February 2008

Employee Development
Look before you leap!

Timothy F. Bednarz, Ph.D.

According to a recent article published in The Wall Street Journal, “next to the stock market, what CEOs talk about most is their lack of bench strength.” There is conflicting data in the media that predicts a looming recession in 2008. A portion of the gloom and doom talk may be driven by the upcoming presidential election. But even if there is only a slim chance of a recession you need to be fully prepared if it does occur.

A perfect storm might be shaping up for many companies who are considering potential layoffs, while facing the issues of succession planning to deal with an even bigger event; the wholesale retirement of baby boomers in the upcoming years. Demographically speaking this is a potentially larger threat to companies than any talk of recession. Because of this, the standard management reactions to recession may not be in their best interests if and when a recession does hit.

Unfortunately, before this economic event does occur and ahead of the demographic shift in the workforce, a talent gap in many companies already exists. Often this is the result of the actions many companies took during the 2001 economic downturn, when many training and development departments were downsized and are only now appearing to rebound.

Consequently, companies haven’t been developing and training a sufficient number of employees to fill their needs. This is despite the long-term trend of frequent job changes by employees. This is compounded by large numbers of employees who have a desire to advance within their companies but weren’t provided with sufficient training and broad enough experience to be considered for promotion. If this wasn’t bad enough, a survey by the Society of Human Resources Management reported that approximately 60% of companies have no succession plans of any sort in place.

What can you do in the face of uncertainty? If the recession may impact your company, you need to identify and target your best talent, even if they are relatively new. In many companies the last hired is typically the first fired. Under the existing circumstances you must shelter the best potential employees from the pending ax. The critical need is to identify those who want to grow and advance and keep them growing by rotating them through a variety of jobs. If they can prove themselves in one area, they should rise to the challenge in new ones. Recession may force companywide restructuring, so consider placing these individuals into new jobs rather than terminating them from old ones.

Identify your future talent gaps and begin to groom a pool of employees to fill these upcoming needs. If you terminate your best talent and then hire from the outside to fill future needs, you are only encouraging other employees to switch employers. By developing within your existing talent pool and promoting internally you are creating employee loyalty while retaining their experience and expertise. This has substantial value in the face of large numbers of looming retirements, as employee loyalty is increasingly becoming an important commodity that cannot be squandered or undermined.

However, broadening employees’ experience is not enough. You may need to reallocate reduced learning and development budgets to train these individuals in the skills and competencies that are required if they are to advance and add value to your company.

Furthermore, you need to act quickly to develop the appropriate contingency plans if a recession does impact your industry and company. If the worst-case scenario does not occur you have not wasted your time. If you take these steps you will strengthen your company by creating new learning opportunities, which will improve performance and strengthen loyalties. You will have also evaluated your entire talent pool to identify who is best suited for what job.

Whatever the triggering event, whether by recession or retirement, this problem is not going away and immediate action is required to deal with these contingencies. The one thing to consider is that a recession during 2008 can cause unanticipated consequences to future succession and employee development plans if you fail to plan and anticipate. You cannot wait until it’s too late and the time to evaluate the value of your employees is trumped by the company’s need to shed payroll expenses. Now is the time to anticipate and plan, while you have the luxury of time to do it.