Employers Capitulate on Business Slowdown – The Turnaround is Coming

In our Q2 TalentWatch® Dow Jones - July 2007-July 2009research report (TalentWatch is Bersin & Associates business research on employment, hiring, talent readiness, and investment trends, available to research members) we see definite signs that business leaders in most industries have now lowered their expectations and essentially “capitulated” on the 2009 recession.  This means that companies have stopped looking into the abyss and have now “reset” their plans with lowered expectations.

We think this is a positive sign.   Let me share some of the findings:

  • In Q1 25% of all businesses we surveyed (approximately 350) stated that they saw a “sharp drop” in business or accelerating slowing in demand.  In Q2 this number dropped to only 16%.    Today 26% of respondents indicate they see accelerating growth in the coming year vs. only 22% last quarter.
  • In Q2 60% of all businesses told us that one of their top three strategies was to “cut costs” – this is almost flat from 61% the prior quarter, so cost cutting continues to be a major priority.
  • In Q2 only 4% of respondents told us they see a rapid increase in demand, vs. 6% in Q1.
  • In Q2 27% of organizations told us they were undergoing a restructuring, down slightly from 30% in Q1.

When we asked HR executives about their key talent strategies, their talent priorities are as follows:

  • 67% cite “gaps in their leadership pipeline”, up from 64% in Q1 (this is bullish)
  • 66% cite the need to “improve a performance-driven culture”, up from 71% in Q1 (this is bullish also)
  • 37% cite the need to “downsize the organization”, down from 33% in Q1, which is also bullish.

We are still going through one of the worst business downturns in decades.  But what this data is showing us is that business leaders have now reset their plans, done most of the staff cutting they plan to accomplish (although more could come), and are no longer surprised by the slow economy around them.

What does this mean to HR and L&D leaders and staff?

While staffing plans are still very slow and HR budgets have been cut again (down 4.5% from Q1), we do believe that leaders in most industries are now building investment plans for the future.  Many of the research members we speak with are telling us about new management development programs (first line management continues to have the lowest readiness of any leadership role by far), focusing heavily on pay-for-performance and communications programs to drive employee engagement, and re-looking at their whole process for internal employee mobility to allow the organization to adapt to the new economy.

One of the other themes we hear again and again is the weak processes in place for succession management.  Today most larger companies have downsized many people (and many in senior positions), and they understand that these roles will need to be filled again some time in the future.  The old-fashioned “replacement charts” which served as succession management will not work.  So we have embarked on a series of webinars and workshops to help explain how to implement what we call “Transparent Talent Mobility,” the real future of succession management.

Please read High Impact Succession Management® for more on this critical topic – if you do not have a strong talent mobility strategy your company will fall behind as the economy grows.  (Or contact Kim Lamoureux, our principal analyst in this area.)

I hope this data is helpful, I have some other exciting things to announce in the coming weeks.

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  • Very helpful, thanks for the thoughts.

  • Sweta

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