Managing talent in a turbulent economy: Part2
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Managing talent in a turbulent economy: Part2


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Navigating a course through rough waters - avril 2009.



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Managing talentin a turbulent economy
Navigating a coursethrough rough waters
April 2009
 2 Key findings
 3 Global economic outlook remains extremely challenging 4 Cutbacks and layoffs dominate the corporate talent agenda
 5 Cuts get deeper and more diffi cult
 6 Layoff survivors also feel impact of tough economy
 8 Cost cutting crowds out sales and service as a key strategic priority
10 Focusing on defense: Talent priorities refl ect the rough economy
11 Recruiting down for all but experienced hires
13 Companies surveyed still recognize the need to retain and train key employees
15 Spotlight on talent and risk
18 Survey participants
20 Contacts
Managing talent in a turbulent economy – April 2009
Key fi ndings
TAhbiso ruetpotrhteprseusrevnetsy the major findings of a March 2009 • Reducing employee headcount remains the top talentTDhelisoitstuer svueryveytahbeoutrswtaiyns tao tpherxeeec-uptiavretslaonndgtiatluendti-priority and, over the last quarter, surveyed talentnmaalnsatguedrsy in inwdausstcroiensdwuocrtleddwifdoeraDreelaodijtutsetinbgytFhoeirrbesmanagers have shifted the criteria being used toIwnosirgkfhotrsc.esT thoisna rvisgtaetediaticoonurfseeatthurroeusghretshueltrsoufrgohmwaaters determine workforce reductions. As layoffs get deeperJofa tnoudaaryys2t0ur0b9u sleunrtveecyotnhoamty.p Tolhlee sdtu3d2y6,tsheen sieocrobnudsiin- a and more difficult, even employees with critical skillstnheresse-lpeaartd leornsgitudinal survey, also examines how strategic filling key roles are at risk of losing their jobs.aprniodrithieusmaanndtraelseontu traccetiecsxehcauveti cvheasnagte lda srignceebouusri-January2n0e0ss9essurwveoyr:ldwide in the Americas, Asia/Pacifi c,• While layoffs and other belt-tightening measuresand Europe/Middle East/Africa. A more detaileddominate executive attention, surveyed corporatedeInm tohgeraMpahrcichpsurroveyl,e seanbioorutextehceutriveessp roenpodretendtsthceayn bemanagers still recognize the need to retain and train keyfoeuxnpdecattsitghneifiecanndt cohfatllheisngreesp toortp.ersist in the broader talent. Layoff survivors can expect to feel the impact ofeconomy, just as they had in January, and few believe the difficult economy through lower compensation andthe worst is behind us.benefit levels.• In response, surveyed executives are focused sharply • With governments taking a higher-profile roleon cost cutting, including layoffs and other austerity in business, the intersection of talent and riskmeasures. Efforts to align company costs with today’s management and regulatory compliance has emergedeconomic realities are now crowding out plans to keep as an area of rising concern for surveyed businessand expand the customer base—a significant change leaders and HR executives.since the January survey.
Managing talent in a turbulent economy – April 2009 2
Global economic outlook remainsextremely challenging
The March 2009 survey is the second edition in aOne in three executives surveyed seetehxreeceu-tpivaertslaornegrietsupdoinnadlisntgutdoytdheesigpnereildotuoseaxnadmoifnteenwayseve uunpredictable currents of today’s economy. In additionn to gher times gauging broad trends in talent management, thisstudy also spotlights the actions companies are taking toAs the global recession deepens, executives in every major implement and integrate talent management in their riskmarket and across every major industry are struggling to management and regulatory compliance operations.bring corporate costs in line with falling revenues anddepressed profits. According to the 397 internationalDigging Deeper:Corporate leaders surveyed inexecutives surveyed for Deloitte by Forbes Insights in Life sciences/Health care companies expressed aMarch 2009, austerity measures occupy an increasingly moderately more optimistic view about economicsignificant portion of management time, outranking conditions, with just 24% suggesting the worst is stillefforts to increase sales and serve customers as top to come, compared to 32% overall.priorities now and in the coming months.Layoffs remain widespread, as newspaper headlines In March, as in January, corporate executives surveyedattest. This survey suggests that headcount cuts are clearly recognize the mounting economic challenges theygetting deeper and more difficult for executives and talent face and the need to reorder their strategic priorities tomanagers to make. These managers are struggling with survive. An overwhelming 90% of executives surveyedhow best to align their workforces with the reality of what expect the business environment to remain depressed,many expect to be a prolonged downturn. with one-third predicting that still tougher times lie ahead.A mere 8% believe the worst is behind us (fig. 1).
