After the most severe global recession in decades, signs of an economic upturn are finally becoming evident.
The post-recessionary environment will see companies at a crossroads for talent, where critical decisions on managing talent will need to be made. They can implement success strategies that create and develop global talent pools, or they can choose to ignore the warning signs and risk experiencing an erosion of talent that is likely to result in sustained underperformance.
The message from a survey of more than 400 senior global executives conducted by StepStone Solutions in partnership with the Economist Intelligence Unit is that businesses must concentrate on people and on their business talent—and do so urgently.
Companies that are aiming to take advantage of the recovery are looking to people as their greatest asset; consequently, they need to begin rebuilding their talent pool. With almost half (44 percent) of survey respondents expecting a significant improvement in their organization’s business performance in the next 12 months, it seems clear that most companies consider the worst to be over.
This confidence is reflected in hiring expectations, with half of respondents saying their organization would be hiring for new jobs and existing positions in the next 12 months. Lingering uncertainty means that external hiring remains tentative, with more emphasis on building talent from within. Companies are also recognizing that they need to act now to rebuild bridges with existing employees if they are to take advantage of the upturn in the economy.
Following are some key findings:
• Employee trust is an issue, especially in sectors hit by large layoffs: More than half (55 percent) of respondents have had to make redundancies during the past year, and only 32 percent say that levels of trust in their organization are high. The problem is even worse in some sectors—for respondents from the automotive sector, 67 percent say that levels of trust in their organization are quite low. That figure dips to 44 percent in the hard-hit construction and real estate sectors. What’s troubling is that while 38 percent of chief executives, presidents and managing directors see trust as high, 40 percent of line managers reveal that levels of trust are quite low, with just 16 percent saying that their employees are engaged.
• Graduate and entry-level recruitment have dropped significantly: Only 6 percent plan to focus on graduate recruitment, choosing rather to focus talent efforts internally. Fostering talent from within will offer organizations the opportunity to invest further in engaging with their existing employees; however, it also means they could face a potential talent drought in the long term.
• Developing talent internally has become a critical strategy: Performance management, leadership development, and training and development are the top three priorities for most respondents in the next 12 months (cited by 46 percent, 41 percent and 36 percent, respectively, of those surveyed). Buying in external talent is seen as less likely, with only 21 percent citing graduate recruitment as an important investment and just 7 percent pointing to investments in bringing talent in from overseas.
• Managing an age-diverse workforce requires an increasingly customized approach: Almost half of those surveyed (49 percent) say that factors motivating employees vary widely between different age groups, with 50 percent citing career development as being important for younger workers and graduates, while 38 percent cite benefits such as stock options, health care and pensions as being important to employees 50 and older. Meanwhile, most see younger workers as more able to adapt to new roles and embrace new technologies (68 percent and 70 percent, respectively). Older workers are viewed by 80 percent as being better able to work without supervision.
What it means
The economic downturn forced many HR managers to spend more time managing the loss of employees rather than building internal expertise or recruiting fresh external talent. With business confidence levels on the rise, many are now looking at the prospect of hiring staff, even if that is simply to restore or maintain, rather than increase, headcount.
Companies still appear to lack a systematic approach to talent management, with many responding to economic changes with short-term initiatives, whether that means cutting staff in bad times or hiring again in the good. For companies that halted their graduate recruitment programs, it will be harder to re-enter that market once the economy picks up, leaving them facing the risk of a shortage in their supply of potential future talent.
Companies that fail to engage sufficiently with existing employees risk facing an exodus of talent as their best employees simply head for jobs elsewhere. The talent drift, if left unchecked, could have serious long-term implications for the business.
Demographic trends—particularly in countries with an aging workforce—suggest that the future can only hold increasing competition when it comes to recruiting and retaining top talent. Significant age differences among employees will lead to employers increasingly tailoring roles and responsibilities, as well as career paths and flexible benefit packages, in different ways for older and younger workers.
As the labor market tightens, businesses will need to work harder to retain and engage employees toward the end of their careers, getting maximum value from their knowledge and experience and using them to mentor the next generation. With the reality of an increasingly aging workforce, investing in the recruitment and career development of Generation Y will help to stem a shortage of future talent.
Meanwhile, with emerging markets such as Asia Pacific seen as a source of growth for many global companies, labor markets in those regions remain tight—and this trend is likely to increase as the world moves into recovery mode. This all points to a need for companies to take a more long-term view of their workforce planning and talent strategies.
On the positive side, our survey also showed that talent management has risen up the corporate agenda, and many savvy companies are treating talent management as part of their long-term strategic planning. But there is less evidence from our survey of companies taking a consistent approach to their investments in talent, with strategies that survive the bad times as well as the good.
As the global economy continues to recover, businesses are finding themselves at a crossroads with regard to talent management. Companies must be prepared to spend time and budget on employee engagement and career development opportunities to counter the risk of a slow talent drift.
Leading companies will once more look to recruit and retain the best talent—and those able to move first will probably have rich pickings. As businesses move away from purely surviving, and as market conditions improve, there is pressure on organizations to create management strategies that develop strong talent pools at all levels of the business.
Those that choose not to invest in talent will find it difficult to implement recovery strategies.
To access the study, go to www.stepstonesolutions.com/eiu.
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