Five Reasons to Focus on Recruiting in 2009

Posted on December 30, 2008. Filed under: Sourcing and Recruiting, Talent Strategy, Workforce Planning | Tags: , , , , , , |

Here we are entering the worst recession in more than 30 years, reading about layoffs, downsizing, and restructuring in almost every industry.   So why would I start our 2009 research with a discussion about the need to focus on recruiting?   Well, contrary to what many may believe, even in times of job reductions recruiting must take a top priority.  Let me give you five good reasons:I Want You

1.   Even in times of an economic slowdown, many organizations still suffer from severe skills and leadership shortages.  Our Fall 2008 TalentWatch® research shows that 36% of organizations have severe shortages in line managers;   17% cite major shortages in technical roles, and industries like healthcare, government, and professional services still have shortages in many line positions.   While the pool of job candidates is much greater now, organizations must still focus on identifying and selecting the best candidates and this must be accomplished with fewer dollars for recruiters, headhunters, and job placement advertisements.

Bottom line:   recruiting teams must continue to seek out top candidates, despite reduction in budgets.

2.  Job seekers become more desperate, making the recruiter’s job more difficult.   In today’s economic climate, job-seekers will aggressively seek out positions — meaning that you will receive more applicants and a much higher job acceptance rate than normal.   Managers must carefully decide if today’s passionate candidate really believes your organization is the perfect fit or if he or she is just desperate to find a position.   And in some cases the pool of highly qualified candidates may have shrunk:   in tough economic times top candidates may want to avoid a risky relocation, making it hard to attract a highly qualified candidate from another geography.

Bottom line: recruiters must slow down and screen candidates more carefully than ever.

3.  Downsizing initiatives may cause an increase in turnover and reduction in engagement.   Many studies show (and common sense bears this out) that organizations which go through severe or sudden downsizing then get a “double whammy” — an increase in voluntary turnover and a reduction in engagement.   I distinctly remember going through sudden layoffs at two of the high-tech companies I worked for.   In both cases the good people immediately started looking around for jobs, knowing full well that they could be the next ones to go.  And those who may not have as many opportunities start to lay low and hide, hoping to avoid the next round of cuts.  The employees who survive a layoff often feel like “survivors” – and often feel less committed to the company and its turnaround efforts.  This is why so many companies go through multiple rounds of layoffs:  the first cut seems deep, but problems get worse if the process is not handled carefully.

Bottom line:   any downsizing effort requies a heavy dose of communication, vision, and strategy to bring people together.   Read our brand new research, A Manager’s Guide to Successful Downsizing, for more tips and examples.

4.   A strong recruiting program brings new ideas and excitement into an organization.   The toughest challenge to deal with during a downturn is the need to create a strong sense of commitment and focus to rebuilding the business.  We ask people to take on new roles, work longer hours, and often lead change programs which are new and challenging.  We want our people to be committed to restructuring and growth.  One of the greatest ways to build such a spirit is to see key new people entering the organization in critical roles.  Not only does it give people a sense of excitement, but it brings new ideas and creativity into the organization.

Bottom line:  do not be afraid to bring new pe0ple into the organization during a restructuring — the right people can create the urgency and change needed to succeed.

5.  Remember that recruiters must continuously recruit existing people into new roles.   When a company restructures, downsizes, or goes through a reorganization there is a tremendous need to “recruit” people into new roles.   I distinctly remember the terrible feeling I had when I had to “take over” a role from a sales group which had been downsized at one of my prior employers.   Rather than being “recruited” into the position, I was “assigned” the job.  It took me many months to get excited about the opportunity and build a network of people to support the reduced function.  In retrospect, if someone had professionally “recruited” me into the role I would have been far better prepared and excited about the new opportunity.

Bottom line:  stay focused on your internal recruiting and job migration efforts, as these changes will be as important as ever.

Sourcing, recruiting, onboarding, and employee lifecycle management are vital parts of high impact talent management.   Stay focused on this important part of your organization and you will be well prepared for growth when your business cycle turns – which may be sooner than you think.

