The president and CEO of business advisory firm PRG-Schultz, and founder of Infosys Consulting, says it’s simple—adopt the strategy today’s leading firms followed during the last downturn. Rather than retrench for survival, invest in growth, especially in the talent that will be the engine of that growth.
"Firms that have the P&L strength and ability to invest into a downturn invariably come out stronger," he says.
The recession is forcing companies of all types to take a hard look at spending and investment. For professional services firms, one of the largest budget items is human capital. The typical response to a slowdown is caution. Hiring plans are put on hold and layoff plans are created.
This is appropriate, Bahl says, but it’s only half of the equation.
"You may need to downsize, but make sure you’re cutting in the right place and for the right reasons. It is equally or more important to reward your top performers, those who will be crucial to your innovation and success going forward."
Russ Hagey, partner and worldwide chief talent officer at Bain & Co., shares the same view.
"Firms that invest in their people will, over time, be rewarded. Being thoughtful about the most talented staff and individuals is an important element," he says.
Hagey says Bain’s response to the previous downturn ran counter to the typical cut-and-survive approach in several ways.
"When other firms were canceling interviews or offers, we maintained our recruiting efforts at business and undergraduate schools," he says. "We kept our commitments to the offers we extended which furthered our reputation on campuses."
The decision to maintain recruiting at planned levels bolstered Bain’s reputation for integrity. It also sent a strong message of growth to prospective and existing employees.
It also ensured that three years later, the firm would have the talent it needed to manage engagements. In addition to keeping recruiting steady, the firm maintained its usual global training schedule, which it sees as an important part of its culture.
Beyond staying on plan with recruiting and training, Bain also used the downturn as a time to take a hard look at its strategic goals. Marcia Blenko, a partner in Bain’s Boston headquarters, says the firm viewed the downturn as an opportunity, not a threat.
"Turbulent times are a business challenge but offer a huge opportunity to gain strategic advantage," she says. Bain decided to invest selectively in areas where it felt a strong presence would be important in the future.
This included developing innovative practices and hiring top talent.
"We used the last downturn as a period to do some partner hiring. We were able to add some very strong partners to our team and fill key geographic and industry-vertical needs," Hagey says.
These commitments to people and the business have paid off. As Bahl notes, firms such as Bain and BCG, which made investments in the last downturn from 2001 to 2003, have practice areas six times the size they were at that time.
"That doesn’t normally happen in a six-year time frame," he says.
Hagey says the investments were a major contributor to Bain’s recent growth.
"Our people investments during this time had a direct impact on our ability to grow at double-digit rates over the last five to six years and to gain share," he says.
While this recession promises to be deeper and longer than the previous down cycle, there are a few reasons that it makes even more sense to invest in people this time around.
First, despite the recession, consulting talent is in high demand, a situation that is unlikely to change in the near future. The aging workforce, growth in emerging markets and tough economic times for companies are increasing the demand for expert consulting advice.
"Clients need us to deliver high-impact outcomes now more than ever," Blenko said. "To do this, we need the absolute best talent—developing the people we have and recruiting from the outside."
Jay Marshall, managing director and head of strategy and business development for performance and turnaround consultancy AlixPartners, agrees.
"The skills of restructuring the balance sheet and working in crisis become more important in a downturn like this," Marshall says. "In our business, we take small senior teams into clients. You can’t go into a crisis or restructuring or performance improvement engagement without people who have been there and done that. So, finding and investing in the right people is paramount to our model."
Second, during more stable times, top talent is not as accessible as it can be in uncertain times. Layoffs result in the availability of good people who would not otherwise be job hunting. And, Marshall warns, market instability makes even a firm’s very top talent look closely at plans and prospects, making them more susceptible to offers from competing firms.
"This is a very important time to be thinking about talent management—identifying your best people, developing them, making sure they feel they have some future," he says. "You have to keep in mind that the best people, even in a downturn, are mobile. They have other opportunities. You can forget that in a cost-cutting mode."
Marshall says the downturn presents a window of opportunity that will diminish as the economy recovers. There will be less talent available once the recovery begins. And, he adds, the market share that is up for grabs will be determined now, not during the inevitable upswing to come.