To read Managing Talent In A Turbulent Economy Part Four please click here.
Key findings
In September, for the first time since Deloitte began its longitudinal study of global talent trends and strategies, surveyed executives are more inclined to believe the worst of the economic crisis has passed, rather than the worst lies ahead. Many of these corporate leaders are preemptively leaning into the recovery, adopting talent strategies aimed at heading off a looming "resume tsunami" in the hope of preventing key employees from departing for better opportunities. Nevertheless, many companies risk being left behind because they have not implemented either the talent or innovation strategies needed to seize the opportunities presented by a recovering economy.
Since January 2009, Deloitte has been conducting a longitudinal survey to evaluate how executives are managing their workforces during the economic downturn—and whether they have effective strategies in place for the recovery to come. The September 2009 survey, like its predecessors, provides insights into the talent plans and priorities of major companies across every sector of the global economy. The results of the September survey revealed the following key findings:
- The hints of economic optimism that first appeared in the May survey have grown considerably. Surveyed executives and talent managers who believe the worst is behind us outnumber those who believe the worst is yet to come—and by a considerable margin.
- Many companies in the survey are implementing strategies to avoid a resume tsunami by going on the offensive to retain today's key employees and train the next generation of leaders. Corporate layoffs, which have been prevalent throughout this survey series, declined significantly at these companies, suggesting that many companies have completed the task of rightsizing their workforces.
- While nearly all surveyed companies recognize the importance of innovation, few of them appear to have talent plans in place to drive innovation in their businesses.
- There are clear and compelling differences between talent and innovation leaders and talent and innovation laggards. We identify talent and innovation leaders as those companies with a deep understanding of the link between talent and innovation, making them far more likely to have identified the critical employees who drive innovation in their companies; far more likely to have specific training programs in place to develop critical innovation employees; and far more likely to be making the investments—both financial and non-financial— needed to retain the employees who drive innovation in their companies.
Deloitte believes that companies that remain in a defensive posture risk losing the fight for talent that this survey suggests is already heating up. Hunkering down with cost cutting and headcount reductions alone may prove to be a losing strategy for weathering the resume tsunami, leaving companies without the workforce strength they need to benefit from the economic recovery.
The economic outlook Brightens
For the first time since this study was launched in January 2009, more surveyed executives now believe the worst of the economic downturn is behind us, rather than the worst is yet to come—and by a decisive 31% to 7% margin. This greater optimism was reflected in a September survey of 325 senior corporate leaders and talent managers working at large companies (annual sales of $500+ million) across a range of industries and the three major economic regions. The survey was conducted by Forbes Insights on behalf of Deloitte.
Rising economic optimism is mirrored by a fall in pessimism (Figure 1). Over the course of this longitudinal survey, the number of executives who predicted the worst is yet to come increased from 30% in January to 32% in March before dropping dramatically over the past two surveys to 18% in May and now just 7% in September.
While the overall economic outlook may be brightening, participating executives, who have passed through perhaps the most difficult economic crisis in a generation, retain a healthy sobriety about the future. Although the shift toward optimism is notable, 62% of executives and talent managers surveyed still anticipate a difficult operating environment—a figure that has remained relatively constant throughout the survey (January, 64%; March, 58%; May, 66%).
Digging Deeper: Of all industries surveyed, Financial Services executives and talent managers were most likely to report they have weathered the worst of the economic crisis. Nearly four in ten (38%) predicted that the "worst is behind us" compared to 31% overall.
Overall strategic emphasis remains defensive...
The September survey suggests that corporate strategy may be following behind future economic perceptions. When asked which strategic issues rank highest on the management agenda, executives who participated in the September survey ranked "cutting and managing costs" first, just as they had done in each previous survey since January (Figure 2).
While cost cutting was widespread across all industry groups, several other strategic priorities are also vying for management attention (Table 1). For the first time in this survey series, addressing risk and regulation challenges cracked the top three priorities, with both Energy/Utilities and Financial Services executives citing it as a top strategic issue. As seen in Figure 2, managing human capital ranked highly, as it has in previous surveys, led by Energy/Utilities executives who ranked it second and Technology/Media/ Telecommunications executives who ranked it third.
Digging Deeper: Nearly four in ten of surveyed Asia Pacific (APAC) executives (39%) ranked "managing human capital" as a leading strategic priority—the only region to list it in the top three. Only 28% of Europe, the Middle East, and Africa (EMEA) executives and 26% of Americas executives listed managing human capital as a top priority.
But many companies are going on a talent offensive
Despite a still significant focus on cutting costs, many surveyed companies appear to be gearing up to go on a "talent offensive."
