Nurturing Talent in a Forbidding Economy

It won't surprise too many people to hear that loyalty, trust, and engagement at work have been diminished during the Great Recession: We all know talented people who have become disaffected. Maybe we're even one of them. Put all those people together, and it becomes a daunting managerial challenge. Sylvia Ann Hewlett, founder of the Center for Work-Life Policy, took stock of the situation at some of the world's most powerful corporations, including Ernst & Young, General Electric (GE), Goldman Sachs (GS), Intel (INTC), and Johnson & Johnson (JNJ), all of which are members of the center's Hidden Brain Drain Task Force. Here are excerpts from Hewlett's new book, Top Talent: Keeping Performance Up When Business Is Down.—Susan Berfield

In these bleak times, companies are depending on their star performers as never before. Organizations need their top talent to be in peak form—firing on all cylinders—so they can succeed in a market that is the toughest in living memory. How are employers handling this challenge? In a word, badly.

To start with, leaders are seriously distracted. Caught between clamoring clients and vaporizing value, a CEO understandably might find it hard to focus on talent. People issues tend to translate into layoff strategies: How many should you let go? How should the cuts be distributed? Should you act surgically and strike deep or should you dribble out the reductions over time?

When it comes to talent management, CEOs are also hamstrung by outmoded thinking. In times like these—marked by massive losses and rising unemployment—it's tempting to imagine that there's no need to worry about motivating talent. People are so grateful to have a job, the conventional thinking goes, that they can be relied on to contribute 110%. Right? Wrong.

Cutting-edge research from the Center for Work-Life Policy's Hidden Brain Drain Task Force reveals the danger in conventional assumptions about sustaining high performance in tough times. Consider these critical and disturbing data points: In the wake of a mass layoffs, voluntary attrition can be deeper than the cuts themselves. A Center for Work-Life Policy survey shows that between June 2008 and January 2009, 14% of college graduates lost their jobs—of these, 32% were fired but an additional 68% voluntarily left their jobs. Participants in the Hidden Brain Drain strategy sessions were brutally honest when commenting on the impact of the current round of layoffs: 64% were considering leaving, and 24% were spending most of their time actively looking for another job. Those who stay report feeling disengaged, of being caught in long-term limbo: 74% of participants talked about being paralyzed, 73% felt demoralized, and 64% felt demotivated.

What's an Executive to Do? Overcommunicate. Everyone's anxiety level is already off the charts. Silence from those supposedly in the know only makes it worse. When leaders don't provide information, even the prized people whose positions seem safe start second-guessing what's going on. The resulting rumor mill inevitably undermines trust. "You have to have the courage to talk, even if it's just to say: 'We don't know,'" says Kathryn Quigley, head of talent management for the Americas at Credit Suisse (CS). "But whatever you do, you must say something, because people interpret saying nothing as meaning something bad."

Take Charge of Your Talent High performers thrive on acing challenges and surpassing goals. In tough times, many of the performance measures set up in rosier days no longer apply. Asking your top performers to pursue them anyway only sets up your best people for failure and creates bitterness and distrust. Smart managers channel team energy toward goals that are achievable in the current environment.

Don't assume everyone on your team knows the most productive use of her time. Under stress, even talented people often make bad decisions about which projects to focus on and how. You may have to become more of a micromanager to ensure that people are not only working hard but also smart.

Develop a Fair Restructuring Process The "terms of disengagement" matter. Poorly handled layoffs leave a bad taste in the mouths of those employees shown the door and those picked to stay. Wayne Cascio, a business school professor at the University of Colorado Denver, looked at 18 years' worth of downsizing data and found that even though expenses drop in the wake of large layoffs, revenues tend to drop, too—often disproportionately. This is because the remaining workers are coping with survivor syndrome—the anger, fear, anxiety, and decreased risk taking that follow a mass firing.

One way to reduce the number of redundancies is by a creative use of flexible work arrangements. Accounting giant KPMG has developed an imaginative contingency plan called Flexible Futures, which was designed to decrease payroll costs while at the same time maintaining the firm's deep commitment to its people. In January 2009 the firm gave its 11,000 U.K.-based employees four choices. They could volunteer for a four-day workweek and a 20% reduction in base pay; they could opt for a four-to-twelve week sabbatical at 30% base bay; they could opt for both; or they could stick to their current situation. "We were trying to deal with reality but also give employees some control over their own destiny," says Rachel Campbell, head of people for KPMG Europe. To date, 85% of KPMG's U.K.-based employees have signed up: The most popular choice is option three.

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