Organisations responded predictably to the global financial crisis and its following economic recession. They cut costs which, in most cases meant sacking staff, freezing salaries and beating retreat from the recruitment trenches of the talent wars.
Now, however, it’s time to re-tool in readiness for new world order of enterprise. It’s all hands on deck. Ooops! Some of the best hands were jettisoned.
Research is emerging to show that quick fix solutions to cost reduction carry subsequent, and potentially heavy costs. As global management consulting firm Hay Group has discovered, history shows that when organisations hit hard times, the best people often leave first and, the silliest organisations let them go.
And research conducted by Britain’s Compliance and Ethics Leadership Council found in 2008 that disengaged employees were, with the crisis at its height, 24 percent less likely to quit than in previous years. In other words, people that organisations were probably less concerned about losing, stayed put.
A Hay Group survey also conducted at the end of 2008, found that 24 percent of organisations in New Zealand and Australia were under pressure to either lay off staff or freeze pay rates. Their associated research into retaining and engaging high-performance executives during tough times suggests, however, that organisations which took laissez fair approach to protecting their talent pool during the recession, may now find themselves scrambling to hire and develop new leaders from scratch.
The New Zealand Institute of Management’s Northern chief executive, Kevin Gaunt, agrees. And, he adds, some organisations upset their people during the recession by, for example, “wiping bonuses at stroke and then publicly claiming to have made good profits”, even though the economy was flat. “Once they can, people will leave these organisations,” he warns.
Auckland-based executive recruiter Peter Kerridge believes the recruitment market is “still tight, but better than this time last year”. He agrees, however, that many companies may have made rod for their own backs as the recession recedes and the recovery gathers momentum. “Employees and executives have long memories,” he warns adding that organisations now contemplating “taking advantage” of the difficult market by offering “ridiculously poor packages and not paying for skills in areas where supply exceeds demand” will do themselves even more long-term damage.
Gaunt believes positive recruitment and retention policies are often and mistakenly seen as less important than they really are. They are frequently considered as simply “HR speak” or theoretical. “They are not,” he says. “They are key component of any modern organisation’s [performance] toolkit.”
And based on his observations of successful NZIM member organisations, those that focus on retaining their best people rather than recruiting to replace the departed, will do better in the marketplace. “Senior managers should always be looking for high quality people and have strategies to keep them in place,” he adds.
“Retention is very important and at times, fine balancing act,” says Gaunt. “It is not just about giving people more money. It is about fully engaging them so that they choose to stay. This is at the heart of good modern management.”
In his opinion, people are engaged when they:
• are clear about what their role is and they have the tools and skills to achieve it;
• feel that what they do at work is mostly worth doing and recognised as such;
• work with people they enjoying working with; and
• believe in the organisation’s goals.
Gaunt’s thinking is confirmed by Hay’s international research. It found that organisations are more likely to retain their high performers if they both “engage and enable” them. Their research suggests that “in uncertain times” it is even more important that the best people “are clear about where the organisation is heading and where they fit into it”.
Engaging people, according to the Hay Group, is about recognising and rewarding them; gaining their trust; building confidence in senior leaders; providing clarity and direction; offering continuous learning and development opportunities; ensuring work is challenging and interesting; and, listening to people’s ideas and concerns.
Enabling people is about putting them in the right roles; providing ongoing performance feedback and providing supportive work environment.
Organisations frequently gloss over poor performance in boom times and tight labour market. They fail to enforce strong performance management systems. In crunch economic times they do the same thing in reverse, imposing restrictions on all employees regardless of performance. The outcome is that mediocre managers fail to see the need to change, and high performers see little or no return on their discretionary efforts and either disengage or leave.
Trust is critical performance factor in any organisation. How employers treated their people during the recession will count either for or against them as they reset their compass for the future. And key component of building and retaining trust is communication. Organisations that did not honestly, effectively and consistently communicate with their people in the tough times are likely to suffer as the market changes.
Again, as Hay’s employment research found, many organisations put off communicating during the crisis, rationalising that they first needed all the facts or, that they were uncertain about what they planned to do. This could, Hay suggests, be mistake. “The best people want to know what their senior leaders are thinking and want to know the decisions they have made.”
Kerridge agrees that good people should be retained and that, more often than not, that means engaging them. “The research around professionals and executives is consistent,” he adds. “Give good people problems to solve in teams, support them, protect them from [office] politics and interference and lead them well.
“There is now core challenge for leaders to paint compelling view of the future and give teams something to aspire to beyond ‘surviving the recession’ mantra. This could be particularly good time for smart businesses,” he adds. “For those than can see the opportunity.
“But for many, it will be the alkali battery strategy – just keep going until your competitor gives up and goes home. If the market shrinks by third but half of your competitors exit because it gets too tough, smart employers could grow their operation by third without even trying,” he suggests.
As NZIM’s Gaunt says, the best people need to be fully engaged so they choose to stay. So, employers who want to keep their best people at time when the headhunters may be offering new and tempting rewards, engage them in challenges and provide constant performance feedback.
Feedback is more critical than ever in uncertain times, according to Hay Group. “Your best people need to know that they are focusing on the right things, behaving appropriately and adding value. If they are not, they need to know what you want them to do differently.”
Outstanding employees, no matter what level in the enterprise, turn off without ongoing, constructive performance and behavioural feedback.

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