As leaders have steered their companies through this economic downturn several familiar tactics have been deployed. A common move has been to cut costs – many firms have and many more will as an effort to hunker down and focus on the core business. Others, like Oracle’s Larry Ellison, will see the tough times as having created a buyer’s market and will look to make acquisitions on more favorable terms than could have been had months ago. Still others will look for ways to forge alliances, to innovate, or to otherwise shore up their competitive position.
Regardless of the plans leaders develop to forge ahead the single critical success factor is how well the company understands, develops, and then deploys talent. The cleverness of the strategy developed to lead the company out of the downturn is irrelevant if there isn’t a team in place that can execute. Here is the complication – when the competitive dynamics and the broader economic conditions have changed this quickly and dramatically it is critical to understand just what your team can do. No company is playing the same game – or the game the same way – as they were just a few years ago. How well boards of directors and CEOs recognize and respond to that will determine how quickly and how successfully they bring their company through the downturn to leverage today’s improving conditions.
The challenge faced by leaders today is that two characteristics of the downturn make it likely that talent management issues have not been given proper priority. First, because virtually all companies include some degree of cost-cutting in their plans for moving forward many are often too quick to identify succession planning, employee development, and similar talent management investments as targets for saving – it becomes “something we can’t afford to do right now”. The problem with this strategy is that this may be precisely the time that investment could yield the best return. How much experience does the management team have in managing in hard economic times? How deep is their understanding of the impact fundamentally different market conditions will have on the business? What previously unforeseen competencies have become critical for your leaders? How can you develop these competencies without investment? As conditions improve, how can we be sure we have the talent on board to take full advantage?
Second, the turbulent business climate leads to a turbulent labor market. When employees view their company’s situation as tenuous they are likely to consider an exit on their terms rather than waiting to see if the situation improves. Of course those most likely to leave are the most talented – they are the ones that will most easily find other opportunities. For buyers of talent there is an incredible opportunity in the labor market because of this churn. Buyers face a challenge in sorting wheat from the chaff as individuals look to leave companies with futures perceived as bleak or are cut loose – some time back, for example, J.P. Morgan made available the entire top management team of Washington Mutual. For those struggling companies retention becomes an enormous challenge – and it may be one that only can be overcome with investment in talent. And as conditions improve and hiring begins, pent up interest in new positions will lead to turnover.
For these reasons, this is not the time for Boards and CEOs to let off on succession planning and talent management but instead to double down to ensure they have the requisite sets of skills and experiences to be successful in navigating this downturn. Specifically, succession plans need to be revisited – the future that a candidate was being prepared for has fundamentally changed. Consequently what was a “ready now” successor may now face a significant gap in their preparation. And smart buyers of talent may find some great values on the marketplace – but those can only be properly recognized when a clear understanding of what the company needs and what the candidate can do exists.
About the Authors
Nathan Bennett, Ph.D., is Professor of Management in the J. Mack Robinson College of Business. He specializes in leadership and strategy execution, managing innovation and change processes, top management team dynamics, and contextual influences on individual behavior in organizations. Nate has published in numerous widely-read resources for managers including the Harvard Business Review and Wall Street Journal. He is co-author of the 2006 Stanford University Press title “Riding Shotgun: The Role of the COO” and the 2010 book “Your Career Game: How Game Theory Can Help You Achieve Your Professional Goals.” Professor Bennett received both his Bachelor’s degree in Sociology and Master’s degree in Applied Research from Tulane University, and a Ph.D. in Management from Georgia Tech.
Taylor M. Griffin is a partner and COO of The Miles Group.