Talent Practices for a Tough Economy


In the course of my normal early on-line shopping for the holidays, I ordered shoes from Zappos.  Being curious, I followed the CEO on Twitter.  For those looking for a great example of how to talk about tough issues with employees check out the CEO blog at Zappos.  This is a company known for developing an exquisite culture of customer delight that extends back inside the company.  They have just had their first lay-off in 9 years and it hurts.  But they’ve done a beautiful job of articulating (inside and out) why they are taking this action now, their financial condition and what they expect in the near future, and how they are going to treat their employees.  Most notably, the are: (1) providing higher than normal severance for ‘short-term’ employees, and (2) assisting with COBRA benefit payments for those impacted employees.  Equally important, they are encouraging people to ‘talk’ or in this case ‘twitter’ about the situation inside and out of the company.  I was struck by the outpouring of care for impacted employees that was coming from the loyal customer base.  As I have said before, as employees, we can deal with tough issues if (1) we understand the logic behind the decision, and (2) believe impacted employees are being dealt with in a caring and compassionate way.  I look forward to continuing our relationship Zappos . . . I’m impressed. 

8/28/08  Update

When I wrote this blog, I thought I had a very nice array of talent practices.  After posting it, I’ve continued to come across some interesting talent practices, so I have continued to ‘update’ as information comes across my ‘virtual desk.’  I’ve chosen to group the new information under the original post so that you can see how the ideas have developed.  Interestingly, the most active searches by readers have been in the compensation space . . . so I’ve added some examples as the financial performance information has evolved through the back end of this year.

Jim Borgman’s cartoon in the Chicago Tribune last week was priceless . . . because it spoke volumes.  Set aside the question of are “we really in recession or just how bad is it,” the current US economy presents some significant challenges for organizations.  So what are some of the interesting ways organizations are responding:

Recruiting Previously Unavailable Talent: Seizing an opportunity is easier said than done.  But for financial institutions, this is the time to recruit top talent . . . talent you could not touch before. And none know this better than the Chicago financial market.  Wall Street talent who would never have considered career opportunities in Chicago are now finding the comfort of a steady security and commodity market attractive.  Seizing opportunity is not just about sourcing talent from organizations in distress.  Employees impacted by rising cost issues and unrealistic organizational demands are evaluating their current employment propositions very carefully and making strategic choices about their future.  Gas prices and long commutes give way to considering attractive opportunities to work closer to home or even in the home.  Even the most resilient of road warriors are looking for relief from the grind of tough air travel while suffering the burden of over restrictive cost cutting travel policies.  Indeed, this is the time to put your unique employee proposition to work in the recruitment of talented employees.  This is a great time to strategically up-skill the organization.  Likewise, internally it’s a time to make sure that you are not eroding what is important about your employee proposition as your own organization responds to tight economic times — your ability to recruit and keep top talent is most certainly at risk. 

Changing the nature of work: Law firms are not known for their innovation, particularly when it comes to a very traditional career path . . . but even that is changing.   In tough times, organizations tend to farm out project based or seasonal work more aggressively rather than hire regular employees to manage through what appears to be a limited engagement.  But leveraging consulting from traditional legal firms can be quite expensive.  Enter a new kind of law firm — Axiom, Outside GC LLC and Phillips & Reiter PLLC are examples of legal organizations who act more like talent brokers than law firms.  What’s different?  Well at Axiom, lawyers are employed full time and receive benefits, but no pay between assignments.  According to the Wall Street Journal, the cost to clients is about 50% less than traditional law firms.   So what’s attractive from an employee point of view?  Some people are in transition.  But even more people are thinking about alternative work arrangements wanting a break from the pressure of traditional large organization career.  Others are ‘slash workers’ and want project based opportunities while they pursue a variety of different work experiences.  Others simply want more family time.  And some are Gen Y’s right out of law school who are looking for engaging opportunities right out of the box.  I think we will continue to see more ‘talent brokerage’ with high end niche knowledge workers as a way to flex talent pools in general and as a way to tap into top talent who are in transition in a cost effective way.  This is, of course, a type of workforce in transition . . .meaning, most hiring managers have not yet caught up to the real nature of the talent opportunity and are still thinking of ‘brokered talent’ as low level temps. And time will certainly tell, but I think we are seeing an important talent trend emerging. 

