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Many U.S. Firms Lack Long-Term Talent Strategy

Despite the prolonged economic downturn, it seems most companies aren’t giving much thought to protecting their talent if the economy continues to worsen.

August 21, 2008
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Despite the prolonged economic downturn, it seems most companies aren’t giving much thought to protecting their talent if the economy continues to worsen.

One-third of U.S. companies do not have workforce contingency plans in place, according to a recent survey by Watson Wyatt Worldwide. Of those companies that say they have contingency plans in place, more than half say those plans center around layoffs, while an additional 46 percent say their plan is “to restructure their organizations.”

Few companies surveyed seem to be thinking of creative ways to protect key talent should the economy remain in a slump, says Laura Sejen, global director of strategic rewards consulting at Watson Wyatt.

Only 8 percent of companies say they are planning to offer a reduced workweek.

“Maybe some companies are thinking they can’t anticipate what’s going to happen, so they will just address issues as they arise,” Sejen says. “But it’s hard for me to believe that any business could think that they would not be subject to the volatility of the market.”

The Watson Wyatt study findings point to a bigger issue among U.S. companies: Most never do any workforce planning, says Peter Cappelli, director of the Center for Human Resources at the University of Pennsylvania’s Wharton School of Business.

“If they are not planning during bad times, I doubt that they are planning in general about what their workforce needs are going to be in the future,” he says.

As a result, companies constantly will be chasing the problem. When the economy picks up, they are going to be paying a higher premium for talent, experts say.

The lack of workforce planning is going to put many U.S. companies at a disadvantage in competing with their counterparts in Asia and Europe, which for the most part have workforce contingency plans.

Eighty-four percent of employers in Asia-Pacific and 80 percent of employers in Europe have contingency plans, according to the Watson Wyatt study.

Asian employers may be more prepared for a continued market downturn because they have been through the dramatic challenges that U.S. companies have not really faced, Cappelli says.

“If you are in a country like Thailand, you have dealt with currency crises and coups, which have really affected companies,” he says.

Also, because so many employers in India and China are new, they aren’t stuck in the old way of thinking that many U.S. employers can’t shake, he says.

European companies may be more proactive about workforce planning because they are, for the most part, dealing with unions, which are more prevalent in Europe than in the U.S., says Gary Rich, a New York-based leadership consultant.

“Having contingency plans could be part of companies’ agreements with their unions,” he says.

But the fact that so few companies have developed contingency plans for their workforces shows how shortsighted U.S. employers still are, Rich says.

“This is a comment on American companies’ planning processes and the quarter-to-quarter mentality at public companies,” he says.

—Jessica Marquez

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