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Staying the Course Sticking to the Talent Plan at Caterpillar, Coca-Cola and McDonald's

May 18, 2009
Related Topics: Strategic Planning, Workforce Planning, Featured Article, HR & Business Administration
Despite an economy in turmoil, millions of jobs lost and sagging employee confidence nationwide, there’s no reason to panic, say HR executives at some of the largest corporations in the world.

The top people officers of McDonald’s, Coca-Cola and Caterpillar are largely sticking to strategies for talent management developed before the recession got ugly in late 2008.

“Our recruitment strategy is staying exactly as it has been,” says Cynthia McCague, director of human resources at Coke, which employs 92,400 people worldwide. “We’ve been very focused about the capabilities we’re building, and we’re continuing to go after them.”

Workforce Management recently met with McCague and her counterparts at restaurant giant McDonald’s and earth-moving equipment maker Caterpillar at the McDonald’s corporate headquarters in Oak Brook, Illinois. The executives were there for a conference on leadership development. Amid the recession, McDonald’s still prefers grooming leaders internally rather than poaching from competitors, says Rich Floersch, the firm’s chief human resources officer.

McDonald’s, whose restaurants serve more than 58 million people in 118 countries daily, also continues to have faith in employee recognition investments despite recent scandals about outsized perks in the financial world.

“Recognition programs, regardless of this economy, are so powerful in terms of building commitment, engagement and loyalty,” Floersch says. “Boy, it’d be a long time before we’d think about changing any of those.” McCague and Floersch have it easier than many human resources leaders. Their firms are producing profits amid the downturn. Coke, with its pitch of “Simple moments of pleasure … for cents at a time,” and McDonald’s, which can serve as an alternative to more expensive restaurants during tough times, may be more recession-proof than many companies.

But even Caterpillar, which has announced a workforce reduction of 23,000 people including “flexible workers” such as contractors, is sticking to its long-term talent plan, says chief HR officer Sid Banwart. “We know we need to have a good pipeline of engineers in the good years and the bad,” says Banwart, whose company hauled in revenue of $51 billion in 2008.

It’s not exactly business as usual for these leaders. But amid the choppy waters of business today, their message is this: steady as she goes.

Workforce Management: What’s most on your mind when you think about where the economy is going? What’s keeping you up at night?

Banwart: For us the economy has had a significant effect around the globe. Top-line sales are going to be down significantly this year. For us it’s all about conserving cash and conserving talent. And we don’t think those two have to necessarily be mutually exclusive. We want to conserve cash and we want to conserve talent.

Floersch: We know people are being affected by the economy, in term of people they know—friends of theirs or relatives. So how do we make sure that we continue communicating with them about the strength of the business? How do we make sure that we keep the high levels of the engagement and commitment that we’ve been enjoying?

McCague: We had the same concern about our people who are hearing about friends and family. We were actually in the U.S. going to ramp up our credit counseling and EAP services so they and their families have more access. WM: Are you taking different steps in the way you’re either recruiting or retaining people in this recession?

    Banwart: We are continuing to use the same approaches we’ve always used to develop a pipeline and develop leaders at Caterpillar. While the downturn is affecting our top line fairly seriously, we’re still going to spend $1.5 billion on research and development this year. So we know that we have to have a good pipeline of engineers in the good years and the bad. And we’re absolutely committed to keeping that going.

    WM: How is McDonald’s changing talent management?

Floersch: Not a lot. We’ve been putting in place a lot of strong programs at the store level and for our staff employees that we continually monitor. We have commitment survey scores all the way down to the store level for all of our 32,000 restaurants, whether it’s company-owned or franchisee. We are seeing more applications coming in for our jobs. I’m getting a lot more personal e-mails from people I know for salaried staff. It’s three, four times the amount I was getting before. They’d like to be considered for a job at McDonald’s. It could be a LinkedIn connection. It could be a friend of a friend. But we are seeing increases in the number of people that are applying for jobs at the store level as well. We’re operating in a very strong business cycle right now. People have seen that, and they know they’re going to get some of the best training and development at McDonald’s. I think they’re interested in that.

McCague: Our CEO has a phrase that we’ve borrowed from the [Obama] administration: We believe that we can’t waste this crisis. If we do the right things in every market around the world, we’re going to come out with stronger market share and a healthier business at the end of this cycle. Our recruitment strategy is staying exactly as it has been. We’ve been very focused about the capabilities we’re building, and we’re continuing to go after them. One thing that I think is interesting is our best people are hearing from headhunters every single day. It implies to me that a number of people are continuing to see great talent as being a target even during the downturn.

Floersch: We’re seeing our voluntary turnover numbers come down a bit, both at the store level as well as the staff level. I wouldn’t give you any numbers, but I can tell you the trend has been down.

WM: I imagine that’s a function of people wanting to have a more secure financial situation.

Floersch: I have to believe that that’s factoring into it, if you’re with an organization that’s doing well.

