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How does top talent react to cost cutting?


Budget cutsAs businesses seek to consolidate and cut back, development opportunities for key talent may disappear. Claire Logan examines how to retain and motivate top talent whilst budgets are being slashed.

Tactical cost cutting and management of redundancy programmes take up the majority of an HR team’s time during a recession. However, implementing both of these effectively and efficiently will not be enough; HR also needs to support the organisation to come out of the downturn in the best possible place – a key aspect of achieving this involves managing talent.

Ever since the McKinsey report on ‘The War for Talent’ (1997) we as HR professionals have, quite rightly, invested a great deal of time and energy in getting key talent through the door and then managing their careers effectively once hired. We wanted top talent to know they were special. We provided a myriad of opportunities – on-the-job development included heading up new ventures, managing new product launches or heading high profile projects reporting to senior directors. We also invested greatly in their personal development by providing one-to-one coaches, external mentoring or accredited study programmes.

“Organisations are drawing back from expansion plans and reducing discretionary spending on development opportunities.”

Right now, all these development opportunities look more fragile. Organisations are drawing back from expansion plans and reducing discretionary spending on development opportunities. Faced with this, top talent will quickly come to the conclusion that their development is on hold. For high achievers, the resulting impact on morale could be significant and reduce the likelihood of them staying with the organisation in the long term – when the market picks up they will be the first to find a new home.

So what should you do to keep top talent actively engaged while cutting costs?

Get them to lead cost-cutting/redundancy programmes

There is a tendency to protect key talent and reassure them as soon as possible that they will not be affected by cost cutting. However, many of your high performers have never been through a downturn before and this is an ideal opportunity for them to learn. One high-potential employee was persuaded by colleagues to act as an employee representative during a redundancy programme – they found that ‘the ability to increase their network and raise your profile in the organisation is a key benefit’. Making difficult decisions about people’s employment will be a critical aspect for long-term development so get your talent actively involved in leading redundancy programmes and building a cost-conscious culture into the organisation.

Review your long-term incentive plans

With the fall in the stock market, any long-term incentive plans which are heavily reliant on shares could very well be out of date. Financial incentives that aim to pay out when the market picks up could be one of the small steps you could take in this area to convince your top talent of their central role in the future of the organisation.

Maintain challenging performance targets

One of the mistakes organisations often make is to stop setting stretching targets for high performers just because of a period of cost cutting. Maintaining demanding targets and expecting delivery is critical to keeping motivation levels high. If performance dips from great to average you are still perfectly within your rights to address this with your top talent. It is likely to have an impact on the motivation levels of others if your top talent start taking their foot off the gas, so make sure that you pick them up on it and keep expecting strong performance.

“Even top talent will be feeling the uncertainty of the current economic climate.”

Watch for behaviour that does not fit with your company values

Even top talent will be feeling the uncertainty of the current economic climate. If not affected personally, their friends, family and partners may be affected and this can provoke unexpected behaviour. Particularly in competitive environments, there may be an increase in behaviour that focuses on ‘self preservation’ at the cost of working cooperatively. This is a sure-fire way to miss business opportunities as an increased internal focus never results in better customer service. Don’t let your talent get away with this type of behaviour, especially if it does not fit with the values of your organisation or if it could damage your brand.

Re-evaluate who is in your talent pool

Adversity can bring out the best and the worst in people at the same time and this is an opportunity to re-evaluate who you really want to invest in for the future. Those who are not resilient to the pressures or do not have the emotional engagement to lead their teams through the uncertainty are not likely to be the leaders of the future.

Engage with your top talent and make sure you are investing in the right people – even during the downturn. If you do this and use your top talent to plan for the future it means that when the markets improve, you will be ready to hit the ground running.

Claire Logan is a managing consultant at PA Consulting Group

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