Talent Management in a Slowdown – Update

In the last few months we have read more and more about the global economic slowdown.  Jim Cramer, the Wall Street pundit, wrote in today’s New York Magazine, that he has never seen things as dismal as they are on Wall Street.  Today the State of California announced a 5.7% unemployment rate, an increase of almost 12% over last month.  And I have noticed a fairly steady increase in HR and L&D leaders now looking around for work.

How is this affecting our HR and L&D organizations?  Our most recent Business of Talent® survey shows a similar impact on corporate HR and training.  Today 45% of HR and L&D executives cite “reductions in cost” as their top priority for the coming quarter, an increase of almost 30% over the last three months. 

In our just-released High Impact Learning Organization® research, we see similar trends.  Today’s L&D managers and executives cite “reducing the cost of training” as their #2 challenge, after business alignment.  And for the first time ever, people cited “building a business plan for learning” as their #3 challenge – illustrating the need to further take L&D investments and make them business-relevant and operationally excellent.

But in the midst of such news, we see many many good things coming.  As I mentioned in our earlier post on the economic downturn, “only when the tide goes out can you tell who is swimming naked.”  Now is the time for HR and L&D to become more relevant than ever.  In fact, one could argue that business slowdowns are good for talent organizations – they force us to become laser focused on what really matters now.

Witness some critically important things going on:

• Organizations are focusing very heavily on building critical capability models for success.  Such models are mandatory to determine who to hire, who to develop, and who to lay off.  Organizations such as British Telecom, Microsoft, Chevron, GSK, Mercer, and Pemex are all spending significant new dollars to identify their critical competencies.  Such work is strategic and long-lasting.
• Organizations are looking more carefully at HR systems investments.  We now see RFPs from companies which look far more carefully at the business strategies behind talent management, rather than projects to “automate” processes which may or may not be adding value.  One of the world’s leading consumer packaged goods organization recently asked us to help them rebuild their business case for talent management systems after spending six months gathering requirements.  Such an effort is good – it creates focus and business alignment in HR systems investments.  Nothing is worse than buying HR software to find that noone wants to use it.
• Informal learning is exploding.  We are just about to publish a major research report on the use of social networking in corporate L&D.  Organizations now realize, often driven by cost reductions, that the corporate L&D organization can not possibly build all the content the company needs.  They are starting to invest in social networking and communities of practice as a mainstream solution.  In fact, in our High Impact Learning Organization Top 18 findings, we found that informal learning and content sharing are now more important to success than the traditional disciplines of performance consulting.
• Centralization is coming back.  Almost all the clients we talk with now are looking for ways to reign in spending on L&D and other HR initiatives throughout the company.  Such efforts may look like cost savings from the outside, but inside they are driven by the intense need to coordinate L&D and HR efforts to build an integrated talent management process.  Caterpillar, Aetna, Rogers Communications, Wellpoint, and other clients are all focusing heavily in this “strongly centralized federated approach.”

We are preparing a series of reports on the economic trends driving HR, so stay tuned.  Even if the economy does continue to slow down, I hope you believe, as I do, that such a slowdown will not last beyond early to mid 2009.  My experience talking with hundreds of organizations shows me that even in times of great dislocation, our economy is filled with entrepreneurial and creative spirit to build new businesses in the face of change.  And change is something we must deal with in good times and bad.

More to come…  your comments welcome as always.