Slashing jobs now may cost firms in long term

ORGANISATIONS SHOULD use the downturn to build their talent bases rather than simply slashing their headcount indiscriminately to make short-term cost savings.

That is the view of Peter Cheese, head of talent and organisation performance for Accenture.

He believes most organisations are not addressing the long-term consequences of their budget-reducing approach.

“Companies will ultimately regret their decisions when things improve and they discover that they have gaps in critical parts of their workforce that they will struggle to fill and will find it more difficult to recruit talented staff,” he says.

Previous post-recession periods have witnessed a frantic scramble to recruit talent as demand improves. But experience suggests that, in many cases, businesses pay over the odds to recruit at that time, having shed talent during the downturn.

The organisations that perform best are those that position themselves for all business cycles, Mr Cheese says. “Research has shown that high-performance businesses consistently outperform their peers across business cycles, industry disruptions and cycles of CEO leadership,” he says.

“One of the key reasons these companies outperform their peers even in the down cycles is that they continually innovate.”

Mr Cheese says companies should be active in the recruitment market right now, seeking out talent that may not have been available in the boom years.

Workforce reductions in other organisations and lowered remuneration expectations present windows of opportunity for companies that can see the longer-term picture, he says. “Freezing recruitment will dry up the supply of talent that’s needed to drive the growth of the business in the years ahead,” he says.

Instead, companies should study the marketplace to map the supply of talent and gain an understanding of how talent pools have reacted to recent changes.

Having a well-defined talent strategy should assume the same importance as managing finance and marketing, he adds.

Another advantage of the current market conditions is that there is an expectation of change and companies should utilise this to restructure their organisations.

Mr Cheese says that, while cost savings may be an imperative, the reorganisation of work processes could achieve these objectives without the need to cut muscle from the business. Shared services models and outsourcing arrangements, for example, could lower operating costs without the need to shed high-performing managers.

Where an organisation is convinced of the case for reducing headcount, it needs to have the right information to determine if the right people can be retained, he adds.

One consequence of the recession is the lack of mobility in the workforce. “There’s been a big drop in voluntary attrition levels, as people are afraid to leave or retire, so right-sizing is more difficult,” says Mr Cheese.

There is a danger that you may have a rump of disengaged mature workers, causing a “presenteeism” problem, and organisations need to have performance management procedures in place to deal with this, he says.

Rather than pushing expensive middle and senior managers out of the organisation through early retirement, he recommends using the capabilities of such senior staff in leadership development programmes to help build the next generation of managers for the organisation.

During a downturn, there is an increased need to keep employees engaged with their jobs and aligned with the company’s objectives so communication is vital.

Managers need to share information with their colleagues, even if they do not have all the answers. Teambuilding activities and company social events, often in the line of fire when budgets are cut, assume greater importance during times of uncertainty and should be preserved at some level if possible, Mr Cheese says.

As well as keeping an eye on overheads, he argues that organisations need to remember to keep an eye on their brand and their reputation as a good place to work if they want to retain and attract talent.