PS, as part of our continuing efforts to provide you with world-class, highly actionable research and advisory services I am very excited to introduce Madeline Tarquinio Laurano, our new Principal Analyst focused on sourcing, recruiting, and workforce planning.  Madeline comes to us most recently from ERE, where she was the primary recruiting analyst among their 80,000+ readers, and research experience at Linkage Group and Aberdeen where she studied leadership development, succession management, and onboarding.   We welcome Madeline to our research team — and her new blog “All Aboard” will focus exclusively on the important and rapidly changing areas of sourcing, recruiting, job boards, and the use of social networking in talent acquisition.

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Life or Death: Building a Corporate Learning Culture

Posted on December 3, 2008. Filed under: Enterprise Learning, Talent Strategy | Tags: , , , , |

Witness the number of companies undergoing a wrenching transformation (read “potential death”) in today’s economy: the US Auto industry (GM, Ford, Chrysler) , the US Newspaper industry (LA Times, NY Times), and many elements of the financial services industry.

A recent global survey of 1100 business leaders by Boston Consulting Group found that one of the top three things keeping CEOs awake at night was their ability to “build a learning organization.”   Our research shows clearly that organizations can be broadly grouped into two types: those that “learn” and those that “don’t.” Those that “learn” have an uncanny ability to evolve: they are what we call “enduring” companies, and they find ways to continuously change their products and services as markets change.

Examples of companies that “learn” include UPS – which started as a horse and buggy delivery company and is now a global logistics company operating in every mode of transportation.   Another is Caterpillar, a company which has evolved its products from steam-driven tractors to a broad array of building equipment and services around the world.

Our High Impact Learning Organization® research demonstrates that companies which have a “learning culture” have much greater financial returns over a 10-20 year period – in fact the HILO 80, the 80 top companies in our 780 company research group, deliver more than 10% greater earnings growth and over 15% revenue growth over a 10 year period than the average in their industry.

Building a Learning Organization is a Matter of Life or Death

Today, with the economy clearly at a low point, an organization’s ability to learn is a matter of life or death.

So what is a “learning culture” and how do you build one?  Well there When we look at companies which endure and prosper over long periods of time, we see that they have an uncanny ability to innovate, reinvent themselves, and adapt to change.   Our research and upcoming Learning Culture assessment discovered that there are nine independent pillars which drive an adaptable learning organization:

  1. Executive Culture.  Do line executives truly support and reinforce the business processes and investments needed to support innovation and learning?  Do they take a personal interest in employee and leadership development?  Do they regularly move business leaders throughout the company to gain new perspectives?  Do they maintain funding for learning and innovation initiatives?  Do they drive and manage change?  Do they take risks and encourage and support new products?
  2. Managerial Culture.   Are line managers incented, coached, and directed to build capabilities in their teams?  Are they paid to develop people and innovate?  Are they empowered and motivated to be coaches and not just managers?  Are their a variety of support and development programs for managers to provide feedback and development for their people?  Are they rewarded for experimentation and innovation?  Are they open to “bad news?”
  3. Customer Culture.  How close are product, service, and support teams to customer needs?  Are there vigorous and regular processes for customer input?  Do customers have many ways to interact with the company and provide input?  Is customer input considered sacred and valuable?  Are customer facing roles given high priority and respect in the organization?  Is there a free-flowing set of customer needs available to everyone who creates or produces a product or service?
  4. Operational Culture and Process.  How are line organizations incented and organized?  Are employees provided with the opportunity to change processes and products when necessary?  Are their programs and systems to monitor and improve quality and customer service?  Are customers intimately involved in process and product development?  Are their processes in place to learn from mistakes or does the team “shoot the messenger?”  
  5. HR, L&D, and Leadership Development.  Does the HR and L&D organization have the funding, mandate, and executive support to build organizational and leadership development programs?  Do they support knowledge sharing programs?  What stage of maturity is the company’s leadership development program?  Are their regular opinion surveys and other forms of feedback from employees and customers which drive organizational change?  Is innovation rewarded and incented?
  6. Financial Support.  How is employee development, knowledge management, innovation, and training funded?  Does each business unit or operational unit have to find money in their own budget to accomplish such tasks?  Is there budget for skunk works or new ideas?  Is there a corporate funded group which promotes innovative development teams and programs?  Are such programs monitored and supported year after year or do they get cut during bad times?  Does the organization benchmark its spending against its peers?
  7. Career Planning and Employee Mobility.  Does the company have a plan, model, or process for career planning?  Is it easy or possible for someone to change roles or move into a new position regularly?  When a reorganization takes place, is there a way for people to move from team to team without penalty?  Are job rotation and developmental assignments regularly offered?  How well do managers understand and participate in the career planning process?
  8. Employee Development and Alignment.  How are employees developed and measured?  Do they have an incentive to build new skills, learn new things, and get involved in new projects?  Is development considered a valuable part of an employee’s career?  Is there a widespread goal development process and how does it accomodate the time needed to build new processes and systems?
  9. Technology Investment.  Is there an ongoing investment in technology infrastructure to support learning, knowledge sharing, employee connectivity, social networking, e-learning, content management, and other tools.