WM: Are you doing anything differently to increase the level of engagement?

Floersch: It’s a continuation of a principle around creating a compelling employment value proposition for your employees—figuring out what it is that they value most. And then, particularly at the store level, making sure that the work environment is very strong around respect. In retailing, the level of respect that they feel—either within the team, with their manager or with the customers—is a very important dynamic around how well they feel about working at that restaurant.

McCague: A theme I’m hearing from all three of us is: Keep doing the things that you know work for your organization, but do more of them, do them deeper, make sure they’re more sustainable during this kind of period.

WM: How about your voluntary turnover?

McCague: It depends so much country by country. I’m seeing a trending-down in the U.S. of voluntary turnover. I’m seeing a tremendous number of employees who are glad to be a part of an organization that continues to grow and be successful. WM: How about voluntary turnover at Caterpillar? That’s often a challenge after a downsizing—to engage the people that survived.

Banwart: We talk about honoring the heroes that left—either voluntarily or involuntarily—and engaging the warriors that remain. This is all about engaging the people who are going to carry the company forward from the depth of the recession to the growth that we know will come. Our voluntary turnover has actually shrunk almost to zero. People are hanging on to the jobs they’ve got.

WM: What are you doing about poaching? People say this is a time to go after your competitors’ best people.

Floersch: We’re heavily involved with internal development. That’s our strong bias—particularly on the line side, when we have people running either regions or divisions or markets. It’s so important to have people that have come up through the system. WM: So really you’re not going out thinking which Burger King or Taco Bell folks would be good?

Floersch: If we indicate where we have a need and we don’t have an internal candidate that is strong enough to be equal to or better than the incumbent—particularly on the staff side—we will take a look on the outside. But there’s no concerted effort right now to be able to say that we’re going to go around and start poaching.

WM: Do you see a willingness to make shared sacrifices in the workforce today? Are you doing anything to tap such an all-for-one, one-for-all spirit?

Banwart: We announced on December 22 that our officers would be taking pay cuts of up to 50 percent—this is in total compensation—senior managers up to 35 percent and staff up to 15 percent. That’s been driven by changes to the short-term incentive plan, and the equity plan. I’ve been getting calls from all over the country saying, “What did you do? Why did you do it? How did you do it?” It’s very simple. We just said we think it’s important to set the tone at the top.

Floersch: Some of the better companies are positioning themselves that way, by having the top of the house lead. We decided to take a lower salary budget. We’re not certainly in the Caterpillar situation, but we did say we’re going to take a lower salary budget for our executives versus our staff employees and our field employees.

WM: Are we talking about a smaller increase to salaries?

    Floersch: A smaller increase. Our budget was still “plus”—we didn’t freeze any salaries. But the budget for the staff employees and field employees was significantly higher. So they had a greater range.

McCague: We actually announced in December that executives over a certain level—pretty much director level and above—won’t have any merit increase for this year, and that we’re delaying everybody else in the world by three months. It was very clearly communicated that this was to make sure that we stay strong and healthy through this period of time when we’re committed to capturing as much growth as possible.

WM: Should recognition programs go out the door because we’re trying to look like we’re all battening down the hatches?

McCague: We’ve been very purposeful about staying the course on our recognition programs. We did a program all over the world prior to the last Olympics where various people could be nominated for living the values of the company. There were two to four representatives from every geography that went and worked the Olympics—had the chance to be there. The CEO met with them and spent time with them. We’re in the middle right now of looking at the World Cup, and something pretty similar, with a focus this time on productivity. And a chance for lots of people to experience the magic of being part of these great events that some of us sponsor. So we think it’s important to keep going on those things. You probably are careful about exactly how many you do, and what you spend, and that you’re getting the most bang for the buck when you do it.

Floersch: More of the noise has been at the executive level with these things. So any of our meetings now, we’ve made the decision that they’re all going to be in the Chicagoland area. So that’s important right there in terms of a message. But recognition programs are so powerful. We are about ready to bring in our top-performing 1 percent employees from around the world to Chicago to celebrate them for a weekend. And the whole senior management team will be there. It’s called our President’s Award. This is purposefully where it’s below the executive level. We don’t have executives eligible for this program. Recognition programs, regardless of this economy, are so powerful in terms of building commitment, engagement and loyalty. Boy, it’d be a long time before we’d think about changing any of those.

WM: What about you, Sid, in terms of recognition programs?

Banwart: We’re not a consumer products company. Our recognitions have always been internal and local. But like my colleagues, we believe very strongly that recognition is something that must continue. And it’s especially important at the local level in real time for something that is important to that team at that point in time. It may be breakfast in the cafeteria with the boss. Or it might be a service pin to recognize longevity—by the way, those aren’t cheap anymore with the price of gold. The point is, recognition is not something you turn on and off because of the economic situation. It’s probably especially important in tough times.

Workforce Management, May 18, 2009, p. 1, 18-22 -- Subscribe Now!

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