“Pay me 30% more or I will walk.”
This is perhaps one recurring scene HR professionals faced last year when the job market was buoyant and talent was hard to retain.
Fast forward a year later and the reverse has come into play, with many employees staying put behind their desks, high wage demands a thing of the past.
Unless of course, a prospective employer offering sufficient job security comes along.
Even though the tumbling economy may be hurting most businesses, but for companies with that extra bit of cash, it is the season for poaching top talent from under their competitors’ noses. Previously, these employers may have found it hard to attract the people they want during the economic boom. But with most businesses looking to either freeze hiring or cut headcount as means of survival, top talent is becoming readily available.
Cherry-picking talent
For marine solutions company Jay Ray McDermott, this downturn has given the company a golden opportunity to pick up any talent they want in the market. Whether it is from smaller companies that went bust, retrenched workers or job-hoppers, recruiting has become much easier and more successful compared to a mere six months ago, says Asia Pacific’s HR director Jeffrey Kwek.
Kwek adds, “We actually called back those guys whom originally asked for twice the [salary] market value.” This time round, he could offer the same people a smaller pay package and they would take it without hesitation. “This is one great advantage, people whom we couldn’t attract, we now attract.”
However, Kwek would not be looking to offer salary packages below the market rate to this crop of top talent, even if the downturn could be used as a plausible excuse to do so. Following in the footsteps of other competitors who are currently cutting salaries will only hinder McDermott’s progress when the economy picks up, he explains. When the upturn comes, the company would be in the higher percentile of the compensation benchmark. Hence, high potential employees would not have the desire to move and attrition rates would not be an issue during the good times, says Kwek.
“The money spent is, in our opinion, worthwhile for the next upswing,” he adds.
Giving the boot
Likewise, if the company's stock has fallen dramatically during the crisis, it would be a good time now to force underperformers out of the organisation. It may be unpleasant, especially if they are old-timers, but radical change has to be made in order for the company to institute a complete turnaround to its underperforming culture.
Unfortunately, it is not an easy decision to make, even for Unilever. “It is definitely one of the hardest things we have to do,” says Fergus Balfour, chief operating officer for Unilever’s Foodsolutions Asia, Africa and Middle East at the recent Singapore Human Capital Summit. “We basically had to take out businesses that were failing and face truths about how we aren’t as good as we thought we were.”
While Jay Ray McDermott does not engage in forced ranking during a downturn, if push comes to shove, Kwek would not hesitate to hand out pink slips to bottom line performers. “We would hasten the pace,” he says. “We would rather have five committed people with good salaries doing the five jobs and let the other five go as making the numbers is not as important as having the right match of skills and attitude.”
This is where the implementation of forced ranking becomes very difficult for Unilever, explains Balfour, even if the strategy is “gloriously simple in concept”. He says, “People were being forced to face truths that they never faced before, truths about themselves, truths about the fact that most of them were absolute rubbish.”
“We also had to say goodbye to a number of people who have been friends for a long time. I knew many of them and that was not easy,” he adds.
That is why HR should always do their homework regularly on knowing who to keep no matter what, prior to a downturn, says Kwek. With this ready list in hand, HR can easily sieve out the good performers when cost-cutting becomes unavoidable. To him, this solution is much more feasible than chopping across the board as the savings can be passed on to remaining employees.
Concurring, Balfour says companies need to have the courage to tell underperformers “they were the problem” otherwise newcomers will always assume poor performance is tolerated and the company will continue to suffer.
As long as people are “removed with some humanity”, a strong performance culture will always be prevalent in the company, says Balfour. “It is in how you deal with the departure of people that also says much to the people who are coming up to replace them.”
Taking note
But remember, it is always hands-off the top performers during any staff culling, says Kwek. Unlike the average frontline worker or backroom staff who can be easily rehired under any circumstances, critical talent is the bread and butter of any company. “We would not let them go by any means,” Kwek says. “It’s not that the rest are not important, it’s just a very pragmatic approach because if they walk, you lose a lot of investment.”
Yet, removing low performers does not equate to removing low level employees, says Kwek, as it depends on the business requirements at hand. It is only when there are two employees vying for the same job, would the low performing one be asked to go. “You can be a cleaner, but if you are the only cleaner here, even though you are not the best performer, we still have to keep you if you are doing a reasonable job and because we may not be able to find someone else to do the job.”
Naturally, the same rule does not apply for high potentials in the company, even if their current skill level does not match the job at hand. HR must have the foresight to look ahead, Kwek explains, as the cost of retaining the talent now and rehiring him from a competitor in the future would even out eventually. “Keep the talent floating around because loyalty and commitment is being built up here, [and] the downturn period is where he learns the most because people are less constrained from time to teach him.”
This is the one philosophy HR has been constantly preaching to McDermott’s leaders over the years, says Kwek. “And today, this period, is the time we are demonstrating it.”
‘Operation Cleanup’
At this low point of the economic cycle, it is also the best time for HR to shed the benefits that the company has accumulated over the years. Known as “Operation Cleanup”, perks enjoyed by executives previously would be taken away as part of the company’s cost-cutting measures. Unnecessary long-haul business trips would be reduced, travel classes downgraded and more teleconferences would be held. Removing these “low-hanging fruits”, Kwek says, would not hurt the business, as such luxuries should never have been given in the first place.
Although there would be scale backs of yearly salary increments, companies that usually pay at the top tier of the market rate would only be holding back slightly to maintain the edge over their rivals. Kwek says, “[For] oil and gas, we normally pay at the higher end of the market, say last year’s average was 4% to 5%, we would pay +2%. Although now the market has dropped to 3% to 4%, we probably pay 5% to 6%.”
As a rule of thumb, other than retaining the medical, health and safety, work-life benefits, HR should cut as far down the list as possible without hitting the bone. Kwek says, “If it hurts the morale of the troops, it is too deep. If it doesn’t hurt, they won’t miss it.”
Looking ahead
The worst may be yet to come with the financial market looking set to continue its volatility. But as Jay Ray McDermott and Unilever have shown, there are always innovative ways HR practitioners can use to turn the uncertain economic situation to their companies’ advantage. Yet, it can be tricky to operate under these tough financial conditions.
While there is no science to a successful guide in fighting the downturn, Kwek suggests for HR to start by always keeping the critical talent pool intact and constantly readapting the business model to the economic cycle.
If handled properly, this downturn can be one golden opportunity for HR to bring the company to greater heights. As what Kwek says, “Have short term plans to survive the current crisis [and] also have long term plans for the re-emergence.”