These nine pillars are not easy to build.  In fact, they often take years to build – but we find that high performing, enduring companies do each of these things well.  In the coming months we will be introducing a new set of research and assessment tools to help organizations understand their ability to “learn.”  

While many of these things seem “soft” – in fact they are “hard.”  They demand a focus from business leaders, HR, IT, and line management.  They touch the way a company is managed and the way the company works.  Does this matter today, in the middle of a recession?  You bet it does:  if your company wants to survive during a slowdown, you must be able to adapt quickly and effectively.

Watch for more on this topic in coming months – and a major launch of our research in this area at IMPACT 2009®.

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Where is the “Talent Management” Market going?

Posted on November 9, 2008. Filed under: Enterprise Learning, HR Systems, Talent Management | Tags: , , , , , , , |

As the US economy lost 240,000 jobs last month and the unemployment rate rises to 6.5%, one of the questions I know many people ask is the direction of the “talent management” marketplace.  Let me give you our thoughts on the trends taking place.

First, the urgency of “talent management” in corporate HR organizations has not slowed.  In fact, nearly every organization we talk with is moving ahead with their new talent management strategies, which includes redesign of performance management, further integration of their HR organization, assignment of a Vice-President or other senior HR leader responsible for “talent management,” and the desire to implement talent management software.

Second, we also are finding that most companies are also reducing the size of their HR and L&D organizations (the US L&D market in 2008 has shrunk significantly, and we will be publishing this data in the next few weeks).  We are now working with many organizations to restructure their training departments to create more centralized organizations in the interest of reducing costs, and we see a dramatic dropoff in the development of new L&D initiatives which are not directly related to talent management.

Third, organizations are cutting back on travel and other development-related expenditures and now investing more in lower cost, collaborative learning infrastructure.  One Fortune 100 company we are working with has decided that instead of replacing their learning managment system they are going to implement new collaborative, Learning 2.0 strategies using low cost social networking software to enhance their sales and service training and create more employee engagement.  The LMS “upgrade” looked like a $5 Million project, so it is going on hold.

Fourth, the talent management systems market continues to grow, but at a slightly slowing rate.  In fact, if we look at the Q3 2008 revenues of four publically traded companies, SuccessFactors, Taleo, SumTotal, and Saba, we see positive but slowing revenue growth in every single company.  Revenue growth rates at these four companies are 77%, 39%, 12%, and -1% respectively.  Unfortunately, each of these public companies continues to lose money and all have seen their market caps drop (along with the entire market).  But the market is still healthy:  for example we know that private companies are also growing – Plateau, GeoLearning, and each grew by over 25% in the last year.

