TalentManaging talent in a turbulent economyClearing the hurdles to recoveryJuly 2009
Contents2Keyfindings3Preparingforaneconomicupturn?4Moreissuescompetingwithcuttingcostsformanagement’sattention6Layoffsandheadcountreductionsstillprevalent8Talentprioritiesshifttowardretentionandtraininganddevelopment10Talentmanagersemphasizeexperienceandleadership11 Spotlight on talent retention16 Clearing the hurdles17 Implementing effective retention tactics18 Survey participants/demographics20 ContactsManagingtalentinaturbulenteconomy–July20091
Key ndingsMany business executives around the world cautiously believe the worst of the economic crisis has passed, based on a recent Deloitte survey. With a more optimistic outlook on their horizon, they now have new concerns that a “resume tsunami” may be building, ready to hit once the economy turns and their employees begin to consider new opportunities. Are companies devising and implementing effective retention strategies to hold onto the key talent they will need to prosper when the eventual recovery comes? To understand how the current economic crisis has affected talent, Deloitte has been conducting a longitudinal survey to gauge how top executives and talent managers across the global economy are reshaping their workforces as they confront the most challenging operating environment in generations. The May 2009 survey, similar to the January and March editions, tracked the ways select business leaders are shifting their talent strategies and priorities to meet the challenges of today’s sideways economy and how they plan to clear the hurdles to economic recovery. The results of the May survey revealed the following key fi ndings: •Pessimism about the broader economy has given way to the fi rst hints of optimism. Senior corporate leaders surveyed still expect economic conditions to remain diffi cult but, for the fi rst time this year, the number of executives who predict “the worst is yet to come” declined, while those who report “the worst is behind us” increased signifi cantly. • This budding optimism is refl ected in the actions these executives are taking to prepare for an eventual upturn in the economy. While headcount reductions and other cutbacks remain prevalent, many surveyed executives are sharpening their focus on retention and employee development initiatives so they can be prepared when the turnaround begins. • Once the recovery begins to take hold, these business executives and talent leaders can expect a “resume tsunami” as unemployment declines and voluntary turnover rises. While many of the surveyed talent managers appear to be updating retention plans and devising retention strategies in anticipation of a turnaround, Deloitte believes the depth and quality of these moves will separate the talent “winners” from the talent “losers” when the economy improves. • Surveyed talent managers and executives are most concerned about losing younger employees from both Generation Y (under age 30) and Generation X (ages 30-44). To retain these future leaders, many are considering a mix of retention initiatives, including greater fi nancial incentives and fl exible work arrangements. • Although retention planning is widespread, one fi fth of executives surveyed report they are doing nothing to revise their workforce strategies to prepare for an eventual recovery. And few of these executives have a clear understanding of the negative impact that increased turnover will have on their company’s ability to perform or on their bottom line. Managingtalentinaturbulenteconomy–July20092
Preparing for an economic upturn? InMay,319seniorbusinessleaders—bothHRandnon-HRForthefirsttimeinthislongitudinalstudy,thenumberofexecutives—participatedinasurveyconductedbyForbesexecutiveswhoreportedtheworstisyettocomeintermsInsightsonbehalfofDeloitte.Theseexecutivesserveatoftheeconomydeclined—and signifi cantly, from 32% in largebusinesses(annualsalesof$500+million)acrossaMarchto18%inMay(Figure1).Atthesametime,therangeofindustriesandthethreemajoreconomicregions:groupthatbelievestheworstisbehindusdoubledto16%theAmericas,AsiaPacific(APAC),andEurope,theMiddlefrom8%inMarchand5%inJanuary.TheseexecutivesEast,andAfrica(EMEA).maynotbereadytopredictaneconomicupturn,butmore seem to think they can see the bottom from where AsintheJanuaryandMarchsurveys,participantsclearlytheyaretoday—adecisivedeparturefrompreviousrecognizethechallengestheircompaniescontinuetofacesurveys.in the broader economy. However, despite a generally sober economic outlook, there was a marked shift in the May survey toward a more optimistic view of the future. Figure 1. Executive outlook on the economy: May vs. March vs. JanuaryThings are tough and will be for a while18%The worst is still ahead16%Theworstisbehindus8%5%32%30%MayMarchJanuary66%58%64%As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.Managingtalentinaturbulenteconomy–July20093
