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Published April 2008

Talent Management May Be More Popular, Useful in Tough Economy

Steve Gross

 

Despite bad economic news and global concerns about recession, a new Mercer survey reveals most organizations are not leaning toward extremes of cost cutting, but are focused on the long term.

Employers cut jobs by 63,000 in February 2008 — the most in five years — and the economic news in the United States became a study in gloom if not doom. The U.S. Labor Department's recent report noted widespread job losses in construction, manufacturing and retailing, losses that far outweighed any gains in health care, education and other strong sectors. This underscores the impact of the housing and credit crunches and rocketing oil prices on the overall economy. Further, the looming threat of recession in the U.S. has touched markets worldwide and points at the broad economic vulnerability that is a byproduct of globalization.

Yet, downturns, recessions and periods of economic stagnation must be viewed in context. Economies endure cycles, and innovative companies rise to the challenge by creating positive change and fresh opportunities. More than anything, the onset of financial hardship tests human capital strategies and forces organizations to take a hard look at their people, as well as how they view human resources — as an expense to be cut or an asset to be more wisely managed.

Mercer's recent Compensation and Staffing Implications of a Changing Economic Climate survey asked how HR plans and talent management programs regarding staffing levels, compensation budgets, incentive opportunities and other people strategy-related activities may shift in anticipation of near- and medium-term economic changes.
With more than 400 survey responses from American and Canadian employers — and global responses being tabulated, as of this writing, from some 2,000 employers — the dominant message is: While organizations are considering a conservative, planned approach to managing aggregate staff costs, few are reducing planned compensation budgets or initiating pay freezes. It appears HR programs related to talent acquisition and retention are receiving more careful emphasis and attention.

Staffing and Compensation Stability

For example, the survey asked whether respondents considered or instituted changes to staffing levels as a result of the changing economic environment. The majority of U.S. and Canada companies plan no change. But one in three U.S. organizations are considering or instituting staff freezes or downsizing, while only 17 percent of Canadian companies are considering the same actions. So far, the perceived focus of economic downturn is U.S.-centric.

Further, only 16 percent of U.S. respondents and 9 percent in Canada are taking or considering compensation budget actions, while only 7 percent of the organizations in either country are taking or considering salary-freeze actions. Approximately 10 percent are considering or implementing incentive-opportunity or eligibility-coverage changes.