Offering Flexible Work Place Practices:  Tough economic issues have offered flexibility advocates a golden opportunity to push new work place practices into place in ways that demographic challenges of the talent pipeline have not.  Helping employees squeeze more out of a tight family budget have prompted a whole range of flexible workplace practices.  Examples include . . . “4 day work weeks” or other forms of compressed work weeks and regular telecommuting or “work from home Fridays,” or van pools.  Talk about taking work at home to the next level, at Write2Market, an Atlanta based marketing firm, employees must ask permission to ‘drive into the office’ for work.  There are even novel programs like “bring your child to work.”  While I certainly applaud flexibility, there some challenges.  Woe to the manager who uses this as an excuse to abuse employees . . . disengagement will certainly follow.  Thank you Jim for your comic reminder.  Likewise, flexible practices can be great solutions when they are not imposed.  Bringing your child to work is not appropriate for every environment . . even in the same organization.  And requiring all employees to work from home on Friday’s without thought to customer needs, is not an effective long term business response.  ‘Rigid workplace flexibility’ becomes an burden when it is not driven by real employee need and does not effectively facilitate the requirements of the business.  Flexible workplace practices are just that . . . they are supposed to be flexible and they do require a plan . . . a plan that serves both the organization and it’s employees.  And finally, managers often need help understanding how to effectively manage in flexible arrangements. 

Changing the Compensation Game: Need to put a bit more skin in the game to accelerate growth in a tough market . . . well, Skyline Construction, Inc.  offered managers an opportunity to pick their own salaries with in a range.  The deal?  The lower the salary, the bigger the shot at a large bonus.  What’s different? Skyline let their managers put a portion of their salary at risk.  The idea has proven popular . . . now in its second year, 12 of 15 managers choose lower salaries this year, increasing their personal motivation to succeed. 

A while back Best Buy, started an experiment in performance management called ROWE (results oriented work place).   No more fixed schedules, no mandatory meetings, no impression-management or forced face time . . . Best Buy reshaped it’s work place practices to focus performance on output instead of hours worked.  Putting employees in charge of their own work — time, place, and results — places responsibility where it belongs.  Yes, it means managers need to be crisp and focused when developing performance objectives, and that’s not a simple task.  But look at the results — productivity is up 35%, average voluntary turnover has dropped dramatically, and employee engagement is up.  What started as an experiment is now becoming the norm. 


Broadening the Benefit Portfolio:  Not a surprise, in an effort to keep top talent who may be challenged by difficult commuting conditions, organizations like Grossbard & Associates are offering just a little extra in the paycheck to offset rising gas prices.  Some companies are increasing their mileage rates in reimbursement policies while others are offering higher cost of living raises.  EFC International is being even more proactive by subsidizing employee fuel costs on a ‘miles commuted’ basis.  Maritz, on the other hand, decided to offer employees a discount on Sam’s Club memberships as a way to help employees access lower prices at the pump.  Finally, TransitCenter, Inc. helps employees use pre-tax dollars to pay for parking and public transportation needs. 

In some cases, simply having access to benefits is important . . . especially for an employee population who may impacted by downsizing.  Companies like Starbucks and Border’s who offer benefits to part-timers fill a very important employment niche.  Paying attention to employees well being in tough times pays off.  They tend to be more committed and engaged.

