In the Trenches: Motivating Talent in a Contracting Economy

06/09/09

Q&A with Sylvia Ann Hewlett

Booz & Company and Sylvia Ann Hewlett Associates recently signed an exclusive alliance to provide tailored and sustainable talent management solutions to global clients, with a particular focus on driving performance in a contracting and consolidating economy. Booz & Company Senior Partner DeAnne Aguirre and Sylvia Ann Hewlett are co-leaders of Booz & Company’s new offering: “Global Talent Innovation™: Strategies for Breakthrough Performance.”

Hewlett, founding president of the Center for Work–Life Policy, is an economist and internationally renowned authority on talent management, particularly as it regards the fastest-growing streams of talent in the global marketplace—women, minorities, and Generation Y. She has authored numerous articles and eight books, including the forthcoming Top Talent: Keeping Performance Up When Business Is Down, to be published by Harvard Business Press in October 2009. Here, she discusses with Global Talent Innovation co-leader DeAnne Aguirre the specific ways companies can leverage a recessionary environment to attract and retain the best and brightest talent.

		DeAnne Aguirre One consequence of the recession has been further consolidation within specific industries such as financial services. As potential acquirers size up distressed companies, how important is talent management in their assessment?

Sylvia Ann Hewlett

It’s very important, and we’ve seen examples of that just recently. When Barclays decided to take out of receivership a big chunk of what used to be Lehman Brothers, they identified Lehman’s strong people development model as a big plus. Lehman had excellent programs and a rich, diverse pipeline of talent, and Barclays saw that as very attractive and highly complementary.

Aguirre

What measures should a company take to ensure that it retains its top talent, particularly in troubled times?

Hewlett

First, restore focus. In the current crisis, top management has become consumed with managing layoffs and other immediate problems and is not paying attention to nurturing the high-performing talent that made the cut. These are the people they need to have stick around and drive renewal and growth. A recent study highlights what may seem a counterintuitive fact: In the wake of a mass layoff, 31 percent of the survivors walk out the door.¹ One would assume that people would cling to their jobs all the more tightly in times of escalating unemployment. Not so. And it’s precisely the wrong people who walk out the door: the top performers with great track records, the ones with alternatives in any market. So, first and foremost, senior management needs to restore focus and nurture key performers, because the risk is real that they could lose them.

What we find in the new research that we’re conducting both on Wall Street and Main Street is of some comfort, however. The formula for retaining top talent is not complicated. In a merger situation, I would advise the acquirer to involve the talent of the acquired company in crafting the strategic vision going forward, and to make sure they’re incorporated early in the execution of that vision. It creates a lot of buy-in.

Another key learning is that it’s extremely important to have very open and frank lines of communication. You need to create a “no-spin” zone—lots of direct contact and honest discussion about the nature and magnitude of the challenges. That does wonders in terms of building a strong team.

Aguirre

When targeting a company, in your experience, what due diligence should an acquirer complete to determine if the acquiree will be a good fit on the people front?

Hewlett

First off, take a hard look at the demographic profile of the company you’re assessing. That analysis needs to go deep. It’s not just a question of how many women are in top jobs. It’s also a question of the generational makeup. Is the talent pool baby boomer heavy? Or is there a particularly rich reserve of Gen-Y’ers?

The demographic profile maps how well this company will fit with your own pool of talent, and it will highlight opportunities going forward, as well as blinking red lights. For instance, if 50 percent of the senior leadership team is retirement eligible over the next five years, you’ll want to consider that scenario carefully and figure out whether it’s a plus or a minus.

Aguirre
Not only is the labor market contracting, but companies are feeling the pinch in terms of what they can do monetarily to motivate their employees. In such a constrained environment, how do companies maintain workforce productivity?

Hewlett

Monetary rewards have long been the default lever for motivating performance, but they are not the only lever, nor is money even the most effective lever in satisfying employees’ needs and wants, according to our research. Recognition is important, as are flexible work arrangements and career development opportunities. But a simple bonding experience—whether it’s a community outreach project or bowling after work on Friday—also goes a long way toward making teams more productive. And middle managers, the frontline supervisors or the team leaders, are critical in creating that chemistry.

