Challenges of an Improving Economy
June 20, 2013 - SCMR Editorial
Editor’s Note: This guest feature was written by Chuck Parke, Executive Director, Non-Degree Programs, The University of Tennessee, Knoxville. Center for Executive Education
As the key indicators continue to point to an improving economy, many organizations find themselves with new concerns regarding talent management. While dealing with an improving economy is a welcome change, the challenges presented today are significant, and leaders need to understand the impact on their organization of the following potential issues:
• Loss of tribal knowledge due to retirements
• Pent-up demand for formal training
• Retaining top talent
• Recruiting new talent
Due to tough recent economic times and productivity improvements prior to the recent economic crisis, many organizations find themselves with a high percentage of employees who are eligible to retire now or in the next two years. I have talked with a number of organizations where the percentage of their workforce that is retirement-eligible in the next few years is well over 50 percent. This rapidly approaching talent cliff presents enormous challenges for organizations to minimize the impact of their “tribal knowledge” walking out the door.
Some companies have recognized this impending situation and have implemented mitigating strategies, such as establishing part-time positions for “subject-matter experts” who would like to work part-time after they retire. This provides a “lifeline” to expertise that is needed for a more seamless transition.
Other companies are making a concerted effort to update standard work documents to a much higher level of detail. A third strategy is partnering subject-matter experts with younger employees in a more informal knowledge transfer. In dealing with the potential drop in organizational performance, a combination of all three mitigating strategies seems prudent.
In poor economic times, travel and training tend to be the first discretionary expenses that are cut. For the last five years, many organizations have canceled most formal training programs. Even if money was available for training, most professionals already are working heavy hours to meet the demands of leaner, flatter organizational structures. Formal talent development has taken a backseat to survival for many companies.
Due to the length of the recent economic downturn, this pent-up demand for formal training presents some challenges to organizations.
• Lack of formal development opportunities decreases readiness for younger employees to step up into higher leadership and/or technical positions that will be created in the pending wave of retirements.
• Although employees will expect more development opportunities as financials improve, many of the resources and programs may no longer exist to support development activities.
• Formal training will take on a higher importance in attracting and retaining top talent in an increasingly competitive market.
Leaders should assess where their organization falls on this curve of pent-up demand and take action to ensure that training and development activities are rejuvenated within their organization. Comprehensive talent management and development activities need to be resourced both financially and from a human resource perspective. Taking action quickly will help alleviate some of the challenges mentioned above.
Another challenge of an improving economy is retention of top leadership and technical talent. During these past tough economic times, many employees stopped shopping for a better job and simply focused on keeping a job. These same employees have been working long hours for the last five years with few perks and little if any wage increases or bonuses. As the economy heats up, looking for “greener pastures” will become much more prevalent.
Companies have been hesitant to hire additional employees even as volume increases due to a lack of confidence in a sustainable recovery. Given the tough times we have endured, it is easy to understand their concern. However, employees cannot maintain these levels of working hours and stress much longer. As the economy strengthens, other companies are going to be luring away more experienced personnel to backfill for the talent drain discussed earlier. Leaders need to take action before losing key talent at all levels of the organization to other companies that are coming out of the recession at a more rapid pace. Countermeasures should include both intrinsic and extrinsic components to retain their best players.
Finally, the prospect of hiring new employees presents its own challenges. Prior to the economic crisis, many companies had co-op programs or internships to identify and develop young talent. Again, most of these programs were eliminated during the recession. Leaders need to push their organizations to re-launch these programs in a variety of fields. Properly administered co-op/intern programs are some of the best money an organization can invest. The emphasis here is on the “properly administered” part of the previous statement. Poorly executed programs do not reveal the true capabilities of the candidates and in many cases turn the prospective employee away from pursuing a career with the host company. Well-run programs are intense and challenging so that employers can truly get a sense of the potential of a co-op or intern.
Equally important is that the co-ops or interns have the chance to determine if this is the right company for them. During my career, I had much more success growing young talent through internships and co-op programs than hiring away talent from other organizations. One is a known entity and the other is at best an educated guess based on a piece of paper and a series of short interviews.
While these programs are being re-established, companies need to establish strategic partnerships with universities to the extent that personal relationships are made with faculty who can provide key insights on potential candidates.
As the economy continues to rebound, these are exciting times for companies that have had their backs to the wall for the last five years. There is a sense of optimism that times are getting better. I believe that it is critical for leaders to be cognizant of the talent management challenges that come with an expanding economy. Don’t get caught watching the paint dry!
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