“Off-boarding” with Care:  Sometimes the business is such that we need to say good-by, even to valued employees.   I am convinced that how we transition people out of the organization speaks volumes to those impacted — those who are left inside as well as those who are leaving us.  One of my clients has changed their HR job to include ‘on-boarding and off-boarding.’  Putting the same amount of care into helping people transition in and out of the organization can pay large dividends in your ability to attract and keep top talent over the long haul.  And who knows, today’s internal talent may be tomorrows key client.  Off-boarding with care, also keeps current talent engaged.  We can handle tough news . . . if we think it’s fair (meaning we understand the logic behind the decision)  and it is handled with compassion.  It’s important to remember, whether employees continue with us or leave us, they will always be alumni of our organization.  And those alumni can be valuable long term assets for the organization.

Finally, when we change the composition of our workforce, let’s remember to also think about the impact of the re-structuring on the work of the organization.  This is where I put the plug in for all of those who are left absorbing additional work when we loose valued colleagues.  Doing more with less?  Not really . . .there’s a limit to what any organization can do with resource constraints. So when re-structuring think not just about those who leave, also think deeply about the impact to those who stay.  Remember to also take work out of the system. 

As culture expert Edgar Schein reminds us, what leaders do in ‘tough times’ often speaks more loudly about the character of the organization than what leaders do in ‘good times.’  And employees do listen . . . very carefully . . . and take action on what they see. 

What is your company doing in these tough times?  In what ways are you seeing companies respond to the challenges of this economic climate?

08/11/08 Addition: Listening to What Employees Think

A survey in USA Today’s weekend addition asked: Should employers help workers with surging gas prices? Interestingly the responses were . . . 66% with a “no” response, 32% with a “yes” response, and “2%” don’t know.  What do you think?

08/12/08 Addition:  Changing the Compensation Game

Today’s Wall Street Journal reports more changes in compensation.  Given the economic and company performance turndown, one would expect that bonuses would follow.  Not so . . . according to Mercer and Hewitt. In an effort to keep top talent and employees engaged,  companies are still offering large bonuses.  In fact, the number of companies who offer one time bonuses has increased.  So, what’s changed?  Well, employers are starting to use their dollars more wisely, reserving the bigger payouts for higher performing talent.  Instead of rewarding the broader population with the usual average ‘feel good’ bonus, companies are going for ‘higher highs’ and ‘lower lows’ to distinguish and drive increased performance in tight economic times.  For example, highest rated workers may see upwards of 14%, while average workers may see 3.5 to 3.8%.  For the average workers, inflation, gas, and grocery increases may simply eat up any gain in the paycheck.  What’s your company doing?  What are you seeing and hearing in the area of performance management?

8/15/08 Addition:  Changing the Structure of the Organization

Doing more with fewer staff?  Very interesting article in the Wall Street Journal again today.  Dana Mattioli reports on a new ‘tough times job trend.’  Companies are not eliminating jobs altogether . . . they are creating what I call “job mash-ups.” In this case, they are combining job levels and types into new mash-ups. . . and yes, you guessed right. . . at lower salaries.  In an effort to stretch their assets, companies are combining jobs vertically . . .and horizontally.   

Not a surprise, tough economic times prompt us re-think the fundamentals . . . and one of those fundamentals is how the organization is structured.  It’s the moment to confirm what is core to the organization and what should be left behind.  It’s an opportunity to reinvent the what and how of work . . .to eliminate the redundancies . . . or streamline.  What’s interesting about the trend is the blurring of functions and roles . . . offering people an opportunity to develop cross functionally by moving into white spaces or to seize more senior roles based on capability or appetite.  Job mash-ups have real appeal from a development point of view.  And sometimes, job mash-ups propel us into finding new growth engines for the organization. . . opportunities we could not have imagined until we see what could be combined.

Having said that, what is disconcerting about the trend is the potential for abuse.  Jobs poorly combined don’t help the individual or the organization.  Pushing employees far beyond their capabilities leads to burn-out, turnover, and taint your ability to recruit top talent.  Can one experienced professional do the work of a team — not without changing performance expectations or the fundamental nature of the work itself.  So my challenge to HR is to act as that ‘voice of reason’ for those who don’t have a voice in this conversation. . .make sure ‘mash-ups’ make sense for everyone.

