Despite 2010 bringing renewed optimism about prospects for economic growth, the business environment remains tough. According to a recent survey by PricewaterhouseCoopers 96 percent of UK CEOs have implemented cost-reduction initiatives over recent months. While reductions such as these may benefit the income statement in the short term, the longer term impact of these on the company are only now coming to light. A worldwide survey of global executives, published by StepStone earlier this year in association with the Economist Intelligence Unit, found that companies risk experiencing deep talent erosion and sustained underperformance as a result of recent cutbacks.
The first trend uncovered by the survey is that recruitment is getting harder, while staff engagement is falling. Results found that 41 percent of respondents agree they already have a shortage of talent in their organisation and that 44 percent are finding it increasingly difficult to recruit. With recruitment becoming more of a challenge it is critical that companies take steps to retain the key staff they currently have.
Meanwhile, the degree of employee engagement will vary widely depending on who exactly in the organisation you speak to. Approximately 40 percent of line managers, for example, revealed that levels of trust in their organisations are ‘quite low’ and just 16 percent said that employee trust is ‘high’. In contrast, 38 percent of CEOs, presidents and managing directors still believe that trust is ‘high’ and just four percent think it to be ‘very low’. Such a disparity lays bare the disconnect between executives and staff, one which continued underinvestment in talent will worsen.
The second trend highlighted by the report is that companies do not yet feel confident enough to ramp up graduate and entry level recruitment. Lingering uncertainty over the economy has clearly left external hiring as an activity that organisations are approaching tentatively, with only six percent of respondents recognising graduate uptake as a focus for their organisation in 2010 – a figure in stark contrast to the 50 percent of respondents who said they would be focusing on graduate recruitment in 2009. This reduced uptake of fresh talent, combined with increased external competition for executive staff, and low employee engagement across the board, means that those companies operating without the right talent strategies in place risk developing a major skills shortage – just when they need employees’ energy and commitment the most.
If there is an upside to these circumstances, it is to be found in the plans organisations have for the future.
Executives are looking to increase investment in a new generation of leaders. In fact, the top three priorities for talent investments over the upcoming year are performance management (voiced by 46 percent of respondents), leadership development (41 percent) and training and development (36 percent). As they implement these measures, however, executives will need to address the contrasting attitudes and working style of an age-diverse workforce. Two thirds of respondents noted a 10-20 year age gap between staff on the same pay grade and it goes without saying that older workers’ motivations for staying with an employer will be markedly different to those of younger workers, making talent retention even more of a challenge. For example, 50 percent of younger workers cited career development as their biggest priority, but this dropped to just one percent for those who are over 50.
Similarly almost 40 percent of older workers cited non-salary benefits as important, a concern which dropped to just two percent among 20-30 year-olds. As employees in their 50s and 60s increasingly postpone their retirement, companies need to find ways to tap into their experience for the benefit of their younger colleagues.
Ultimately our research among CEOs and business leaders shows that they understand the need to focus on their talent, but that greater, more direct action is needed today to create talent strategies for the future. It is worrying to see low trust among middle-level employees going hand in hand with low graduate recruitment and an ongoing demand for senior executive talent. These businesses are effectively at a crossroads when it comes to their talent and the warning signs can either be addressed or ignored. If overlooked these problems will constitute a perfect storm for businesses, as the best employees head for the exit and fresh talent is not recruited. This could have serious implications for any business in a recovering economy and executives overlook it at their peril.