Figure 1. Executive outlook on the economy: March vs. January
Things are tough and will be for a whileThe worst is still aheadThe worst is behind us 8%5%Dontknow12%%
As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see s/about for a detailed description of the legalstructure of Deloitte LLP and its subsidiaries.Managing talent in a turbulent economy – April 2009 3
Cutbacks and layoff s dominatethe corporate talent agenda
In keeping with this grim economic outlook, cutbacks Companies already feeling the pain of layoffs report littleand layoffs are dominating the corporate talent agenda. relief in sight. Of the companies surveyed that experiencedBetween November 1, 2008 and April 28, 2009, the layoffs in the last quarter, seven out of ten (71%) expect500 largest U.S. corporations announced layoffs totaling more layoffs in the coming quarter, while only 17% of themore than 544,000 workers, according to companies that did not experience layoffs over the lastBut workforce reductions are not confined to the United three months expect to conduct them in the next threeStates. The Organization for Economic Cooperation and months.Development warned in late March that the world’s30 richest countries are facing a combined jump inDigging Deeper:Energy/Utility companies surveyedunemployment of 25 million people in the current were the least likely to experience layoffs over theeconomiccrisis,pushingthejoblessratetoover10%fromppraestditchtrleaeyomffosnothvser(t3h7e%n)eaxntdthwreeeremthoentlehsa.stlikelytoa 2007 low of 5.6%.This trend was clearly evident in our March survey, with Public companies, under greater pressure fromnearly half (47%) of the executives questioned reporting shareholders to hold down costs, appear more likelylayoffs over the last three months (fig. 2), markedly more to turn to layoffs than privately held companies. In thethan those who had predicted layoffs (38%) in our January March survey, 59% of publicly traded companies reportedstudy. More than four in ten (42%) expect more layoffs laying off workers over the last three months, comparedto come over the next quarter, as companies struggle to to 39% of privately owned companies. Half of the public“rightsize” their workforces for a weaker economy. companies (51%) surveyed expect layoffs over the nextthree months, well above the 35% of private companies.Figure 2. Organizations conducting layoffs
Past three monthsNext three months
9%3%Don’t know
Managing talent in a turbulent economy – April 2009 4
Cuts get deeperand more di ffi cult
The criteria used by executives surveyed in makingDigging deeper:Justifications for cutbacks alsoworkforce reductions has shifted significantly since vary greatly by industry. Life sciences/Health careJanuary, suggesting that talent managers are being companies surveyed were much less likely to useforced to consider job reductions that cut deeper into “skill capability” (32%), “role necessity” (32%), andtheir companies and are more difficult to make. Even “past and current performance” (27%) as workforceemployees with strong skills filling necessary roles are at reduction criteria, while Energy/Utility companiesrisk in some companies. were much more likely to use “past and currentperformance” (63%) and “skill capability” (60%).In March, 43% of executives surveyed list “role necessity” Executives in the Consumer/Industrial productsas a key factor in making decisions about workforce sector appear much less concerned with “leader-reductions—a 17 percentage point drop from January. ship potential” (7%), while their counterparts atSome 47% reported “skill capability was an important Technology/Media/Telecom companies are morecriterion in layoff decisions, compared to 55% in January. concerned (23%).Past and current performance is no guarantee of jobsecurity, with less than half of managers (45%) reportingthis as a top factor, compared to 53% in January (fig. 3).Figure 3. Top criteria for making workforce reduction decisions: March vs. JanuarySkill capability 47% 55%Past and current performance 45% 53%ssitRole nece y 43% 60%Compensation level 12% 18%Tenure in organization 12% 16%16%Leadership potential 16%Tenure in position 16%7%Retirement proximity 13%9%Promotion potential 12%7%Business unit 11%16%Location/region 9%8%6%Cultural fit 8%Other 0%3%
Managing talent in a turbulent economy – April 2009 5
Layoff survivors also feelimpact of tough economy
Employees who survive the waves of layoffs can expect By strong margins, executives surveyed reported that overto bear the pain of tough economic times. Companies the next 12 months their companies are more likely toexperiencing layoffs are also more likely to be decreasing decrease rather than increase compensation levels (25%compensation and benefit levels, but they are not the only to 15%), benefit levels and packages (32% to 14%), andones focused on cutting costs. discretionary perks such as subsidized food and parking(39% to 12%) (fig. 4). Corporate bonuses are also beingDigging Deeper:When it comes to reducing costs, companies in the Europe/ pared back, with more than a third (35%) reporting theyMiddle East/Africa (EMEA) region surveyed are more likely to use reductions in expect bonuses to decrease this year.retirement plan contributions (25%) than those in the Americas (14%) or AsiaPacific (APAC) (13%).
