OPINION: DURING THE crisis in 2009, we wondered how chief executives were capable of making the right people management decisions when confronted with a major and multi-faceted issue: a financial, economical, demographical, social and, in some cases, ecological crisis, all at the same moment.
The financial and economic crisis drove 83 per cent of companies in continental Europe to downsize and 78 per cent of them introduced a hiring freeze, as is common in downturns. What was surprising was that 59 per cent of leaders still hired talent strategically, even when it meant going against their own hiring freezes. This was the first time in any crisis period that this had happened.
The crisis of 2009 also showed another important change in the decision-making of leaders in Europe. In all other crises, downsizings happened in a linear and mathematical way, following rules such as “anyone with less than two years’ experience has to leave”. In 2009 we found that, suddenly, uncommon and arbitrary decisions were made whereby, for example, companies compared two colleagues of the same age, with the same diploma and same job and decided that, while one of them could stay, the other had to leave the company.
What went on? Leaders began to compare the performance of the employee, his or her engagement, potential, impact and competencies and they had the courage to leave the safety zone of the mathematical rules upon which their downsizing decisions could be based. This crisis showed for the first time on a large scale that a talent management reflex had introduced itself in such decisions.
What is happening now, in 2010? The retention of talent becomes one of the priorities of our chief executives and leaders, globally. This is because a potentially large portion (depending on the region, varying from 30 per cent to 60 per cent) of employees are wondering if they can or should change employer, even if the company is an “employer of choice”. And those likely to leave first will be the people with the most ability and potential – and the best performers.
How come? I am convinced that the best way to explain this phenomenon is to look at it from a psychological angle. Smart leaders had put their most talented and best performing employees in the most vital jobs. In order to minimise the effect of the crisis, employees were asked to work harder, perform better and deliver more in order to help the company survive and to save jobs. It could be compared with sending your best soldiers to Iraq in 2009.
Companies – internationally at least – are now sensing an economic improvement and hoping for a consistent slow recovery. Thus, they are asking the same best “troopers” to push for a faster increase of market share gain, financial profits and performance in general – and this in an environment where downsizings have reduced the number of people considerably.
The army metaphor continues: the best soldiers leave Iraq and are sent straight to the front in Afghanistan. The consequences are the same as in modern warfare: we witness the onset of an economic “battle fatigue”. They need rest, a fresh start, a new beginning, time for closure. As a consequence, they start looking for another employer.
When your other employees see top performers leave, they will start to reflect on their own engagement and future. Some organisations could thus be hit by a sudden exodus. In such circumstances, leaders and thinkers will have little time to find suitable solutions to turn this around.
In the meantime, hidden in the mist of the economic crisis, evolving demographics are set to complicate things further. In France in 2006, for example, more people retired than joined the labour force. Nature does not stop its course during difficult times. As a result, most companies will now, and in 2011, have to face heavier competition in their recruitment processes: the attraction of the brand will become crucial, and it will even need to be reinvented.
The identification and selection of talent will need to become more transparent and fair inside organisations, creating more room for career progression to more people and not just the happy few.
The ideal ratio should be around 80/20, with 80 per cent of internal vacancies being offered to internal people and 20 per cent of new DNA and talent added from outside the organisation. Not many serious companies with strong reputations are close to this point.
Leaders will have to become more inventive in utilising untapped and under-utilised sources of talent inside and outside the organisation. The inclusion of more women in leadership teams, gender balance in general, age diversity (keeping people motivated and engaged beyond the age of 60) and cultural diversity will become crucial in winning the international battle for talent.
Marc Timmerman is a partner with Axiom Consulting Partners Europe and former executive director of talent management Europe at Hudson
