It's an understandable, knee-jerk reaction to recession, but implementing swingeing cuts, centralising decision making, reducing innovation and curbing bonuses can all have the effect of driving away the very high-potential employees managers should be striving to keep.
Research by Sirota Survey Intelligence has concluded that, during a recession, the actions taken by companies can unintentionally devalue employees, in turn leading to the vicious cycle in which those that are most vital to an organisation's survival leave, and so more recessionary-based decisions have to be taken.
By shifting from seeing employees as assets to be valued to costs that need to be controlled, firms risk cutting off their noses to spite their faces, the consultancy warned, outlining eight key things organisations should be doing instead (see below).
A recessionary-focused culture of much greater centralised decision-making, more controlled information, less entrepreneurial risk-taking and reduced discretionary rewards all make it much more likely that high performers will defect to more long-sighted rivals.
Worse, while the average (or even above average) performer rarely considers leaving their job during a difficult economic period, high potentials do, it argued.
And smart companies know this and will often be willing to go out and hire them right from under an often flabbergasted management, it warned.
The Sirota reseach chimes with a study by the Conference Board last month which argued that over-zealous layoffs can often leave organisations staffed more by those in retrospect they shouldn't want to keep – who have simply kept their heads down – while those they should have been trying to hang on to will already have left.
Key issues for high-potential employees, or HIPOs as Sirota has branded them, were job autonomy, pay, career, rewards and fairness.
"Programmes for high-potentials often seek to involve them in the strategic decision-making, challenge their abilities, develop/advance them quickly, and recognise/reward them generously," said Douglas Klein, president of Sirota.
"The business choices many companies make when responding to a recession can frustrate all of those goals," he added.
Yet at the same time managers needed to walk a tight-rope because if they give their star performers too much attention it will just end up annoying everyone else.
So organisations needed to address the specific concerns of HIPOs while having minimum impact on the rest of the workforce, argued Sirota, with Klein suggesting these were the eight key actions to take:
- Don't stop focusing on their career development needs. Consider developing a retention strategy for HIPOs that includes a strong career development focus. Give them special projects and make sure they are taking advantage of training and development opportunities.
- Re-emphasise corporate values and ethics. "These employees want to believe that the company stands for something special, distinctive," said Klein said. "During difficult periods, savvy employees pay close attention to their leaders to see whether the business' short-term needs are balanced against longer-term company and people values."
- Be transparent. High potentials are the future leaders of the company, so share as much information as possible with them, for example by inviting them to select briefings with top management. This kind of behavior shows trust. The alternative is leaving them feeling uninvolved and susceptible to outside offers.
- Continue to reinforce their need for camaraderie. "HIPOs enjoy being recognized, and want to work with other HIPO's," Klein said. "A major concern of these employees is whether or not the company is able to both attract and retain top talent, so working with like-minded employees sharpens that perception."
- Do more than just cut costs. High performers are keenly aware of organizational inefficiencies and poor strategy execution – a bad economy only exacerbates these feelings. HIPOs want to be assured that the leadership is focusing on the longer-term.
- Involve them in the solutions. "HIPOs want to make a difference," Klein said. "They are seeking 'partnership' situations where they can contribute. Put them in charge of ad hoc teams focused on addressing some of the more difficult problems facing the company."
- Show them they are valued. "With economic rewards often curtailed, it becomes even more important for these employees to feel valued," Klein added. "Failure to treat them as such will create a resentment that can contribute to their leaving."
- Address compensation concerns. While HIPOs do understand what difficult times mean, they also want to ensure that it is still in their interests to stay. Companies therefore needed to think creatively about what these employees consider rewarding (for example deferred rewards, accelerated advancement opportunities), and speak to them on these issues, Klein argued.