In May, Deloitte warned of an approaching resume tsunami in which employees who potentially have been harboring a desire to move on from their current employers may seize new job opportunities as the economy improves. Perhaps recognizing the need to protect their companies from this resume tsunami, many executives and talent managers who participated in the September survey report they are reviving retention initiatives and training and development programs in an effort to keep their workforces intact.
Although reducing employee headcount was listed again as the leading current talent priority, the number of executives ranking it as their highest priority dropped from 42% in May to 34% in September (Figure 3). More interestingly, in a weighted average of talent priority rankings, training and development came out on top, with retention and headcount reduction tied for second among current talent priorities.
Digging Deeper: The September survey revealed an interesting geographical split on current talent priorities. Companies in the Americas and APAC appear to be making a more decisive shift to a talent offensive. Based on average rank, APAC executives reported they are most focused on training and development, while Americas executives are nearly evenly split between retention and training and development. EMEA companies appear to be slower in shifting from defense to offense, remaining strongly focused on reducing employee headcount and costs. This trend is reaffirmed by the percentage figures: 47% of EMEA executives surveyed ranked reducing employee headcount as their top talent priority, compared to just 30% in the Americas and 23% of APAC respondents.
Looking ahead to the future, the strategic shift among executives toward a talent offensive becomes even more pronounced. When asked to rank top talent priorities three months from now, survey participants pushed headcount reductions down to a clear third, with just 22% ranking it highest, behind both training and development (32%) and retention (30%) (Figure 4). This is the first time since the survey's inception that reducing headcount has not topped the list of future talent priorities.
Digging Deeper: Both the Consumer/Industrial Products and Life Sciences/Health Care industries appear to be going on the most aggressive talent offensive. When it came to ranking talent priorities over the next quarter, both industries ranked training and development first at 45% and 38% respectively—significantly higher than defensive measures such as reducing headcount (18% for Consumer/Industrial Products and 19% for Life Sciences/Health Care).
As headcount reduction declines as a talent priority, surveyed companies also report that layoffs are subsiding. While rising unemployment worldwide indicates layoffs are still prevalent, the September survey suggests that many companies have already made the talent cutbacks they need to make. Between January and May, the number of survey participants who experienced layoffs rose steadily from 42% in January to 47% in March, to a high of 61% in May. But in September, layoffs in the preceding quarter among survey participants fell by 13 points, from 61% in May to 48% (Figure 5).
Looking ahead, the layoff picture improves even more dramatically. Only 36% of executives who participated in the September survey anticipate more layoffs in the coming months—a significant drop from the May high of 50%. The 54% of respondents who do not expect any layoffs is the highest since this longitudinal study was launched, up from 43% in May.
Digging Deeper: Participating companies in the Financial Services industry remain the most likely to have experienced layoffs, but Technology/Media/ Telecommunications companies are also looking to cut back talent, both now and in the near future. For Financial Services, 54% have had layoffs in the past three months, and 39% anticipate layoffs in the next three months. In Technology/Media/Telecommunications, 53% have had layoffs in the past three months while 44% expect them in the next three.
Are you developing talent? Will your competitors poach it?
As headcount reductions slide down the management agenda and layoffs abate, many of the surveyed companies are ramping up retention initiatives to keep key leaders and high-potential employees on board—and to prevent competitors from stealing them away. Surveyed companies seeking to survive the potential resume tsunami are focused on several key retention tactics, such as opening up more opportunities for career advancement and offering better financial incentives.
Nearly one-in-three executives surveyed (31%) reported they are increasing career path opportunities—a jump of eleven points from January (20%) (Figure 6). After nearly a year of austerity, even compensation is back on the table, with 28% reporting they plan to increase compensation levels over the next 12 months, up from 15% in January. Talent managers also see flexible work arrangements as an effective retention tactic; 35% of those surveyed plan to increase their focus on this area.
Retaining high-potential employees is just the first step in developing an effective talent strategy. Future corporate leaders must also be trained to handle greater levels of responsibility as their careers develop.
In previous reports, Deloitte flagged the renewed attention to training and development programs among executives and talent managers. That trend grew even stronger in September, particularly when it comes to nurturing the careers of key employees.
According to the September data, nearly half of surveyed executives plan to increase high-potential employee development programs (49%) and a similar number are ramping up initiatives to develop future leaders/managers (48%) over the next 12 months (Figure 7). Programs aimed at developing top talent and training corporate leaders easily outrank all other training initiatives, including regulatory/ risk training and sales-specific training.
Digging Deeper: APAC executives appear especially focused on developing new leaders and managers. Two out of three (67%) APAC executives surveyed plan to increase efforts in this area compared to just 36% in EMEA and 39% in the Americas.