8/20/08 Addition:  Creating Employee Engagement: A Reason to Believe in the future

“Ford Offers Workers a Ride” . . .  interesting article in the Chicago Tribune today.   One of the toughest ‘sells’ we make is not to customers but to our own employees, particularly in tough times.  And Ford is certainly weathering some tough times.  The hard part of the ‘sell’ to employees is creating confidence in the future . . . as Rosabeth Moss Kanter says, when you are in the middle of a turnaround, everything looks like a failure . . . (and I’ll add my own thoughts here) because you aren’t close enough to the future to touch and feel it.  So Ford is doing just that!  It’s giving employees a reason to believe in the future.  In an effort to engage employees, they are letting them drive their new vehicles around the test track.  Pulling 4,000 of their workers from their Dearborn HQ desks to the test track, Ford hopes to show employees that their new models are going to put them on the road to success.  Engaging employees by letting them ‘touch, feel, and drive’ the new 2009 to 2010 vehicles, Ford hopes that they will then ‘talk up’ the vehicles to others . . . engaging their social network as a potential growth engine.  Giving people evidence of a positive future serves to reinforce confidence which can become a powerful platform for positive performance.  And as Kanter says, confidence can become infectious!

8/26/08 Addition:  Paying Attention to Employee Mental Health

Today’s Wall Street Journal article on health by Elizabeth Bernstein was a good reminder that in tough economic times people get worried . . .and that fear will work its way into the organization in unexpected ways.  As the economy continues to tighten, people worry about job security for themselves and other family members, their ability to pay the mortgage or other loans, the cost of gas and just plain living expenses. . .never mind worrying about the value of their homes and their ability to pay for college in the future, and so on.  Not everyone can handle stress effectively and we may see it in general morale, illness or absenteeism, productivity, or disengagement.  This is the time to pay attention to the subtle and not so subtle changes in those around you.  HR can take the lead.  Look for the warning signs that something might be wrong and offer access to the various policies and program available inside the organization . . . options might run from expressing concern to changes in workload, vacation, fitness programs, unpaid time off, employee assistance programs, and so on.  If you are tempted to ignore it . . . remember, morale issues are contagious. 

8/27/08  Addition:  Workforce Planning

What have you done to protect your talent today?  In general US companies are not giving much thought to workforce planning according to a new Watson Wyatt study, referenced on Workforce Management.  Meaning, they are not giving much thought to protecting their talent should the economy worsen . . . protecting key talent when times are bad, you say.  Indeed, this is not about restructuring or downsizing the organization.  This is about identifying critical constituencies (those essential to the core of the business) and putting contingency plans in place to make sure you don’t loose them . . . period.  And a lack of planning puts US firms at a disadvantage to their global counterparts.  Asian counterparts for example have been dealing with this issue for some time . . . currency crises, coups, or just plain competition for the same key talent across Asia Pac.  According to the same study,  84% of employers in Asia-Pacific and 80% of employers in Europe have workforce contingency plans in place.  Do you?  If you don’t do workforce planning in the tough times, when the good times come again you will be at a distinct disadvantage . . .chasing top talent paying premium dollars.  When you loose top talent, you have also lost the seeds of your future growth.  So, I ask again . . . what’s your organization doing?

8/28/08 Addition: Senior Leader Compensation

Finally, some interesting compensation information on the senior leader front as challenging financial results continue to pour in through the back half of the year.  We are starting to see more interesting compensation plays . . . ones that are more closely tied to performance . . . ones that are giving higher highs and lower lows . . . ones that are extending senior leader time horizons beyond the quarter or year in an effort to drive effective long term performance.

Starbucks just announced that it will slash bonuses for senior leaders this year as it continues its reassignment program in an effort to increase profit.  According to the WSJ, Chief Executive Howard Schultz will not get a salary increase this year . . . nor will any US employees Vice President and above given year-to-date performance.   Moving lower in the organization, eligible district managers, store managers and most coffee-roasting plant workers in the US will get a 3.5% annual pay increase.  For all employees in the US, the plan calls for a 2% flat salary increase for those whose performance is at the meet or exceeds level.  This excludes store baristias who are on a separate compensation plan that adjusts salaries on a 6-month basis.  Now that’s a statement. 