Morefissuescompetingwithcuttingcosts or management’s attention BoththechallengesofthetougheconomyandthehintsInMay,morethanhalfofexecutives(56%)rankedofoptimismaboutabetterfutureaheadarereflectedincuttingandmanagingcostsastheirtopstrategicthestrategicprioritiesthatcompeteforattentionamongissue—stillthehighestofanycategory,butdownseventhetopexecutivesandtalentmanagerssurveyed.CostpercentagepointsfromMarch(Figure2).InMarch,costcuttingremainsaparamountconcern,yettherearesignscuttingoutrankedthenextclosestmanagementpriority,thatausteritymeasuresmaybeabating.acquiring/serving/retainingcustomers,by23points(63%to 40%); however, by May, the margin was down to 13 points (56% to 43%). Figure 2. Current strategic issues: May vs. MarchCutting and managing costsAcquiring/serving/retaining customersManaging human capitalImproving top and bottom line performanceDeveloping new products and servicesAddressing risk and regulation challengesExpanding into global and new marketsCapitalizing on M&A/divestiture/restructuringLeveraging technologyInvestingininnovation/research9%anddevelopment7%Other1%1%16%16%12%14%12%12%12%21%20%33%30%30%30%28%43%40%Digging Deeper:Strategic priorities differ depending on whether a company has already taken steps to align its workforce with today’s economic realities. Surveyed executives who are not expecting more layoffs are more likely to be looking at new opportunities compared to those who are expecting more layoffs in the coming quarter —those who are not expecting more layoffs are more likely to be expanding into new and global markets (23% vs. 10%), investing in innovation and research and development (15% vs. 4%), and acquiring and serving new customers (52% vs. 38%). MayMarch56%63%Managingtalentinaturbulenteconomy–July20094
In a sign that these executives are also focused on the future, developing new products and services rose by seven points on the management agenda, with 28% of executives ranking it a top priority. Managing human capital has also been a consistent strategic priority for these business leaders—ranging from 27% in January to 30% in March to 33% in May. Surveyed executives who are not expecting more layo s in the quarter ahead are more likely to be expanding intonaetwionm,aarnkedts,investingininnovsigning-upnewcustomers.Digging Deeper:Across a range of industries, surveyed executives are predominantly focused on cutting and managing costs and acquiring and serv-ing customers. However, examining the full range of strategic issues shows some signifi cant variations (Figure 3). Executives at Financial Services fi rms were more than twice as likely to list “addressing risk and regulation challenges” as a top strategic priority (41% compared to 20% overall). Nearly one-third (30%) of Technology/Media/Telecom (TMT) companies are focused on expanding into new mar-kets vs. 16% overall. Figure 3. Current strategic issues by industryConsumer/LifeSciences/Technology/RankingIndustrialProductsHealthCareMedia/TelecomEnergy/UtilitiesFinancialServices1CuttingandmanagingCuttingandmanagingCuttingandmanagingImprovingtopCuttingandmanagingcostscostscostsandbottomlinecostsperformance2Acquiring/serving/Acquiring/serving/Acquiring/serving/CuttingandmanagingAddressingriskandretainingcustomersretainingcustomersretainingcustomerscostsregulationchallenges3DevelopingnewManaginghumanDevelopingnewAcquiring/serving/Acquiring/serving/productsandservicescapitalproductsandservicesretainingcustomersretainingcustomersManaginghumanManaginghumancapitalcapital(2-waytie)(2-waytie)Managingtalentinaturbulenteconomy–July20095
Layo s and headcount reductions still prevalentWithlayoffscontinuingtocaptureheadlinesandforallthreesurveysanda19-pointjumpoverJanuaryunemploymentratesrisingworldwide,itisnotsurprising(42%)and14pointshigherthanMarch(47%)(Figure5).thatreducingheadcountremainsasignificantfocusforForthefirsttimeinthethreesurveys,agreaterpercentagesurveyedexecutiveswhenitcomestomanagingtalent.ofexecutivesseelayoffsahead(50%)comparedtothoseWhenaskedtoranktheircurrenttalentpriorities,42%ofwhodonot(43%).respondents in May put reducing employee headcount at thetopofthelist—onparwithbothMarch(39%)andAsinpastsurveys,itseemsthatlayoffsaredifficulttoJanuary(38%)(Figure4).Measuredagainstothertalentanticipate.InMarch,42%ofexecutivespredictedlayoffspriorities,reducingheadcountoutpolledthenexthighestoverthenextthreemonths,yet61%ofexecutivesreportbyan18-pointmargin(42%to24%).theyactuallyexperiencedlayoffsinMay.Layoffsalsoappear to be concentrated among certain companies. TalentmanagerswhoarefocusedonreducingThree-quarters(75%)ofthosewhoreporttheyhadlayoffsheadcountusuallyreportlayoffsandtheMaysurveyinthelastthreemonthsexpectmorelayoffsinthenextwasnoexception.Morethansixintenexecutiveswhothreemonths;however,only11%ofthosewhohavenotparticipatedinthesurvey(61%)indicatetheircompanieshadlayoffsinthelastthreemonthsexpecttoconducthadlaidoffworkersduringthelastthreemonths—ahighlayoffsinthenextthreemonths.Figure 4. Current talent priorities: MayReducing employee headcount42%16%16%26%Top priorityTraininganddevelopment24%34%30%12%Medium priorityLow priorityRetention22%34%28%16%Lowest priorityRecruitment12%16%26%46%Figure 5. Organizations conducting layoffs: Digging Deeper:Participating companies in the May vs. March vs. JanuaryEnergy/Utilities sector were least likely to 61%Mayexperience layoffs: 33% reported layoffs in the Marchpast three months and 27% anticipate layoffs during the next quarter. Consumer/Industrial Product compa-50%Januaryies were the most likely to experience layoffs in the 47%n42%42%previous quarter (67%). Going forward, Financial 38%Services executives were the most likely to anticipate layoffs with 53% reporting layoffs were likely in the coming quarter.ExperiencedlayoffsAnticipatinglayoffspastthreemonthsnextthreemonthsManagingtalentinaturbulenteconomy–July20096