Introduction: A Recession Is a Terrible Thing to Waste

“Now more than ever before, we’re counting on our best people to find new ways to drive growth in this brutal marketplace. Reaching out to support, sustain, and fully engage top talent is central to our strategy.”

—Jeffrey B. Kindler, Chairman and CEO, Pfizer

Every company has its constellation of stars—the consistent top performers who help the organization shine. Found at all levels, from associate to senior vice president, from analyst to managing director, stars are known for their outsized dedication, brainpower, and work ethic. They’re the vital few who contribute the most to the bottom line and drive a company’s results and reputation.

In these bleak times, companies are depending on their star performers as never before to light the way out of the darkness. Organizations need their top talent to be in peak form—firing on all cylinders—so that they can succeed in a market that is the toughest in living memory.

How are employers handling this challenge?

In a word, badly.

To start with, leaders are seriously distracted. Caught between clamoring customers and vaporizing value, a CEO understandably might find it hard to focus on talent. People strategies tend to translate into layoff strategies: how many should you let go? How should the cuts be distributed? Should you act surgically and strike deep, or should you dribble out the reductions over time?

When it comes to talent management, CEOs are also hamstrung by outmoded thinking. In times like these—marked by massive losses and rising unemployment—it’s tempting to imagine that there’s no need to worry about motivating talent. People are so grateful to have a job, the conventional thinking goes, that they can be relied to contribute 110 percent. Right?

Wrong.

Cutting-edge research from the Center for Work-Life Policy’s Hidden Brain Drain Task Force (which comprises fifty of the world’s most powerful corporations, including Ernst & Young, General Electric, Goldman Sachs, Intel, Johnson & Johnson, Siemens, and Unilever) reveals the danger in conventional assumptions about sustaining high performance in tough times. Consider these crucial and disturbing data points:

• In the wake of a reduction in force (RIF)—a popular euphemism for mass layoffs—voluntary attrition can be deeper than the RIF itself. A Center for Work-Life Policy (CWLP) survey shows that between June 2008 and January 2009, 14 percent of college graduates lost their jobs —of these, 32 percent were fired, but another 68 percent voluntarily left their jobs. In a similar vein, a recent University of Wisconsin study showed that 31 percent of survivors walk out the door in the wake of a layoff—many of them the star performers companies most needed to keep. Participants in Hidden Brain Drain strategy sessions were brutally honest when commenting on the impact of the current round of RIFs: a large percentage were looking to quit; 64 percent were considering leaving, and 24 percent were spending most of their time actively looking for another job.
• Those who stay report feeling disengaged, of being caught in long term limbo: 74 percent of participants talked about being paralyzed, 73 percent felt demoralized, and 64 percent felt demotivated. “It seems pointless to overcommit to work since the company does not seem to commit to its employees,” commented one participant.
• Interestingly, the flight risk is highest for women, with twice as many women as men considering leaving and many others actively looking for the next job.

The research presented in this book tells a disturbing story. It seems that in troubled times, companies routinely compound their problems by ignoring and neglecting star performers—taking them for granted. And we’re not talking only about the top of the house (the C-suite); we’re talking about high-potential and high-performing employees at every level and rank.

The data is chilling: loyalty is out the window, engagement has fallen off a cliff, and large numbers of top performers are angry, alienated, and looking to quit. Far from lighting the way forward, many stellar producers have one foot out the door. They feel sidelined and sideswiped by bosses intent on other agendas.

Some leaders see the flashing red lights. “We need our top talent more than ever,” says Jeffrey L. Bewkes, chairman and CEO of Time Warner. “Creating media and entertainment that appeals to consumers is much more difficult in the current economic environment. We need to hold on to our best.”

Other leaders ignore the danger signals—to the company’s detriment.

This book underscores the fact that these are treacherous times on the talent retention front. Standout performers always have options, even in tough times. Indeed it’s precisely in tough times that competitors poach your best people. “This is a brilliant time for talent acquisition,” notes Carolyn Buck Luce, global life sciences sector leader at Ernst & Young.

When stars leave in more buoyant times, companies can often find a way to replace them, either by luring high performers from other organizations or by taking the time to groom successors. But in an economic quagmire, many companies lack the luxury of spare time or money. In troubled times, when the stars go out they leave a dark void.

In early 2008, the Hidden Brain Drain Task Force decided to engage with these challenges.¹ As the credit crisis deepened, fourteen task force companies (American Express, Bloomberg, Booz Allen Hamilton, Booz & Company, Citi, Credit Suisse, Ernst & Young, General Electric, Goldman Sachs, Lehman Brothers, Merrill Lynch, Moody’s, Time Warner, and UBS) helped us reach high-potential employees across a range of sectors to explore the impact of the market turndown on the sustainability of talent on both Wall Street and Main Street. Central to the investigation were questions such as, How do managers maintain loyalty in the face of massive layoffs? How do managers sustain performance in the face of dwindling compensation? What can managers do to reduce flight risk and rekindle commitment?

The research (designed and executed by a team from the Center for Work-Life Policy), started with an analysis of Hidden Brain Drain data on high-echelon jobs, which created a 2006 baseline.² The team then layered on data from a series of virtual strategy sessions conducted in June and December 2008.³ The findings allow us to compare 2006 (a time of boom and ebullient profits) with June 2008 (a time of credit crunch and falling growth rates) with December 2008 (a time of gut-wrenching economic meltdown). A detailed research report with additional data is available from the Harvard Business Press.⁴

The data analysis phase of the research was followed—in January through March 2009—with a series of fifty-five targeted, one-on-one interviews. CEOs, C-suite executives, talent managers, and high-potential talent across a range of sectors and geographies were asked to react to our findings and respond to the following questions. How can top performers be pulled out of this state of long-term limbo and reengage? How can they be motivated to give their best once again?

The result is powerful: a menu of pragmatic interventions that outlines how companies can do a much better job of managing talent in troubled times. Here they are in a nutshell:

• Create a “no-spin” zone.
• Think locally, and focus on team leaders.
• Give employees meaningful nonmonetary rewards.
• Develop a fair restructuring process.
• Hold on to your women.
• Show that top leadership cares.
• Re-create pride, purpose, and direction.
• P.S. Don’t forget yourself.

The good news: there are plenty of effective ways to tend to top talent that do not involve spending money. In fact, only spending money doesn’t have a long-lasting impact and may do more harm than good, because it lulls leaders into thinking that a big bonus compensates for bad behavior. As the Beatles reminded us, “Money can’t buy me love.” One advantage of tough times: in place of the easy palliative of a souped-up paycheck, managers must turn to alternatives that truly satisfy employees’ needs and wants.

When things were going well, companies could afford to spend heedlessly in the talent wars. But when every dollar counts, leaders are forced to define explicitly what is necessary to delight customers, serve clients, and motivate talent—in short, to identify the real levers of value.

We live and work in a knowledge-based era, in which the drivers of value are not machines but brains. Staying ahead of the competition is no longer about knocking out widgets; rather, it’s about making the most of high-octane brainpower.

Talent is the gift that keeps on giving. It’s selfregenerating. If you invest in talent, the returns will be exponential and lasting. In 2009, retaining, sustaining, and fully realizing top talent are the keys to renewal and growth.

A recession is a terrible thing to waste. There are powerful opportunities in tough times to create a richer talent management model. Born in adversity, it will carry your organization into prosperity—and keep you there for years to come.