2010 Perspective on Talent in the Recovery Interview with Jeff Schwartz, principal, Deloitte Consulting LLP

The economic turmoil of 2008 and 2009 forced hard decisions regarding layoffs, expenses and closing facilities to improve operational performance and short-term earnings. Jeff Schwartz, principal with Deloitte Consulting LLP and a leader in the Human Capital practice, discusses possible long-term implications and post-recession talent strategies.

The “Great Recession” has forced many organizations to make deep resource cuts, particularly in talent. What repercussions will we see in terms of employee productivity and/or turnover in 2010?

Throughout 2009 we have been surveying corporate leaders around the world to understand how they are adjusting their talent strategies and priorities to manage their workforces given the new economic realities. These corporate leaders have been playing a combination of defense (cutting headcount and tightening compensation and benefit costs) and offense (focusing on retaining and developing key leaders and critical talent and skills) to help position their companies for the future. As the recession has ebbed and economic confidence has risen, many of our Managing Talent in a Turbulent Economy survey series participants are positioning themselves for better times by reviving retention and training and development initiatives that may have been put on hold earlier this year. While cost-cutting measures remain prevalent, over the next three months training and development and retention programs will be competing for the top spot among talent priorities with the executives who participated in our survey — and maybe for their competitors as well.

There is also strong evidence from our research that plummeting morale and poor corporate communication are driving turnover intentions among employees. This represents a serious risk to employers fighting to keep their top talent intact. Based on our research, the “resume tsunami” that could follow the downturn may well exceed previous post-recessionary trends. Companies that could depend on the recession as a retention strategy in 2009 will need to turn their focus to a potential skills shortage later in the year as they return to their growth strategy.

Companies will also have to consider the implications of health care reform legislation. No matter what the form of the final bill, a number of employer health reforms will be made, which likely will impact both actuarial/benefit and workforce planning initiatives. While the effect of health reform will be different from industry to industry, the long-term impact likely will be far reaching.

How might talent strategies change as businesses transition from recession to recovery mode?

Economic optimism reached its highest level among surveyed executives in Deloitte’s December 2009 survey. More than one-third of surveyed executives now believe the worst is behind us rather than in front of us — more than at any point since the survey series’ inception. In 2010, we believe companies can no longer depend on the recession as their retention and talent strategy. They need to identify where they are on the recovery curve and design their talent strategies accordingly. We believe the companies that achieve the best balance of offensive and defensive talent strategies will have the inside track on the recovery curve.

Based on a year’s worth of data contained in our Managing Talent in a Turbulent Economy series, the profile of these successful companies is coming into focus: Companies represented in our survey that do not foresee further painful layoff decisions are committing themselves to retaining top talent, and are investing in “world class” leadership programs to help build robust pipelines of emerging and senior leaders. We look forward to presenting a detailed analysis of this year-long survey series in a report that will be issued this spring.

Do you foresee some industries or sectors faring better than others, should a “resume tsunami” ensue when the economy rebounds?

First, let me comment on the potential “resume tsunami.” As we have analyzed workforce trends and economic cycles, including the recession at the beginning of this decade, we expect a spike in turnover as the economy regains momentum. The issue is not a shortage of workers, but rather a shortage of workers with specific skills and talents that are in high demand. We expect the coming recovery to be no different. Companies are already beginning to see "cherry picking of their critical leaders and talent.” Our research, and other research we’ve seen, suggests a growing percentage of workers are dissatisfied and are either looking or ready to look at new job opportunities as the economy rebounds. We believe now is the time to have a clear baseline for your talent requirements for the next few years with a view on who your critical talent and leaders are, and what critical initiatives you need to have in place, including retention, compensation, rewards, and motivation and training and leadership development. In short, will your key talent and leaders stay with you if they have choices?

Second, over the last year we’ve learned that a few industries have been better able to weather the downturn than others. From the survey results we’ve gleaned that the energy/utilities sector is better positioned in the coming year, expecting fewer layoffs. In fact, energy executives surveyed cited managing human capital as a key priority over cutting and managing costs, the key priority of every other industry.

Consumer/industrial products executives surveyed reported that their industry is facing an uphill climb with difficult economic conditions still ahead. Surveyed executives in technology/media/telecommunications, on the other hand, are feeling more upbeat and plan to focus their efforts in increased training and development in the coming months.

The financial services sector has been challenged between the economic recession and the restrictions on Troubled Assets Relief Program (TARP) recipients. Over the past year, many banks represented in our survey have focused almost primarily on cost reduction. While operational efficiency will likely always be an important aspect of a bank’s business strategy, the landscape is gradually changing. It appears to us that, with TARP becoming less prevalent as banks repay TARP funds, banks are starting to show signs of a renewed awareness around the need to retain top talent — the critical workers who drive performance and growth to achieve a competitive advantage. We have seen some banks begin making investments again in workforce development and talent programs. It’s a lesson learned from the past market corrections: Once the economy picks up, no one wants to have to scramble to find and keep those qualified and skilled workers needed to meet the demands of their business — because it may be too late.

To learn more, explore our latest views on efficiency and growth strategies.

Every organization must choose its own path, striking a powerful balance between investing in growth, driving efficiency, managing risk and meeting compliance obligations. It’s no longer about the downturn or the upturn. It’s about your turn.