Fifth, if you look at the talent management software market, which we see as a tremendously important part of corporate HR and talent management going forward, it is beginning to become a bit crowded.  While we still see explosive growth into many years in the future, our latest research now shows that most buyers see similar features from many software providers.  As a result the “price to enter” the market is higher, and software vendors have to invest more and more in sales and marketing to maintain their revenue growth.  SuccessFactors, the fastest growing of all, continues to invest an amazing 61% of its revenue in sales and marketing, which is unsustainable for any company over a long period of time.   We firmly believe that the talent management software market, just like the LMS market, will segment itself into leaders in different segments (global enterprise, enterprise, mid-market, and eventually small business) – and both Oracle and SAP will continue to grow.

Bottom line:  Today’s economic environment has caused new stresses for the HR and L&D organization and will definitely slow the market for talent management software.  But is the party over?  Not at all.  Organizations of all sizes continue to push ahead with their new talent management, social networking, capability modelling, and collaborative learning strategies — they key is to maintain the focus on these programs in a highly efficient way.

New research on these topics:

The Essential Guide to Performance Management Systems and the Market

Enterprise Social Software 2009:  Facts, Analysis, Trends, and Vendor Profiles

The Talent Management Factbook

The Corporate Learning Factbook

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Talent Management in a Slowdown – Update

Posted on June 22, 2008. Filed under: Enterprise Learning, HR Systems, Organization & Governance, Talent Management | Tags: , , , , , , , |

In the last few months we have read more and more about the global economic slowdown.  Jim Cramer, the Wall Street pundit, wrote in today’s New York Magazine, that he has never seen things as dismal as they are on Wall Street.  Today the State of California announced a 5.7% unemployment rate, an increase of almost 12% over last month.  And I have noticed a fairly steady increase in HR and L&D leaders now looking around for work.

How is this affecting our HR and L&D organizations?  Our most recent Business of Talent® survey shows a similar impact on corporate HR and training.  Today 45% of HR and L&D executives cite “reductions in cost” as their top priority for the coming quarter, an increase of almost 30% over the last three months. 

In our just-released High Impact Learning Organization® research, we see similar trends.  Today’s L&D managers and executives cite “reducing the cost of training” as their #2 challenge, after business alignment.  And for the first time ever, people cited “building a business plan for learning” as their #3 challenge – illustrating the need to further take L&D investments and make them business-relevant and operationally excellent.

But in the midst of such news, we see many many good things coming.  As I mentioned in our earlier post on the economic downturn, “only when the tide goes out can you tell who is swimming naked.”  Now is the time for HR and L&D to become more relevant than ever.  In fact, one could argue that business slowdowns are good for talent organizations – they force us to become laser focused on what really matters now.

Witness some critically important things going on:

  • Organizations are focusing very heavily on building critical capability models for success.  Such models are mandatory to determine who to hire, who to develop, and who to lay off.  Organizations such as British Telecom, Microsoft, Chevron, GSK, Mercer, and Pemex are all spending significant new dollars to identify their critical competencies.  Such work is strategic and long-lasting.
  • Organizations are looking more carefully at HR systems investments.  We now see RFPs from companies which look far more carefully at the business strategies behind talent management, rather than projects to “automate” processes which may or may not be adding value.  One of the world’s leading consumer packaged goods organization recently asked us to help them rebuild their business case for talent management systems after spending six months gathering requirements.  Such an effort is good – it creates focus and business alignment in HR systems investments.  Nothing is worse than buying HR software to find that noone wants to use it.
  • Informal learning is exploding.  We are just about to publish a major research report on the use of social networking in corporate L&D.  Organizations now realize, often driven by cost reductions, that the corporate L&D organization can not possibly build all the content the company needs.  They are starting to invest in social networking and communities of practice as a mainstream solution.  In fact, in our High Impact Learning Organization Top 18 findings, we found that informal learning and content sharing are now more important to success than the traditional disciplines of performance consulting.
  • Centralization is coming back.  Almost all the clients we talk with now are looking for ways to reign in spending on L&D and other HR initiatives throughout the company.  Such efforts may look like cost savings from the outside, but inside they are driven by the intense need to coordinate L&D and HR efforts to build an integrated talent management process.  Caterpillar, Aetna, Rogers Communications, Wellpoint, and other clients are all focusing heavily in this “strongly centralized federated approach.”

