Hiring doesn't stop during a slow economy 23 March, 2008 By Patricia Pickett

The talent management solutions vendor recently published a whitepaper, titled, "Talent Management in a Down Economy," based on an analysis of historical and current data used to determine the impact of economic downturns on hiring and how the efficient acquisition and retention of top talent can help businesses thrive in slow economies.

According to the findings in the whitepaper, the idea that hiring ceases during a recession is a misconception. Agencies such as the U.S. Bureau of Labor Statistics (BLS), which regularly publish job reports, normally provide hiring numbers based on net job growth, or the number of jobs created minus the number of jobs eliminated. However, according to the whitepaper, "the net number does not tell the complete story." Instead, the gross or total number of new jobs created should be viewed as a better barometer of hiring, Taleo Research claims.

The whitepaper points to the first quarter of 2000, a hiring peak, during which 8.8 million gross jobs were created in the U.S., while 7.4 million gross jobs were also created in the third quarter of 2003, which was a period of economic recovery. During the second quarter of 2001, notorious for the burst of the dot-com bubble, 1.2 million net jobs were lost, but 7.6 million gross jobs were created during that same period.

"Hiring doesn't completely stop in a down economy," said Alice Snell, vice-president of Taleo Research. "So the processes for identifying the best talent are as important as ever in any kind of economy, and in some ways, they are even more important. There may be a greater candidate pool on the market because there has been more churn, which means you have an opportunity to bring in some of those high performers."

Contrary to popular opinion, retention concerns are still an issue even during a recession, the whitepaper found. According to BLS numbers from December 2007, the U.S. "voluntary attrition" or turnover rate hovered around 23 per cent -- not much higher than the 22-per-cent turnover rate during the recession of 2001 and 2002.

"Voluntary turnover is a big hit on an organization, not just because of the cost of replacement, but it can affect customer relations, or the company can lose intellectual property or a leg up in R&D," Snell said. "In a down economy, organizations need to make sure that their retention policies are reviewed and optimized because they neither have the kind of cash flow they'd probably have to allocate for replacements, nor do they want to incur time-to-contribution or other costs."

In a down economy, it's especially important for employers to make sure that people are in the right positions and that their top performers have the opportunity to develop, Snell said. "Having a robust performance review system in place, as well as career pathing and opportunities, lends itself toward higher employee satisfaction," which leads to better employee engagement, performance and output, she said. "Organizations can use this as a tremendous opportunity to make sure that their employee base is aligned with corporate goals, that they work with top performers for development, and judiciously bring in new hires."

Snell recommended making sure that employees, line managers and executives all have visibility into the performance management or review system so that rewards are distributed in fair manner. While many organizations turn to the "peanut butter approach," scooping rewards out of a bucket and spreading them evenly across the workforce, "that does not help motivate and retain your top performers," she said. During a recession, even though the total reward may be less significant, "it may be more important to take what there is and make sure that your top contributors that you are struggling to keep are being rewarded out of that pool."

As for organizations that are forced to lay off personnel, Snell advised first investigating whether there is another spot in the organization for good employees. Second, employees need good visibility when it comes to internal transfers or moves, whether lateral or vertical.

Finally, remember that former employees can still be part of the corporate community. "Even if they are not actively working with you today, they may turn into 'boomerang employees' who leave and come back at a later time," Snell said. She advised setting up social networking tools and databases to keep in touch with employees, with the idea that they may return. Even if they don't, those former employees may refer new hires, or become the organization's customer, she said. "You need to make sure the relations are good even though there is not a current position for them."