Monday, 1 June 2009

Bitter Pill, But Just Swallow It

In a recent gathering of old friends and peers, the economic downturn dominated discussions as usual. Interestingly though, the emphasis had changed from comments concerning the implications and issues around a tight labour market, to real issues like reward and retention of key performers, and the importance of adhering to the key fundamentals of sound practices of human resource management when dealing with performance and talent management.

The HR community is well aware of the number of organisations that are revising their budgets to reflect nil or very low movements in pay. This is happening across many sectors and industry groups at present and while the trend is clear, the end result is not. In some sectors, for example in organised manufacturing, the issue will be complicated by collective agreements running through for the next eighteen months or so where average per cent movements are built in. While these agreements made good sense at the time they were agreed upon, they clearly appear generous now and most likely will be out of line with those of other groups negotiating in the current climate.

Managing a small to nil salary increase budget in today’s environment will be a new experience for a number of young HR managers. With increases given in previous years averaging fifteen per cent and more, giving some individuals a small or no percentage movement based on their performance has its difficulties. The regular performance management systems, which produced results to decide on salary movements, will be tested in this climate where similar results would have to be interpreted in the new economic context. But just because the system would be tested, taking the step to forego the entire performance management system will be counter-productive.

When you have a smaller pie to work with, it is even more important to distribute funds judiciously. Your star performers will demand that they are treated fairly relative to the rest of the organisation. In this environment, it is imperative to keep morale up by ensuring that merit-based compensation is equitable. Workforce reduction may be a bitter pill to swallow for the HR professional, but when it does become necessary, you cannot afford to make mistakes. If your performance management programmes include career and succession planning, you will have an unbiased snapshot of your critical roles, key people, and relative performance ratings. Armed with this data, your managers can make more informed choices about whom to let go - and avoid the pricey fallout of letting go of key performers inadvertently. The truth is that great people are hard to find in good times and bad. The golden rule in talent management is to never take your talent for granted.

It might sound clich├ęd but recessions, while challenging, do present opportunities. We must remember that workforce optimisation is the core objective of performance management and talent development, because employees are the most critical assets of every organisation. We should use this downtime to critically review our performance management and talent development programmes and align them with corporate strategy. The companies who diligently pursue their objectives and align business and people strategies will not only weather the storm, but will be primed up to take advantage of the recovery that seems to be in the horizon.

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