We are preparing a series of reports on the economic trends driving HR, so stay tuned.  Even if the economy does continue to slow down, I hope you believe, as I do, that such a slowdown will not last beyond early to mid 2009.  My experience talking with hundreds of organizations shows me that even in times of great dislocation, our economy is filled with entrepreneurial and creative spirit to build new businesses in the face of change.  And change is something we must deal with in good times and bad.

More to come…  your comments welcome as always.


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Talent Management in Financial Services – Impact of the Slowdown

Posted on April 1, 2008. Filed under: Content Development, Enterprise Learning, HR Systems, Learning 2.0, Succession Planning, Talent Management | Tags: , , , , |

This week I had a call with five financial services clients to understand the impact of the economic slowdown on their learning, talent, and systems investments.  How are HR, talent strategies, and enterprise learning investments being affected by the credit crunch and slowdown in the US financial system? 

(The clients included companies in banking and insurance: TD Bank Financial Group, First Horizon National Corporation, BNY Mellon Asset Management, Manulife Financial, and Wachovia.)

I was encouraged to hear that none of these financial institutions is dramatically cutting its talent investments.  In fact, each of these executives told me that their top executives continue to understand the need to maintain investments in people as the business slows.  Most of these companies are, however,  reducing expenses, including a freeze on travel and cutting back on large meetings and conferences.  Some systems budgets are being pushed back.  But for all these companies, existing staff and program investments are continuing.

A common theme expressed by the group is that these cycles have happened before, and that in every case where strategic talent investments were cut, the impact was dramatically negative.  One executive mentioned that during the last slowdown, his company completely eliminated its leadership development program.  As a result of this decision, management problems, employee dissatisfaction, and retention problems quickly grew.  Today, four years later, the organization continues to rebuild the program.  His comment:  “We learned our lesson, and we will never do that again.”

Another trend to note is that technology investments continue.  In fact, every one of these companies told us that they are working harder than ever to advance and improve the impact of their existing HR and learning technologies.  Several of these organizations have large task forces in place (which include IT, HR, L&D, security, and compliance) to develop integrated strategies for online learning and workforce performance support.  (This is completely consistent with our latest research on e-learning, and will be a major topic for our IMPACT 2008:  The Business of Talent® Research Conference.) 

Bottom line:  Well run companies understand that business cycles are inevitable.  (The financial services industry, which suffers economic downturns as hard as any industry, is one of the most sophisticated industries in talent management.)  They have learned that talent and learning investments take years to develop, and these processes and systems create long term sustaining value. 

As one Senior VP of HR put it, “your job is to prevent problems before they occur” — implying that talent and learning programs must be built for the long term.  Even when business slows, the business must still hire, promote, and reward high performers.  These successful financial services firms are following this strategy.

For more information on this topic, please read  Five Talent Management Strategies for a Business Downturn, published in February.

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Five Talent Management Strategies for a Business Downturn

Posted on February 9, 2008. Filed under: Enterprise Learning, Leadership Development, Performance Management, Talent Management | Tags: , , , , , , , , , |

We are clearly entering some form of economic slowdown.  Our most recent index of talent management executives (January of 2008) showed some significant changes from May of 2007:  21% greater interest in cost-reduction, 18% lower focus on product introductions, and a significant increase in focus on building new leadership (18% increase).  So let’s assume your business does see a downturn (and if you are in financial services or housing-related industries, this is already happening), what should you do?

First, a little history.  I lived through severe downturns in several companies.  I worked for IBM in the 1980s (1981-1992) and saw the company start to disintigrate as the computer business shifted from one of monolithic providers (IBM) to one of seperate product and software companies (Dell, Compaq, Microsoft, Cisco).  The company had become far too complacent with its “deserved market share” and watched its businesses rapidly decline.  For almost three years the company issued multiple early retirement programs, restructurings, sold off businesses, and lost many of its best and brightest.  Luckily Lou Gerstner arrived in time to remind IBM that the company had strong core values in its customer service, innovation, and employee focus.  In the subsequent years the company shed its money-losing technology businesses and emerged stronger.

