The reality is, layoffs are just the beginning.
A recession with no end in sight, an aging workforce filled with baby boomers who suddenly can’t afford to retire, Gen Y managers who aren’t equipped to lead in troubled times—it’s a confluence of circumstances the likes of which few HR directors have ever seen.
It’s a situation that a variety of HR industry consultants and analysts are working through with their Fortune 1,000 clients as they grapple with the changes the recession has wrought on their recruiting and talent management strategies.
Many companies are so consumed with layoffs or with just getting by now that layoffs are behind them, they haven’t begun to address the question of what comes next.
“People need to be asking about it, but I’m not sure anybody’s started grappling with it yet,” says Rebecca Schalm, a management psychologist and practice leader at RHR International, the Chicago executive training and consulting firm.
And how can they? With no clear estimate of when the recession could end, many companies don’t know what business strategies they’ll need going forward. And without a plan, there’s no knowing what new workforce needs they will have, says Schalm, who specializes in helping global enterprises retain and train top executives.
In many cases, companies were in such a rush to cut costs that they institute layoffs without considering the good talent they let go along with the bad, says Jason Averbook, CEO at Knowledge Infusion, the Minneapolis HR consulting firm that works with Fortune 1,000 companies such as Dow Jones, Target and Nike. Because they’re in a hiring freeze, they also laid off recruiters and stopped looking for candidates.
“It puts them at a major disadvantage,” Averbook says. “If they don’t have recruiters, they aren’t building the pipelines, they don’t know there’s good talent out there. It’s an amazing opportunity to do talent upgrades, but if HR isn’t thinking that way,” it won’t happen.
It’s an especially good time for second- and third-tier companies to scout for high-level prospects they never would have been able to attract or afford before, says Dale Winston, CEO at Battalia Winston Amrop, a New York City executive search firm. It’s also the perfect opportunity to bring on recruits who fit the times, Winston says.
“There are companies out there convinced that, at the very best, we’ll be facing some serious headwinds in the next 12 to 18 months and the talent that has been in place may not be the talent to weather those headwinds,” she says.
Companies that in recent years purposely promoted younger workers into management positions to appeal to Gen Y recruits are facing a different kind of problem. They’re finding themselves stuck with middle managers who have no experience leading in times of crisis and no clue what to do.
That’s because Gen Y-age managers are more comfortable leading by consensus and empowerment, “and when you’re in a down cycle, you need to be more directive, make decisions with less input from others and make them more quickly,” Schalm says. “That’s not the leadership model they’ve ever used. It’s not a Gen Y behavior.”
Meanwhile, the workforce hasn’t stopped aging. The only change is the baby boomers who HR directors expected to start retiring in big numbers in 2010 and 2011 will be sticking around a while longer. That will give organizations more time to avoid a brain drain and tap into older workers’ accumulated wisdom before they head off to retirement, Schalm says.
It’s too soon to tell whether companies will go back to their former headcounts once the economy rights itself, or if the recession will create lasting changes, though some analysts predict corporations won’t ever reach their pre-recession heft.
One thing that’s already becoming clear: When they do start hiring again, more companies will bypass adding to their full-time payrolls by using more contingent workers. The trend has already started, evidenced by financial results for contingent staffing agencies, which are up, and in longtime payroll specialists such as ADP and Ceridian, which are down, says Averbook.
But a greater dependence on staffing firms could spell trouble for HR, which historically has left hiring contingent workers up to the procurement department. If procurement continues to do that hiring it could create a disconnect, Averbook says.
Since contingent workers don’t go through the same orientations, performance reviews and training as employees, “everything HR does to drive employee engagement is thrown on its head,” he says. “A lot of times these people don’t even have access to a company’s [online] portal, so the messages around what a company is doing to align with customers’ needs aren’t addressed.”
HR leaders should analyze whether their post-layoff employee base fits both their company’s short-term needs and long-term business strategies, according to Schalm.
Don’t focus exclusively on immediate concerns, because “three to four years from now we’ll be back to where we were, with not enough talent, and smart companies” will prepare for that, she says.
Whether a company is operating in crisis mode or rebuilding, managers need to have situational leadership skills. If that’s not the case now, provide managers the training they need to get it.
“Go back to Management Principles 101: Set expectations, monitor people’s progress and stay on top of things,” she says.
Companies should also start or reactivate mentorship programs to pair up less-experienced middle managers with older employees who’ve lived through previous business downturns and can share what they know, Knowledge Infusion’s Averbook says.
Even if they’re in a hiring freeze, companies shouldn’t lay off all their recruiters, he says. Recruiters might not have jobs to fill today, but they can be working on filling the pipeline with prospects for when that day returns.