I was asked a few days ago what I felt were the the “mission critical strategies” that a business should employ for survival during the downturn.

The first piece of advice that I gave was not to be panicked into knee jerk reactions. Panic inevitably results in poor decision making and poor decisions inevitably leads to long term regret.

The answer was then expanded into six key areas:

1) Plan for a long downturn. It’s likely that things will be slow for between one year and five. (in Japan their last recession lasted a decade)

2) Focus on productivity.(Both individual and team delivery)

3) Retain the best talent and continue to develop it. (Historically, talent tends to leave when it believes it is not learning)

4) Encourage innovation

5) Ensure robust succession planning so that if people do leave there is continuation of productivity.

6) Reduce expenditure as far as possible on non-productive items

HSBC have announced that they are cutting jobs in an effort to reduce costs.
Could this be an attempt at saving money whilst ignoring other cost saving ideas that could protect jobs?

Or is it that reducing staff is the easiest solution for the bank, one that sees instant savings and which requires little managerial thought?

During past financial downturns companies would rush to lay off staff as a means of saving money. As a result the time taken to recover was longer because of the need to re-recruit talent. Most businesses seem to be avoiding this mistake in the current financial climate.

However the question must be in people’s minds, “At what point will unemployment be the final option for survival?”.

Since Margaret Thatcher’s Government  introduced legislation that made striking difficult and secondary striking illegal unions have found it difficult to flex their muscles in the same way as they used to.

However, with a financial downturn will the tide begin to change and if so how will that affect business in general?

That will probably depend upon what happens to inflation. The cost of many raw materials for production such as copper, fertilizer and oil have doubled in the last few months. Already at its highest for ten years inflation is likely to rise even higher.

The result is that there will be demands for increased salaries in order to keep up. Petrol tanker drivers are possibly the first in a series of high profile wage demands that will include teachers, health staff, civil servants and refuse collectors that will run through the coming autumn and winter.

To counter rising prices firms, including SME’s, will feel that a mix of strategies including increasing product charges, reduction in quantity delivery and reducing costs such as advertising. In the end, however, it could result in savings that will result in “regretted layoffs”.

However, care needs to be taken with laying off employees because once gone the same skills may be very difficult to re-employ when times inevitably get better.

The reason is the demographics of the working population. Sourcing managerial and technical talent is seen as being the most important challenge for countries such as UK, USA, Japan and Australia. Yet the working population is getting older and many of those “Let go” will be older employees that may retire or choose to retire before the economic situation improves.

Coupled with the fact that booming economies such as China are recruiting managerial and technical talent as fast as it can (It’s cheaper for China to recruit one expert-expat to work in China than to send 20 of their students to study abroad) this could well mean that much of the top talent currently available will have disappeared in the future.

For over a decade employers in the UK have become used to the fact that employees have a great deal of choice in the job market. Talent could leave to jobs with more money and benefits and in the USA and the Far East.

To fight this trend employers in the EU have been encouraged to “engage with their staff”, provide training and development opportunities and ensure that their talent is at all times happy and well managed. This trend has been encouraged by the UK Government as well as EU legislation providing employees with redress for any unfair treatment. In fact for ten years “niceness” has been in vogue.

However, has the tide begun to change? With the financial downturn employers would expect to see employees become less demanding so as to protect their jobs.

That will probably depend upon what happens to inflation. Already at its highest for ten years and predicted to increase to above 4%, employees are likely to expect increases in salary in order to keep up. Petrol tanker drivers are possibly the first in a series of high profile wage demands that will run through the coming autumn and winter.

Employers will feel constrained by increasing costs and an inability to increase their product prices and cost savings will result in “regretted layoffs”. The time to know that a recession is upon us is when the daily news bulletins begin to report redundancy figures as happened in the 1980s.

The trick for forward thinking businesses will be to identify those employees that are essential to survive the downturn, identify the skills that are needed and to develop a strong team that can ride out the storm.

Why is it that only 18% of financial services firms are able to describe themselves as very successful at retaining talent?

This should worry firms who fear that their key executives will be easy prey for competitors with the need to maintain sales during s financial downturn.

Throwing money at the problem is recognised as a blunt tool for recruitment and retention that can too easily be beaten by competitors eager to lure talent away. Few firms are confident that they are genuinely engaging and motivating their talented executives.

Between 2010 and 2025 it’s estimated that up to 95 million BabyBoomers will leave the US workforce but only 40 million X&Y generation workers will be available to replace them.

Source: Nouriel Roubini Blog

In a recent report into global talent talent it’s been found that business leaders agree that recruiting and retaining talented employees is getting tougher (46.5 per cent saying it was becoming slightly more difficult and 41 per cent believe it is becoming significantly more difficult).

Yet only a quarter of organisations surveyed have a talent management strategy in place and 16 per cent said they had no talent management strategy.Given the low number of businesses with a formal talent management strategy, it’s unsurprising that a third of respondents said their organisation were poor at forecasting the need for talent requirements and being able to retain talent.Recruitment and retention difficulties are seen as being most acute in Asia, whilst business leaders in Western Europe and North America agreed that employee career switching is a major issue in fuelling talent shortages and they are more concerned than their Asian counterparts of the effects of an ageing population.

In recent years with most economies growing and shortages of talent being common, candidates and employees have held the upper hand in workplace negotiations. However with speculation that a U.S. recession could trigger a global business slowdown, the position of power in employment negotiations may soon change.

It’s been reported (Daily Telegraph Dec 9 2007) that one in five CEOs in the FTSE 100 have moved jobs or been sacked during 2007 and that this is the highest number for five years.

Whilst accros the world the average tenure for a CEO is just over 2.5 years in the UK we have fared much better at over five years but this is now changing. Notable changes have been Paul Thompson of Resolution Life who managed just two years, Northern Rock’s Adam Applegarth, John Clare of DSG International, Philip Moore of Friends Provident.

The result has been that the average tenure for a FTSE 100 co is now under five years and it’s estimated that by 2017 the UK will join the rest of the world in having their top people remain in post for only 2.5 years.

Companies that have also experienced senior people departing include BP, Barclays, Logica CMG and BT

The problem with this is that whilst it might satisfy the shareholder’s needs for returns this continual change at the top does nothing but increase instability, insecurity and ultimateley profits for the rest of the organisation. The reason, there is no chance of one strategy being implemented and showing substantial results working it’s replaced with another.