What we typically do not hear about are the business owners and managers who are taking advantage of the downturn to upgrade their firm's talent. Just as savvy investors like Warren Buffet buy assets when they are undervalued as a proven way of realizing positive returns as the economy improves, savvy business owners and managers are taking a similar approach to acquiring human assets. They know that when many are cutting staff or freezing hiring, and the demand for human capital falls, talent, like financial assets, becomes undervalued and an ideal time to invest.
Add Talent in a Downturn
When many firms are cutting staff and your own business forecast is uncertain, does it really make sense to bring on new employees? Of course, it depends on the circumstances, but business owners and managers focused on the long term know that not only must they sustain their business during the economic slowdown, they must be ready to accelerate growth as the economy rebounds. Typically, those firms with the best talent are the ones best positioned to ramp up as the economy improves. Firms that delay in hiring talent often find themselves falling behind their competition. When they try to catch up, they find that in a growth economy, talent is both too expensive and too hard to find. This results in unfilled jobs and hires that disappoint with marginal performance.
Take Sales Positions, for example. If hiring an "A" player from a competing or relevant firm will help you add revenue during the downturn and ramp-up quickly with an improvement in the economy, you can certainly support the investment. Suppose your business plan calls for expansion into a new market segment, geography or product line in 2009 or 2010. Identifying a key sales player who can help you now, but more importantly later, will be an important investment.
You might ask, "Why would a top performer be willing to change jobs now?" and "Won't I still have to pay top dollar for such talent?" Today, some firms are cutting staff and reward and recognition programs in order to survive the downturn. Top sales people, even those not cut in across the board layoffs, are often discouraged by declining sales and customer support, an underinvestment in their firm's product pipeline, and hits to their compensation and benefits plans. Your firm's commitment to talent and future success creates a compelling opportunity for a top performer who may be willing to join forces with you for less than he or she would when business is booming and salary, options, bonuses and perks are at their highest.
Manage Your Talent Portfolio
In a downturn, sharp investors also take a hard look at the investments in their existing portfolio. It may be time to trim certain investments that have underperformed and have limited upside going forward. Perhaps, return on these investments will lag as the markets improve. Similarly, sharp business owners and managers take an objective look at their existing staff. Are all key jobs filled by "A" players? Would upgrading the talent in such key roles make an important difference during the short term and as the economy improves? If so, it is time to upgrade your human capital portfolio by bringing in top talent for such a role and reassign an existing employee to a different role where he or he can perform more effectively, or provide him or her with the means to leave the company.
How Do You Go About a Talent Portfolio Review?
Begin with Sales Positions, where studies show the production difference between a top performer and an average performer is 123%—a clear basis for making a change. For many firms, Finance is the next most important function to assess. Current staff may provide strong accounting and controller services for your firm. In these challenging times, you may need more analysis and new approaches to risk management, credit, contracts and other areas where improving cash flow and other financial aspects of the firm will ensure its success now and position it well for the future. Upgrading talent in one or two key financial positions may make a significant difference for the firm.
After reviewing the Sales and Finance functions, where you prioritize next depends on the nature of your business and where you have focused your attention in the past. For manufacturing businesses, the supply chain function, if not recently revitalized, provides a significant opportunity. "A" player talent can improve the function from a "purchasing" or "procurement" mindset to one where innovative thinking and know-how improve operating efficiency, financial results and customer partnerships. Research and Development is another manufacturing business function that deserves a hard look. If an upgrade of talent in a key position will provide an opportunity to accelerate the new product pipeline, it is time to make a change. For service businesses, Customer Support is often one of the areas cut back in tough economic times. This is done just when the customer relationship is most vulnerable. If replacing a satisfactory employee with an "A" player will improve customer retention and financial results, now is the time to act.
Select, Don't Settle for Talent
When adding new talent, it is important to take an even more rigorous approach than most firms normally take. The following three key steps are important:
- Prepare job and candidate specifications. Rather than just using a job description, focus on the top three things that need to be accomplished in the next 18-24 months. It might include such plans as penetrating new market geography, introducing three new products, or implementing a new cash management system. Be specific in terms of the outcomes and how they will be measured. Determine the competencies and experiences necessary to accomplish your stated goals.
- Source for "A" players. As you source top talent, use a multilayered screening process to determine "A" players from everyone else. If you are using search firms, you may be able to negotiate an arrangement for reduced fees, given that many firms are not hiring. Consider employee, customer and professional association referrals as a good source of talent. Be sure to identify top talent from the competition and other relevant firms.
- Build a three-stage interview process that gives you substantial objective data. Remember, a clear pattern of past behavior is the best predictor of future success.
As a smart business owner or manager, you are likely paying close attention to your business's asset portfolio, cash flow and sales in this challenging economic period. Adding top talent, upgrading your talent portfolio, and building a process to get the right people in the right job will go a long way to making you a savvy talent investor as well.
For more information on how to attract talent and build your talent portfolio, contact Don Lang from Talent Effects, Inc: 770.664.0110 or donlang@talenteffects.com.
As the turmoil in the financial markets continues, organizations of all sizes struggle with their responses. While attempting to determine if the stock market has bottomed out, when the credit freeze will thaw, what the new administration will mean for the economy and what consumers are thinking, some organizations are taking a wait and see posture. They are doing nothing until at least some indicators point them to action. Other firms, seeing the market and housing collapse and the resulting impact on demand, are cutting back sharply in spending. Many of these firms are making significant cuts to staff. As you might expect, layoff announcements are making for gloomy headlines.
