Is the Economic Downturn the ‘Calm’?

The economic downturn over the last several years has led some businesses to conduct layoffs, freeze hiring, pay, benefits, as well as not pursue acquiring new talent in effort to improve projected earnings. Other companies have taken advantage of the available talent and set their sights on new growth opportunities for the future.

Author John Pullen’s article in Entrepreneur included research conducted by Boston based Interaction Associates, which included responses from 450 organizations. The survey maintained that “…low-performing outfits, which make up 65 percent of respondents, were more focused on cost-cutting and productivity, despite (or possibly because of) their lack of financial success. And in most instances, number crunching failed to pay off for these firms, with 45 percent falling short of their net-profit goals.”

Another USA Today article from Matt Krantz discusses how some companies are successfully engaged in reducing their workforce by shifting from labor intensive to technology intensive. Author Krantz shares Jack Ablin of BMO Private Bank concurs and believes in “doing more with less.” This strategy is consistent with trends in the banking industry over the years.

If the “do more with less” mantra has been what many businesses adopted, will losing the cross-functional employees prove to be even more costly?

Jack Albin also maintains that it isn’t always existing companies that are the engines of new job growth, but also new companies. Albin notes that many larger companies continue to shrink their workforce. Ablin also proposed we may need more new companies for new job growth, which many in the banking business would love to see be the catalyst for business growth in their industry. As more technologies are introduced to offset the resource costs new businesses may find it more challenging to compete in certain tech heavy industries if they choose the same business model.

So what does this mean? Is using technology to do more with less the answer? Do companies even have the talent and resources to utilize the technology, and if not, how do they get there?

Leadership would obviously have to formulate a strategy for the future in an effort to find the high ground in this area. However, the compensation story behind all of this may be of utmost importance before making any decisions. Many companies have chosen to retreat in the areas of hiring, pay, and benefits to maintain or improve profitability, and may find themselves as a ripe target for those seeking to grow.

An article in USA today touts how wages have improved by 2% and how 73% of 40 top economists believe wage growth will accelerate in 2014. If compensation does rebound in the employees’ favor as leading economists believe, will businesses be able to retain top talent?

If the “do more with less” mantra has been what many businesses adopted, will losing the cross-functional employees prove to be even more costly?  Highly trained employees typically get that way from costly training investments by an employer.  As the employee talent levels improve with more training and experience, do they become more valuable and yet less insulated from poachers that seek to grow their business by purchasing highly trained employees for a fraction of the training investment?

Perhaps hybrid jobs could also lead to additional challenges in recruiting and training as well, as what used to take two weeks of training may take months to fill and train for an already downsized workforce.  A typical two week notice from a cross functional employee may leave significant gaps from the time the employee fulfills their notice- if they fulfill their notice- until the time when their fully trained replacement arrives.  The new hybrid job may be close in job evaluation to what some leads or supervisors do, which may make them even more challenging positions to fill.  How will that impact service, sales, and returns?

The foundational aspect of attracting, recruiting, and retaining top talent starts with a sound compensation philosophy and the tools to enable top performing teams to reach their profit and growth goals, while remaining true to their organizational values. The recent recession and actions many companies have chosen over the years to continue growth or perhaps just stay in business may have knocked their compensation plan out of balance and made them vulnerable for the talent wars to come.

If you are concerned that the downturn in the economy was the calm before the storm in finding and keeping the best talent, or just believe your compensation plan just needs a tune up and want to see what can be done about it, please contact us at BalancedComp today.

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