Might I add as we move toward year end, the company to watch on the Senior Leader front will be American Express.  You may remember Amex received well deserved praise for their CEO compensation play at the beginning of the year.  They have given CEO Ken Chenault an options bonus schedule based on clear aggressive financial metrics over a 6 year time horizon.  The financial hurdles as laid out are quite high for EPS, revenue and ROE, and a lesser performance will only give him a fraction of the total grant.  Furthermore, the total return to shareholders must be at least 2.5% above the S&P 500 average — so he cannot simply ride the market.  A senior leader compensation play clearly tied to performance over time — what a concept. 

8/28/08 Addition: Off-Boarding with Care

Earlier I wrote about the importance of ‘off-boarding’ with care.   There are times when we need to say goodbye to valued employees . . for a variety of reasons.  In those cases, it’s our hope that at some time down the road, our paths will cross again. 

The best examples of off-boarding come from companies trying to keep top talent . . . in the hopes of their return.  Deloitte and Touche (USA) makes it easier for employees to return after career breaks of up to five years, whether family or education related, by offering a range of benefits like . . . access to the company intranet, subsidized training to keep skills current, access to a mentor or career coach.  Cost effective, the program costs a fraction of the cost to recruit and develop a new employee.   Likewise, Gensler welcomes talent back via a return program . . . symbolically welcoming talent back with a ‘boomerang.’  Other companies keep in touch with previous employees through formal alumni networks using vendors like Select Minds. . .while others leverage grassroots social networks that spring up when companies are forced to downsize groups.

Increasingly we need to be comfortable with the fact that talent is unlikely to stay with us for their entire careers . . . there will be a series of ‘on and off ramps’ for a variety of reasons . . . some company driven others will be driven by individual needs and wants.  Keeping in touch with great talent can be a source of long term competitive advantage.  Whether employees continue with us or leave us, they will always be alumni of our organization.  And those alumni can be valuable long term assets for the organization.

9/13/2008 Addition: When Times get Tough, Increase the Travel Budget

I just returned from the Network Roundtable meeting and had an opportunity to listen to Larry Prusak talk about the power of culture and networks.  A colleague asked Larry a question . . .”in tough economic times, what would be your #1 recommendation for the organization.”  His reply . . . increase the travel budget.  Interesting . . .certainly not what most organizations do.  First thing to go is the travel budget.  His point, if knowledge is truly the driver in your growth engine, why would you cut the travel budget ?  Knowledge is massed in networks where people share trust, perspective, and a culture over time.  Knowledge is a social thing . . . not an individual thing . . . which requires care and feeding.  The cost of knowledge is the ability to create shared experiences so that people can share . . .absorb . . .and build anew.  Can technology do this for us . . . yes, to an extent. . . it can certainly accelerate information sharing and even knowledge development.  But ‘being together’ is key at critical points is key to a network’s ability to develop trust . . . enable collaboration . . . create knowledge . . . to drive innovation.  It’s hard to create a shared culture of ‘asking for information and sharing knowledge’ when you are physically isolated. 

Ok, so who really does that in tough times . . . well MWH Global did.  In fact, they rearranged the travel budget . . . they decreased executive travel and increased travel at the mid-level in the organization where the dollars could have the greatest impact.  And the outcome . . . a measurable increase in organizational capacity and ultimately revenue.  Interesting indeed.  What do you think? 

10/28/08 Addition: Leveraging the lull to develop skills and spark innovation

Like many of our organizations, Toyota is facing a significant lull in manufacturing for a significant portion of their workforce.  With a tight economy and changing gas prices, Toyota like the other car makers is experiencing the same challenges as the other auto makers.  Their response to that challenge is what makes them unique.  Rather than send workers home like the other auto makers, Toyota is keeping their workers on the line to sharpen their skills and look for innovation opportunities.  And they are already seeing the potential cost savings benefits to keeping employees engaged in processes they have redesigned.   What a concept . . . use short-term idle time to keep employees engaged, trained, and looking for incremental productivity savings and innovation opportunities. 