Signs of life in recruitment: With many companies on a talent offensive, recruitment efforts are showing signs of life. The number of executives who report they plan to increase experienced hires over the next year rose to 39%. There was also some relatively good news for recent college graduates seeking entry into the workforce: 26% of executives plan to increase campus hires—up from 15% in both March and January. As in previous surveys, "experienced hires" remain in high demand, ranking first among recruiting categories for every industry surveyed: Financial Services (48%), Energy/Utilities (40%), Consumer/Industrial Products (37%), Life Sciences/ Health Care (32%), Technology/Media/Telecommunications (32%).
Many surveyed companies appear convinced that highpotential talent that is not properly developed can be easily poached by competitors. Despite a weak economy, concern over losing key employees to better opportunities has been growing steadily, increasing from 43% in January to 44% in March to 51% in May. In September, the number of executives who said they were either highly or very highly concerned about losing high-potential employees grew to 60% (Figure 8).
Spotlight on talent and innovation In each edition of this longitudinal survey, Deloitte has zeroed in on a different aspect of talent management to provide a deeper look at how corporate leaders may be shaping and reshaping their workforces. In September, Deloitte shined the spotlight on innovation, specifically the talent strategies companies use—or too often do not use—to drive and support innovation.
Not surprisingly, September's survey revealed that participating executives clearly understand that their ability to innovate will help determine how successfully companies navigate today's difficult economy and whether they will thrive during the economic rebound many see ahead. By overwhelming margins, executives surveyed responded that innovation is either very important or important to their company now (84%) and will continue to be important both one year after the recession ends (82%) and three years in the future (85%).
Digging Deeper: While the desire to be innovative is widespread, it is not regarded equally by all industries. For example, by a 32-point margin (62% to 30%), Consumer/Industrial Products executives rated innovation as "very important" compared to Energy/Utilities executives.
A red flag: Companies value innovation, but do not have the talent strategies to drive it
Deloitte sees a clear red flag in the survey data: While most participating executives recognize the importance of innovation, many are not implementing the talent strategies they need to drive innovation within their companies.
When asked about their company's efforts to encourage innovation, more than six out of ten survey participants (61%) acknowledged they either had no talent strategy currently in place to drive innovation or did not know if they had one (Figure 9).
Digging Deeper: A majority of executives in only one industry—Consumer/Industrial Products (52%)— report their companies currently have a talent plan in place to drive innovation. Every other industry lagged behind the overall average of 39%: Energy/Utilities, 37%; Technology/Media/Telecommunications, 36%; Life Sciences/Health Care, 35%; and Financial Services, 33%.
Just four in ten surveyed executives (42%) believed their companies have identified the key employees and leaders most responsible for driving innovation within their organizations (Figure 10). Only 39% of survey participants have put specific programs in place over the last year to retain and develop this critical band of talent.
As far as specific tactics to drive innovation, just 43% reported that their companies had systems in place for managing innovation. Even smaller minorities could respond that they had "established an innovation process owner" (33%), "sponsored innovation competitions" (29%), or "created an innovation council" (27%). Somewhat more hopefully, 61% indicated they had "increased" or "significantly increased" the emphasis on innovation in their business strategies over the past year.
Digging Deeper: Surveyed APAC executives lead the way with incorporating innovation into their business strategies. Over the past year, 72% of APAC respondents report they "increased" or "significantly increased" their emphasis on innovation in strategic planning. Smaller majorities in the Americas (58%) and EMEA (53%) made similar progress.
Talent tactics to help drive innovation
When it comes to retaining the most innovative employees, participating executives and talent managers agree that financial rewards provide the most leverage. However, executives clearly believe that non-financial incentives—such as support and recognition throughout the company—can also be effective tools to drive innovation throughout their workforces.
When asked to list the three incentives most critical to retaining top innovators, bonuses or other financial rewards ranked first at 49%, closely followed by "support from leadership" at 42% (Figure 11). One third of surveyed executives (33%) also believe innovative employees respond well to both formal and informal recognition through vehicles like company newsletters, emails and other announcements. And 25% agreed that training and development programs specifically linked to learning new innovation skills can help keep key employees satisfied with their employers.
Looking more closely at their own companies, surveyed executives were quick to identify the barriers to retaining employees critical to their organizations' innovation program. When asked to list the top three retention barriers, survey participants ranked lack of career progression first at 40%, just ahead of lack of compensation increases at 37%. Lack of training and development opportunities was cited by just over one-quarter of executives (26%).
So do executives believe they are doing enough to retain employees who are critical to their company's innovation efforts? Not according to the September survey data. A significant 84% responded they were either somewhat concerned (61%) or very concerned (23%) about losing innovative employees. An even larger percentage (88%) are worried they will not have the talent they need in the year after the recession ends to manage their innovation programs.
Digging Deeper: While lack of compensation increases and career progression are the biggest barriers to retaining innovation leaders, there are variations across regions. APAC respondents are most concerned about lack of compensation—48% listed it as their top barrier to retaining innovative employees. EMEA (49%) and Americas (35%) executives cite lack of career progression as their number one concern.
