Plans, 08-03, 1+.
- "Managing in a Recession." (2008, February). Cambiar News, p. 1.
- Perth Leadership Institute. (2008, February). A recession's role in transforming leadership development. White paper.
- Pitcher, G. (2008, January 29). HR has a ‘vital' role to play in managing recession risk. Personnel Today, 3.
- Veiga, Alex (2008, March 11). Economists see U.S. avoiding recession. Yahoo!News .
Carol Morrison is a Senior Research Analyst and Associate Editor with the Institute for Corporate Productivity (i4cp), specializing in workforce well-being research.