I also worked for Sybase, one of the fastest growing companies in Silicon Valley.  Sybase rocketed to almost $700M in revenues during my tenure, and became a magnet for many of the smartest, brightest minds in technology.  One day Sybase woke up and realized that Microsoft and Oracle had “figured out” client/server computing (Microsoft had the benefit of actually licensing Sybase technology), and in a few quarters this fast-growing company ground to a halt.  Sybase had beem through a torrid pace of acquisitions (one company a quarter for almost four years) and had done little to build the talent culture it needed to weather the downturn.  When the tornado hit, there were tremendous layoffs (several waves of them), and the company whittled itself down to a core — losing many of the innovators who built the company.  As the new management team entered they focused on one thing:  making a profit.  To do this the new Sybase leadership team continued to cut products, reduce sales commissions, and lose people.  Eventually the company did become profitable, and only then could they start to implement a growth strategy to re-emerge.

A third company I lived through was DigitalThink.  This company was also a high-flyer.  When I entered the company it was a 300 person fast-growing developer of e-learning solutions.  It felt like Sybase and IBM in the early days:  the best and brightest were all there.  The leadership team had big goals and the company was run like a huge rugby team:  everyone took to the field, banged into each other, and marched down the field.  Many of us had conflicting opinions about what strategy to pursue, but we had a big market ahead of us so we all focused on the areas we felt were most important.  But the company had little or no real talent management program.  When DigitalThink hit the wall, the company woke up one day and found itself in shock.  Again, layoffs occurred, and again in painful stages.  And the strategy which seemed so brilliant only a few months ago was in question.  Today DigitalThink is gone, having been acquired by Convergys.

As I have studied many companies and talent management strategies over the years, I have learned many lessons.  As we enter a rough spot in the economy, let me try to share a few of them here.

 1.  Downturns should be expected, so plan for them.  Do not be surprised or panic.

The first lesson is simple:  prepare now for a downturn.  What would you do if you lost 20% of your revenue next quarter?  What programs, organizations, and people would you cut?  What program would you maintain?  Would it challenge your business strategy?  Or would you see it as an inevitable cycle?  Where would you cut and where would you invest?  Think about this now.

Every business and every market is dynamic.  You must constantly expect challenges:  new competitors, product cycles, buyer changes, and economic downturns.  Plan now.  And when the downturn occurs, pull out the plan and implement it.

One of the funniest quotes I ever read was this:  “Only when the tide goes out do you know who has been swimming without a bathing suit.”  (Warren Buffet I believe.)  Dont swim naked.  You should constantly investigate the weaknesses in your business and find the areas of long-term strength.  Invest in them during good times and bad (Merck invested heavily in R&D during its recent downturn, HP invested heavily in its imaging technology during its hard times, and IBM never stopped its R&D labs throughout its tough times) — these are your “bathing suit” – you’ll need them when the waters thin.

When a down turn occurs, rather than cutting across the board, focus on building your strengths and cutting your weak areas.  Invest in your strengths during a downturn, and cut the areas which were already weak, failing, or were perhaps propped up by the “good times.”

2.  Maintain and invest in your talent programs.  A downturn will remind you that “talent is all you have.” 

We have studied hundreds of companies and constantly look at the maturity of their talent management strategies.  Again and again I comment to people that the most well-developed talent management strategies happen to reside in companies that endured terrible economic or business cycles.  These organizations have been forced to search their souls, and what they found (if they survived), was that “talent is all we have.”

Consider the rapid product cycles in almost every industry.  Your organization’s success is totally dependent on your workforce’s ability to innovate, reinvent itself, provide excellent customer service, and remain loyal and dedicated when tough times come.  You cannot build this culture during a crisis.  You must build it before the crisis, and use it to weather the storm.  IBM had an enduring culture far before its downturn hit.  Sybase and DigitalThink did not. 

