Getting Ready for the Economic Turnaround

by Dave Brookmire
January 2008

One year ago, the key business issue for senior HR professionals was how to maintain our companies' competitive advantage while attracting and retaining top talent. What a difference a year makes. Today, most companies have experienced a decrease in turnover, largely due to the economic downturn and higher unemployment. In fact, as the economy continues to create lower sales, businesses are struggling to maintain profitability. To survive the current economic climate, many HR departments are having to reduce the workforce, delay merit increases, delay new hires, cut employee health and welfare benefits, and cut discretionary HR items like training, tuition reimbursement, etc. However, those companies who want to succeed in the long-term and not just survive in the short-term need to start getting prepared NOW for the inevitable turnaround.

When the economy bounces back (and it will), businesses will again face the challenges associated with attracting and retaining top talent. However, the new twist is, the retention and motivation tools used in the past five years just won't work when the economy comes back and employees have more choices on whether to stay or go. For example, stock options, once the primary compensation and retention tool for most companies, are no longer desired by employees who were "burned" by the promise of wealth and riches. Employees will ask for actual cash compensation and other benefits.

Let's think like our employees for a moment: what do they want out of their jobs? The baby boomers, ages 45-63, have been working most of their adult life for 20-25 years by now. At this point in their careers and life, two things have become very important. First, they want to build wealth so that they can retire, say by age 65. With stock options essentially underwater for the vast majority of these employees, the primary means of building wealth is through retirement and savings plans. Second, they want to stop "giving" everything to the company and start "getting" more out of life. Right behind the baby boomers are the generationXers, ages 31-44. It is well documented that these workers are seeking development of their "work portfolio" and also seek a good balance between work and non-work activities.

So what can a company do now, to be sure they are in a position when the economy turns around to retain the top talent required to maintain a strong competitive advantage?

Here are five actions you must take, now:

1. Identify your key intellectual assets and be sure you are meeting their needs for today and in the future. Most companies have a handful (5-10%) of employees that essentially create the value of the organization in the marketplace. These employees are typically "rainmakers," engineers, developers and marketers. If the CEO does not have a list of these employees and a plan to ensure their "care and feeding," the company may be in for a real surprise when the economy turns. You can be sure these are the most marketable assets you have and your competitors would be very happy to have these all-stars on their team. An objective way to identify your all-stars is to rank employees based on past performance and the critical skills required in the future. All-stars typically have high performance and high contribution for the future success of the company.
2. Keep training. When business is slow it is a perfect time to train employees and build their customer relations skills. Remember how hard it was to take employees off the job to train them when you could not keep up with demand? Your employees need to feel that the company is concerned with their development and provides support for training and professional education. People seek to join companies that display a commitment to developing their skills and work portfolio. To stop training and development for a software engineer is a death wish.
3. Provide for a work-life balance. In tough times the corporate mantra is "do more with less." Layoffs coupled with a lack of hiring means that workload and hours increase for the remaining employees. Even in this climate, don't forget to provide them with opportunities for a work-life balance. This is a hard concept for most executives to grasp for two reasons: First, the executives are most likely baby-boomers themselves and have been conditioned and reinforced to believe that hard work produces results. Second, they are more likely to be Type A personalities, so the idea of time off seems a bit uncomfortable. The level of work-life balance your company provides will be key when the economy turns and your employees have more choices again. You should be designing and implementing work-life benefits now (e.g., family benefits programs, wellness programs, convenience benefits, and time off benefits).
4. Develop reward programs that meet your key employees' needs. Baby boomers are in the most critical phase of their work life. Wealth accumulation is key, since they are only 15-20 years away from retiring in their late 50’s and early 60’s. While stock options at one time were perceived as THE retirement vehicle, most people's options are not worth too much today, and may not ever supplement the 401k savings plans. Let's go inside your key employees' thought processes. For years, they did not take any recruiting calls seriously. They loved the work, environment, their boss, and were paid what they thought was fair. In their minds the company had promised long-term cash accumulation with the stock option program. So what will change in the recovery? Everything may generally stay on the asset side for you, but they will likely be much more receptive to the recruiting calls if they perceive that another situation can provide wealth accumulation to meet their retirement and/or work-life balance needs. In fact, companies that want to compete or enter the market may establish cash-based plans to replace or supplement stock option plans. You should be developing cash based plans for your key employees. Instead of giving everyone a fixed percentage match, you should reconsider the match and apply your dollars much more strategically to attract and retain core skills.
5. Form creative employment relationships. There is a growing trend for baby boomers to resist the corporate life and strike up businesses on their own. To attract and retain core skills, companies need to form more creative employment relationships than ever before. Develop new programs that foster entrepreneurship and creative thinking within your own company. Encourage employees to share their ideas and give them the opportunity to build businesses around their idea to benefit the company. For example, companies continue to outsource non-core activities such as recruiting, PR, lead generation, etc. Why not provide for your internal staff or lead person to stay with you, but on a consulting or outsourced basis? This will enable you to receive the non-core services from an employee who has experience and a history with your company while providing the employee with an opportunity to grow a business. This is a very different employment relationship and contract than the traditional employee-employer roles.

Get ready, the rebound and recovery is coming. You need to protect your intellectual assets by planning and implementing now.