Insights into human capital - Here's how to implement a balanced response in the current economy

Eric McMurray

August 1, 2008

B usinesses are operating under challenging conditions during this period of economic uncertainty.

In light of this economic downturn, Towers Perrin conducted research to understand companies' business priorities and workforce plans. Our 2008 Business and Workforce Challenges Survey polled more than 430 HR, finance and operations executives, representing midsize and large companies. Here are some key findings:

• Targeted staff reductions more likely than large-scale reductions. Forty-one percent of surveyed companies project a small-scale/targeted reduction in workforce. By contrast, 11 percent are highly likely to undertake a large-scale reduction.

• Significant expense reductions. Fifty-six percent of organizations plan a significant expense reduction effort.

• Focus on expansion. Fifty-six percent of organizations will expand into new products and service lines, and 40 percent of organizations are likely to expand into new global markets.

• Restructuring and acquisition plans. About a third of organizations are highly likely to undertake some form of significant restructuring or small- or medium-scale acquisition.

• Emphasis on talent management. Sixty-six percent of organizations will be focused on performance management; 62 percent are emphasizing organizational communication; 55 percent are concentrating on succession planning; 54 percent are focused on retention programs; and 42 percent are addressing training.

We worked with a finance organization that was facing severe economic pressure given the sub-prime crisis and fragile mortgage market. This organization was dealing with a disjointed IT operation; varying governance structures; sub-optimal distribution and utilization of resources; low productivity; workforce skill atrophy; and a dramatic increase in operating costs. We started by grounding everything in the client's business strategy and focusing on:

• Organizational analysis and design. Understanding the overarching business strategy and how the IT organization supports it; learning which core areas delivered value to the business, and ultimately to customers, and which areas were non-core; and among the non-core areas, determining whether to retain that capability in-house or externally.

• IT workforce analysis. Assessing talent pools and critical roles.

• IT strategy and CIO delivery mode. Addressing the evolving needs and challenges of the business and its technology organization.

The primary objectives were to develop strong working partnerships with customers; create deeper bench strength in development capabilities; strengthen relationships with third parties to augment current capabilities and capacity; and design a viable organizational architecture that would address the company's current and emerging business needs, data, systems and applications architectures.

During times of corporate restructurings, employee engagement is likely to suffer. One way to preserve employee engagement is through proactive leadership involvement and change management programs. We made it a priority to ensure employees understood the nature of the change and why it was taking place, felt a sense of ownership and that their voices were being heard, and trusted that leadership was making smart decisions in their best interest and in a balanced way.

This 90-day process delivered the following results:

• 16 percent selling, general and administrative cost reduction

• Retention of key talent (95 percent for one segment)

• Employee engagement levels were maintained.

This example illustrates a cost reduction, while positioning the business for future growth. The outcome underscores the importance of a balanced view; a different paradigm that addresses top and bottom-line growth.

Eric McMurray is managing principal and Southeast market leader for Towers Perrin.

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