Figure 4. Anticipated changes in retention focus over next 12 monthsRedeploymaenndtjoofbswionrkheirgshteorddievimsiaonnsd31%46%Redirectionofionu-thsoouusreceedmwplooryketeos27%50%Flexible work (e.g., telecommuting, 23% 53%reduced work week)Career path opportunities 17% 56%Compensation levels 15% 57%Benefit levels and packages 14% 52%Discretionary perks (e.g., subsidizedfood/beverage, subsidized parking) 12% 46%Paid holidays and vacation 10% 61%Tuition reimbursement 8% 55%
18% 5%18% 5%21% 3%23% 4%IncreaseRemain the same25% 3%D seecreaDon’t know32% 2%39% 3%27% 2%31% 6%
Managing talent in a turbulent economy – April 2009 6
As layoffs become more frequent and less predictableand benefits are curtailed, it is no surprise that employeemorale remains low. More than one in three executivessurveyed (36%) reported that employee morale decreasedover the past three months, while 25% reported trust andconfidence in leadership declined (fig. 5).Figure 5. Impact of economic climate on talent efforts over past three monthsFrequency of employeecommunications 34% 50%Retirements 25% 56%Trust/confidence in leadership 19% 54% Voluntary turnover 18% 59%(not including retirements)Introduction of new talent programs 18% 49%Employee morale 18% 45%High-potential voluntary turnover(not including retirements) 16% 61%
15% 1%15% 4%25% 2%19% 4%30% 3%36% 1%19% 4%
 e frequency of employee communications is onthe rise as executives surveyed seek to counter lowht on by an anemic economyaenmdp slaolyaerey /mboernaele  tb rcoutubgacks34% of corporate leaders surveyed report their companies communicatedmore frequently with their employees over the pastthree months.
IncreaseRemain the sameDecreaseDon’t know
Managing talent in a turbulent economy – April 2009 7
Cost cutting crowds out sales andservice as a key strategic priority
While the overall ranking of key strategic priorities for by a 23-point margin (63% to 40%), compared to justsenior executives surveyed remains unchanged since five percentage points in the previous survey. Investing inJanuary, cutting and managing costs are now by far the innovation/research and development dropped by roughlyprimary concern of the executive suite, outdistancing half between January and March (fig. 6).other priorities by more than 20 percentage points. Whenasked to identify the strategic issues that currently occupyDigging deeper:Life sciences/Health caremost of management’s attention, executives ranked and Energy/Utility companies surveyed seecutting and managing costs first (63%), acquiring/serving/ improving top- and bottom-line performance asretaining customers second (40%), and managing human a lower priority than other companies—a findingcapital and improving top and bottom line performance consistent with their more optimistic overallthird (tied at 30%) (fig. 6). economic outlook. Just 22% of Life sciences/Health care and 17% of Energy/Utility executivesAlthough “acquiring/serving/retaining customers” ranked ranked it as a top priority versus 30% overall.second in this survey as it did in January, the number Public companies, which must answer to restlessof top managers who gave it a top rating dropped shareholders, were more concerned (37%) aboutprecipitously from 56% in January to 40% in March. Cost improving top/bottom line performance thancutting now exceeds sales- and service-related activities privately held ones (24%).