This means several things:  do not sacrifice your values, principles, and people.  If you do need to lay people off, do it surgically – focusing on the people, projects, and organizations which most need change.  Across-the-board layoffs will dramatically impact your employee loyalty and engagement.  And the process of downsizing can be humane.  I’ve lived through two unhumane examples and one humane example.  When and if layoffs do occur, you do not want the “survivors” to worry.  It must be done in a positive way.

And do not forget to reward your high performers.  Even during a downturn you will find many people performing a high levels of performance.  In fact you are likely to find that many people “rise to the occasion” and perform at greater levels during stress.  Operations managers cut costs and improve productivity.  Sales teams find new approaches to solving customer problems.  Internal personnel find waste and manage internal projects aggressively.  You should recognize and reward these people.  Give bonuses and rewards.  Recognize tremendous achievement.  Such an approach will build an enduring culture, one which will help you survive a downturn and grow when the good times come back.

3.  Continue to search for great talent.  Consider this an opportunity.

If we do have a real broad downturn, the job market will soften.  This means that many of the best engineers, sales people, marketing people, managers, and executives will be looking around.  Rather than “freezing all hiring,” you should use this as an opportunity to upgrade your own organization.  During the last economic downturn in my career (2000-2001), many of my most talented friends were looking for work.  These were people who were “proven winners.”  Keep looking for these people and hire them wherever you can.  Consider it an opportunity to “upgrade” your workforce.

4.  Communicate honestly and clearly.

One of the most powerful things that happens during a crisis is that people pull together.  They talk to each other a lot.  They look for leadership.  They want to know what is happening.  And if you are not communicating clearly and realistically, they will worry.  This is your organization to clearly explain your “rainy day plan” – where you are going to invest – and how you plan to bring the company out of the problems it is in.

I have found that people are actually very loyal to their organization.  If you clearly state the truth, and provide a clear, well-developed plan for survival and growth, most people will get on board.  If people have been well managed in the past, they will rally to the cause. 

This is when leadership is tested.  Can you leaders clearly communicate a plan?  Can they convince people to come together in the interest of the organization?  Do they really understand what and where to cut, and where to invest?  This is when your leadership development programs, culture, and core principles will really be important.

When IBM went through its dark days, I do remember that the company continued to invest in its people.  Even though the company lost money, it did not eliminate its employee development programs or its R&D labs.  The company’s strong culture of customer service remained.  It took a new strategy to turn the company around, but once this strategy was clear, Lou Gerstner communicated it vigorously and clearly.

5.  Turn outward, not inward.

Avoid spending time standing around the water cooler.  When a downturn occurs there is a natural tendency to spend a lot of time and energy on internal efficiencies.  While this must be done, you should make sure you spend even more time focusing on customers.  Now is the time to remind youself what business you are in.   What products and services are doing well?  Which are not?  How has the economy affected your customers?  What are their new needs?

When we saw a downturn at DigitalThink, we rapidly shifted our product mix from “growth-enabling” solutions to “efficiency-producing” solutions.   If you stay close to your customers they will tell you what to do.

In my personal experience this is often the hardest rule of all.  When a company starts to lose money or market share there is an immediate reaction to “fix things.”  While this must take place, it should also be an opportunity to “see new opportunities” and move into new markets.  And if a broad economic downturn is affecting your customers, it is important to see this quickly, so you can adapt your business to go in different directions.

During the 1980s Intel, one of the most successful high technology companies in the world, went through a major upheaval.  The company suffered major losses through its investments in the memory business and the delay of a major new product.  It was a tough time, and several of my friends worked there.  The company implemented what they called the “10% solution.”  Every employee took a 10% pay cut and was asked to work 10% harder.  The company buckled down and reinvested in its core.  It spent even more time with customers.  And it identified new strategies, eventually creating the Intel Pentium, one of the most successful products in the company’s history.

Five simple lessons: 

  1. Plan ahead.  Don’t swim naked.  Cut strategically.
  2. Continue to invest in talent.  Reward high perfomers.  Keep the culture in tact.
  3. Look for great hires.  Dont freeze all headcount.
  4. Communicate clearly and honestly.
  5. Turn outward.