We’re also finding that employees, particularly newly acquired employees, find a lot of meaning in visible symbols that their new employer cares, whether they’re protecting wellness programs from budget cuts or creating the conditions that enable employees to take advantage of these programs by, for example, going to the gym twice a week.

We went into one company where they made a point of re-publishing their wellness program brochure immediately after an acquisition to reflect and accommodate the addition of new employees. That simple gesture made a huge difference to people.

Aguirre

Our research shows that Gen Y is, generally speaking, as motivated by flexible work arrangements as they are by pay raises. How should companies respond to and leverage this new value set?

Hewlett

Gen Y is echoing what women have been saying for years. Leading companies have long understood how to motivate women by using time as currency and creating work arrangements that accommodate their work–life challenges. Women have consistently rated flexible work options more highly than salary raises as an incentive to increase productivity.

We’re finding in this environment that all kinds of nonmonetary rewards really matter. One of the top ones in producing high rates of engagement is flex benefits. Another is recognition for a job well done. We’re finding that thank-you notes from the CEO go a long way toward making overstretched employees feel good about the work they’re doing. Team-wide or company-wide forms of recognition are also valued. Many companies have figured this out, and they came up with really creative ways of recognizing effort this past winter. The results have been powerful.

Another thing that employees crave right now is the opportunity to give back to society. They see the huge increase in foreclosures and the spiking of unemployment rates. They realize, for example, that homelessness just went up 30 percent in our cities. So, to work for a company that helps them channel their compassion into constructive volunteer energy makes them feel great about their employer and actually replenishes the soul. It’s a very important reward that companies should bear in mind.

Aguirre

Analysis has shown a very strong correlation between diverse teams and stronger financial returns. Is the current economic downturn an opportunity or a threat to the trend toward greater diversity?

Hewlett

I think, at first glance, it’s a threat. To the uninformed, this diversity stuff feels like a luxury when there are so many other pressing things to worry about. In fact, however, the recession presents forward-thinking companies with the opportunity to outsmart the competition with a vigorous diversity strategy. Strong, diverse teams attract clients and grow market share.

The numbers are clear. Diversity impacts the bottom line. Comparing like firms on the same metrics, we see an 8 percent spread in ROE between companies that have good numbers in terms of diversity at the top and those that do not.² And the plain fact is: White men today constitute only 17 percent of a global talent pool newly dominated by women and multicultural individuals.³ What a transformation! Diversity, it turns out, is not a luxury but a prerequisite to continued success.

Aguirre

Last question. If the doors closed and you had two minutes in the elevator with the CEO, what messages would you want to convey?

Hewlett

Hold on to your women. Hold on to your multicultural employees. In most recessions, these groups either are disproportionately pushed out or disproportionately quit. Flight risk is unusually high. No company wants to find two years down the road that it has lost its carefully developed pipeline of talented women and minorities. When the economy recovers, that company will be at a disadvantage in a fierce competition for talent and will find itself at the back of a long queue. The fact is, replenishing the ranks of female and multicultural employees is a slow, protracted process.

Our research indicates that the most vulnerable women and multicultural employees are those in the senior ranks, as they are rather isolated. If you lose them, the domino effect is profound, because you’ve then lost the mentors for your younger non-white male talent. So I would urge this CEO to reach out, to recognize, and to figure out how to nourish and nurture diverse talent in these rough times.

Second, I would urge the CEO to give careful thought to developing a fair restructuring process, remembering that the terms of disengagement are very powerful in defining one’s brand as an employer. There are good and bad ways of letting people go, and there is every reason to believe that if these processes go well, these people will resurface as valued customers, clients, or boomerang employees.

It’s important to stress that during layoffs people want to be treated with respect, and that means being offered an explanation. They want to understand the business rationale for the downsizing or restructuring. The power of accurate information and effective communication cannot be overstated. It’s also true that laid-off employees value and appreciate the “after-care” they receive, such as access to a job bank. A helping hand at this difficult time is deeply valued, not only by those let go, but also by those who stay behind. The terms of severance send a strong signal about the company’s value set and the integrity of its culture. It’s important to get this right.

-¹ "Halting the Exodus After a Layoff,” Harvard Business Review, May 2008.

² "The Bottom Line: Connecting Corporate Performance and Gender Diversity,” Catalyst Inc., January 2004.

³ “Global talent pool” is defined as individuals around the world who have at least a bachelor’s degree.