In the course of this longitudinal study, Deloitte has identified a clear divide between companies that are positioning themselves effectively for the economic recovery and companies that are in danger of being left behind. In the September survey, this divide was evident once again when it comes to implementing talent strategies dedicated to driving innovation. While hunkering down may help a company survive the recession, we believe it represents a losing strategy for companies that want to excel during changing times and the economic recovery.
The talent and innovation leader's checklist
Does your company really have a talent strategy to drive innovation? The September survey revealed clear fault lines between how "talent and innovation leaders" and "talent and innovation laggards" are positioned for the coming economic recovery. The talent and innovation leaders represent the 39% of surveyed companies with an innovation plan, while the talent and innovation laggards represent the 61% of companies with no innovation plan currently in place.
The following checklist outlines the primary behaviors uncovered by our survey that underscore the intersection between talent and innovation and separate leaders from laggards.
Identify who drives innovation. Talent and innovation leaders are more likely to have identified the critical employees in their companies who drive innovation— by a 47-point margin over talent and innovation laggards.
Deploy strategies to retain and train innovative talent. By more than 3:1 (68% to 20%), talent and innovation leaders are more likely to have specific programs in place to retain and develop the critical talent that drives innovation in their companies.
Develop the next generation of corporate leaders. Talent and innovation leaders are significantly more likely to be ramping up training and development programs for the next generation of talent. By a 19-point margin, talent and innovation leaders expect to increase their focus on leadership/management development (59% to 40%) and high-potential employee development (61% to 42%) compared to talent and innovation laggards.
Invest in critical talent. Talent and innovation leaders make the investments—both financial and non-financial—to reward innovative employees. By double-digit margins, they are more likely than talent and innovation laggards to be increasing compensation levels and benefits (36% to 23%) and opening more career opportunities (41% to 25%) for their top talent. By a 12-point margin (56% to 44%), talent and innovation leaders are more likely to tie bonuses or other financial incentives to innovation and, by a 10-point margin (34% to 24%), are more likely to make innovation a key factor in employee performance reviews and promotions.
Be proactive in the talent marketplace. When it comes to recruiting, talent and innovation leaders are more actively recruiting critical talent (50% to 39%) and attracting critical leaders (46% to 35%) who can drive innovation in their organizations. Innovation leaders are not just focused on acquiring proven talent; they are also boosting efforts to bring in future leaders by increasing on-campus recruiting at a higher rate (37% to 18%).
Go on offense, not just defense. By a ninepoint margin (29% to 20%), talent and innovation leaders are more likely to be focused on developing new products and services. Talent and innovation laggards, on the other hand, remain firmly on the defensive, cutting costs at a greater rate than talent and innovation leaders (61% to 53%) and reducing headcount at a higher rate (39% to 23%). This may be one reason why, by a 13-point margin (39% to 26%), talent and innovation leaders are more likely to believe the worst of the economic crisis has passed.
Stay paranoid or lose key talent. One reason innovators are so keen on recruiting, retaining, and training key employees is because they understand talent will become a scarce commodity once the economy recovers. By nearly a 2:1 margin (22% to 12%), talent and innovation leaders have "very high" concerns about losing high potential employees to their competitors.
The bottom line: Talent and innovation leaders have a deep understanding of the link between talent and innovation and are actively deploying talent strategies that will drive innovation within their businesses. Talent and innovation laggards risk losing ground, not only to a weak economy, but also to competitors who will be better positioned to benefit from the recovery because they are taking the right steps now to integrate talent and innovation priorities.
Survey participants/ Demographics
In this fourth edition of Deloitte's longitudinal study of talent trends and strategies, 325 international executives participated in the survey conducted by Forbes Insights on behalf of Deloitte. Survey participants were typically senior leaders within their organizations, with 42% occupying the CEO, CFO, or other C-suite positions. Another 22% served as SVP, VP, or Director of their companies. Both HR and non-HR executives were represented (Figure 12).
All executives who participated in the September survey worked at large corporations with annual revenues above $500 million; nearly 20% at companies above $20 billion (Figure 13). Participants included executives and talent managers at both publicly traded and privately held companies.
Geographically, the survey was well balanced between executives in three major economic regions: the Americas (37%); Europe, the Middle East, and Africa (31%); and Asia Pacific (32%) (Figure 14).
A wide range of industries was represented in the September survey, including: Consumer/Industrial Products (26%); Financial Services (21%); Technology/Media/Telecommunications (20%); Life Sciences/Health Care (12%); and Energy/Utilities (8%) (Figure 15).
The fifth edition in Deloitte's longitudinal survey will be published in January 2010, completing a year-long study tracking talent trends and attitudes from the depths of the recession through the emerging economic recovery.
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