Living through a business downturn is not always fun, but it can be a tremendous opportunity.  Consider this an opportunity focus on your core, strengthen your talent programs, identify weaknesses, and reinvent your company.  As HR or business leaders, you can use these proven approaches to help your organization thrive if times get tough.


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An Economic Slowdown – What does it mean to HR?

Posted on January 5, 2008. Filed under: Enterprise Learning, Talent Management | Tags: , , , , , , , , |

As we look ahead to 2008, many pundits are trying to predict the direction of the US and world economy.  Today we see that the US unemployment rate ticked up to 5% and the job creation rate (18,000 for December) was at its lowest level in four years.  The unemployment rate is affected by many factors, but the job creation rate clearly shows one thing:  a business slowdown.

The industries most hit, of course, are construction, financial services, and related building-related goods and services.  If you are in these industries, you are likely seeing the impact of the slowdown now.  As we review our research agenda for 2008, let me discuss a few thoughts about how enterprise learning and talent management will likely be affected by an economic downturn:

  • Programs that reduce costs will take on higher priorities.  In the last economic turndown (2000), organizations continued to invest in training and other talent initiatives, but much of the underlying motivation was cost-reduction.  For example, much of the tremendous growth in e-learning was driven by the business’s interest in reducing the per-employee and per-hour cost of training.  We have truly seen these savings take place – today more than 30% of all employee training is consumed online, and the total amount of training (hours) continues to go up.So if you are looking at buying and LMS, implementing a performance management or recruiting system, or revamping a succession management program, think about the cost reductions it will create — not only the top line benefits.
  • The “war for talent” is likely to become a bit easier.  Over the last several years we have seen a tremendously tight labor market in many areas:  technical professionals, sales and service personnel, financial professionals.  As the economy slows, these forces will shift — so your energies can focus more heavily on carefully recruiting the “right” talent.  While this has always been the top priority for talent acquisition, I think HR professionals can spend more time going back to the basics again – looking at critical competencies, pre-hire assessments, and other tools to improve the selectivity of your recruiting efforts.  We are starting a formal sourcing & recruiting research program this year to help you in this area.
  • The focus on multi-generational learning and collaboration will continue to be critical.  If you are in a business which may be slowing, you will still focus heavily on maintaining your leadership pipeline and absorbing young workers.  In fact if the economy does slow, many of the older people who were not planning on retiring yet may in fact doso, changing the dynamics of the aging workforce.  In our upcoming High Impact Learning Organization research we will show you how dramatically organizations’ needs have shifted toward the “networke learning” model — almost 40% of the organizations we surveyed told us that they have a “significant challenge” in absorbing and training the “under 25 year old” workforce.  These problems will be solved through internal social networks, mentoring, coaching, and other forms of non-traditional learning programs.  
  • E-Learning investments in corporations are going to take on a new focus in 2008.  Our research shows that despite huge investments, most organizations are still frustrated with many elements of their e-learning programs.  If we do have a slowdown, in the interest of cost containment, organizations will continue to transition their “course-based” e-learning programs to more “learning on demand” programs.  We will be highlighting best practices in this area at our upcoming research conference, IMPACT 2008:  The Business of Talent, on April 22-24 in Florida.  (Please do join us.)  Watch for a major research study in this area coming in the next 60 days.
  • Driving business alignment in learning and HR will become even more important.  When the business is slowing, line managers have less patience than ever for “generic HR programs.”  They want your help solving specific business problems:  reducing headcount, reorganizing and training teams, improving performance of individuals and groups, and possibly restructuring compensation to deal with lower budgets.  The “new performance management program” or “new succession management” program which is probably on your list for 2008 must be “recast” in words and values that sell its value to line managers.  This is nothing new, but it will become more urgent if your business slows.

We have many important research programs underway right now, and we should be able to see the realities of this economic shift in the next few months.  We welcome your comments and feedback:  what is the economic slowdown doing to your business and how is it affecting the programs and strategies in your organization?  We look forward to hearing from you.

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