Talent Readiness Beyond the Demographics: How are you preparing for the future?

We all approach this ‘workforce crisis’ issue from different perspectives.  For some of us, the issue is quite real and our organizations are worried about a range of issues, including impending retirements, brain drain, a revolving door in key markets, a lack of talent in certain disciplines, generational issues, and looking for actionable insights.  Meanwhile others of us are legitimately left wondering what the ‘fuss’ is about. . .yes, we’ve seen the data but our current talent piplines seem to be happy, healthy and full.  Still others of us are quite simply too busy ‘right sizing’ our organizations and trying to survive in the current economic climate.  Regardless of your starting place on the issue, I think we ought to be asking ourselves some tough questions on behaf of the organizations we serve . . .

  • Do you know what your organization needs to enable its future success?  Do you know what specific organizational capabilities and individual skills will be required to support the organization’s growth strategies . . . short and long term?  Do you systematically spend an adequate amount of time looking outside the organization for predicitive insights about what the future holds for your organization?  Do you drive today’s talent decisions in a way that enables your future viability? 
  • What strategies do you have in place to address key talent gaps?  Do you have a workforce plan . . .have you determined which talent needs are critical to the growth of the business?  As you are making key talent decisions today, are you protecting your future?  Are you global in your mindset, even if your business is local . . . because your talent most certainly thinks globally about where and how they do work. 
  • Do you have an organizational culture that fits the future needs of the organization and the evolving workforce?  What shifts in the organizational culture do you need to start driving now?  Do you have the type of culture that attracts the talent you need to enable your future?  As Edgar Schein so elegantly puts it, “Leaders create culture.  Culture in turn creates the next generation of leaders.”  To influence the success of our future, I think we need to pay attention to leader behavior now.  Given that refining culture talkes time, are you actively and consistently coaching leaders in a way that enables your future not disables it?
  • How strong is the talent pipline?  Has your leadership team identified the key constituencies which have a material impact on both the current and the future performance of the company?  In what ways will the rapidly evolving workforce demographics have the most impact on the talent for these positions?  I think one of the most intriguing questions is how the demographic changes will impact the path to senior management.  The development road to the top is arduous, and once there, the challenges are significant and demanding.  Add generational aspirations and lifestyle needs to the equation, and therein lies the organizational dilemma.  Will your talent pipeline be robust enough to yield the right number of talented leaders when the time comes?
  • How engaged is your workforce?  As your organization competes for talent and a share of mind, employee engagement becomes an important part of the total employment equation.  Over the past several years, companies have tapped into employee engagement initiatives as a way to increase customer satisfaction and bottom line results.  Others have tapped into engaged employees as compelling ways to fuel their growth engine with innovative ideas.  What are your key touch points that influence your workforce’s impression of the company and thus, their engagement?  What undiscovered potential does the employee engagement equation have for your business?  What “unintended messages” has your organization been delivering. . .disengaging your talent at a time when you most need them? 
  • In what ways have you created a culture of learning within your organization?  How will your company retain the institutional memory of those leaving the organization?  Are your employees adequately prepared to deliver against your future needs?  I am convinced that learning will be a source of competitive advantage.  And to do that internal training organizations need to morph into sophisticated learning consortiums with deep experience in a range of learning methodologies and technologies.  They will not only develop the human capital of the company but serve as the innovation engine for the business.  Companies at the forefront are actively using social networking with a range of technologies that appeal to different generational cohorts.  What are you doing to compete?  

The fundamental shifts in the workforce demographics will impact every aspect of our organizations.  The talent decisions we make today will most certainly impact our ability to compete in the future.  Are you forward looking enough to help your organization navigate these challenging issues, regardless of your starting place?

So, how are you preparing?