Figure 6. Current strategic issues: March vs. January highlighting signifi cant changes
Cutting and managing costsAcquiring/serving/retaining customers 40%Improving top and bottom 30%line performance 25%Managinghumancapital27%30%Developing new products and services 21% 26%Addressing risk and regulation 16%challenges 20%12%Expanding into global and new markets 12%Capitalizing on M&A/divestiture/ 12%restructuring11%Leveraging technology 12%10%Investing in innovation/research 7%and development 13%Other 1%3%
Managing talent in a turbulent economy – April 2009 8
The shift to cost-cutting mode becomes more pronounced As companies shift their focus away from sales andwhen comparing March and January results by industry. customers, talent managers surveyed are also pullingUnlike in January, executives surveyed in every industry back on training activities in this area. Roughly one innow rank cutting and managing costs as their number one five (22%) now report they are decreasing job-specificstrategic priority. In March, for both Consumer/Industrial training in sales and customer service versus 13% inproducts and Technology/Media/Telecom, cutting costs January, while the number increasing this training felldisplaced landing and keeping customers as their top from 29% to 24%. The declining focus on sales was morepriority (fig. 7). pronounced among non-HR executives, with just 34%ranking “acquiring/serving/retaining customers” as a topmanagement priority, compared to 54% in January.While January’s survey revealed a mix ofTsuhrevegyeenderaanlldytpheesssitrmoisntigceemcopnhoasmisicoonurtelodoukcinofgecxoesctsutivesoff ensive and defensive measures, Marchmay also be cutting into plans aimed at repositioningresponses indicate executives are clearlyrceovmeaplaendieasmfoixrobfetotfefretnismiveesaanhdeadde.feWnhsiilveeJamneuaasruyresss,urMvaerychon defense.responses indicate executives are clearly on defense. Otherthan Energy/Utility executives, no survey participant inMarch listed investing in R&D or developing new productsas one of their top three priorities.
Figure 7. Current strategic issues by industryConsumer/ Life sciences/ Technology/Ranking Industrial products Health care Media/Telecom Energy/Utility Financial services1 Cutting and managing Cutting and managing Cutting and managing Cutting and managing Cutting and managingcosts costs costs costs costs2 Acquiring/serving/ Acquiring/serving/ Acquiring/serving/ Managing human Acquiring/serving/retaining customers retaining customers retaining customers capital retaining customers3 Managing human Managing human Improving top and Acquiring/serving/ Improving top andcapital capital bottom line retaining customers bottom lineperformance performanceDeveloping newproducts and services(2-way tie)
Digging deeper:Are executives in different regions employing different strategiesto manage through difficult times? Yes, according to the March survey. Far moreexecutives surveyed in the Americas (21%) are looking to leverage technology toimprove operations than their counterparts in APAC (6%) and EMEA (8%). By eightpercentage points, APAC companies are more focused on expanding into global ornew markets than companies in the Americas. The reverse is true when it comes tocapitalizing on M&A/divestiture/restructuring opportunities; 16% of executives inthe Americas ranked this as a top priority, compared to 7% in APAC.
Managing talent in a turbulent economy – April 2009 9
Focusing on defense: Talentpriorities refl ect the rough economy
Corporate executives, firmly in cost-cutting mode, Headcount reductions are a higher talent managementreported that reducing employee headcount represents priority in some industries than in others. By a 12-pointthe top talent priority today and will remain so over margin compared to total respondents, companiesthe coming quarter. Nearly four in ten (39%) survey surveyed in the Financial services sector rank reducingparticipants named reducing headcount as their top talent headcount as their top current talent priority. Reducingpriority, about the same (38%) as in January. Looking headcount now and over the next three months ranksforward, a slightly smaller, but still substantial minority as a lower talent priority for Life sciences/Health care(34%) report lowering headcount will be their top talent companies and Energy/Utility companies.priority three months from now (fig. 8).Figure 8. Current and anticipated talent prioritiesReducing employee headcountCurrent 39% 13% 17% 31%Next 3 months 34% 16% 19% 31%
RetentionCurrent 24% 36%Next 3 months 27% 30%
Training and developmentCurrent 24% 36%Next 3 months 25% 37%
RecruitmentCurrent 13% 15% 22%Next 3 months 14% 17% 20%
Digging deeper:From a global perspective, EMEA companies surveyed stoodout for being less focused today on reducing headcount, with only 20% currentlyranking it their top talent management priority. Looking to the next quarter, thesesame EMEA-based companies anticipate a turn for the worse, with 35% reportingthat reducing headcount will be the top talent priority over the next three months.
30% 10%32% 11%
31% 9%29% 9%
Top priorityMedium priorityLow priorityLowest priority
Managing talent in a turbulent economy – April 2009 10
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