Skills vs Training the Path Forward

An interesting New York Times article today addressing the downturn in admissions to and matriculations from liberal arts based college programs raised several important questions that impact hiring managers. Are nonspecific educational programs that emphasize critical thinking, information synthesis and historical context relevant in an increasingly technological and regulatory compliance-oriented buisness environment? What would you prefer to hire as an analsyt working for you - a techician with deep training or a smart critical thinker? These questions are especially important for managers trying to position their organizations for success in and after a downturn.

It is inevitable that students will gravitate, especially during a downturn, toward degrees that give them a leg up in the hiring process. Students will also follow the money, which has been flowing away from Wall Street recently, toward more stable career choices.

Even in a seemingly broad-based and non-technical field like human resources management; we have seen the emergence of certification programs designed to train new entrants into the field along with the continuing importance and strength of continuing professional education. If presented with two candidates one with a certificate and one without, most managers are likely to go with the certificated hire. Notwithstanding the pre-hire training aspects, the true value of the certificate may lie in the indication that the candidate is truly interested in the area of work and willing to make a longer term commitment to learning and development. The certificate highlights not the end of the learning journey but simply the beginning.

If carried to its logical extension the programs could yield a workforce that is too narrowly trained and not capable of conducting the broader and more challenging synthesis across disciplines that yields innovation in development and in problem solving. As we conduct opportunity hires and reduce existing headcount the challenge will be to avoid purging the exact but elusive qualities we will need to successfully meet the challenge of the future.

Furloughs and Pay Cuts

As the financial strains stretches on employers are increasingly taking action to save cash. Many have chosen to cut headcount early and often, this is especially so in the service industries. Others who were not dependent on large numbers of people to fuel their growth out of the last downturn had contributed to what was then referred to as the jobless recovery. The result is an inability to reduce headcount enough to achieve profitability without severely injuring the fabric of the organization and hindering recovery.

So what to do? Current practices have focused on freezing and reducing salaries across the board starting at the top to reducing the number of days worked (furloughs). Reducing salaries can work for the short run as long as senior management is seen to be sharing the pain in the form of larger percentage cuts and no bonuses.

Furloughs have been used frequently in manufacturing environments including high tech for years (think the last two weeks of the calendar year). They are now being actively used in government and other entities (especially unionized) where it is difficult to implement headcount reductions or changes to the pay system.

The challenge to both approaches is to identify an exit strategy. The strategy needs to go beyond when to reinstate but how to do so. Early communication of the exit plan will go a long way to improve morale and drive performance.

Discipline and Process

The key elements to consistency are discipline and process. Process provides a framework and discipline provides the follow through. Consistency, as I am acutely aware, as a new blog author is a significant part of the formula for success in writing a blog. Consistency is also a significant part of the formula for avoiding issues that might be identified as "unnecessary or excessive risk taking." These terms as applied to a certification requirement for participants in the TARP capital infusion program aren't defined. HR, legal and risk managers have little choice but do craft a rational process from whole cloth that will provide a basis for certification. The first step is to establish a disciplined process for review of the incentive program to insure that intended or unintended consequences are not excessively risky.

The old adage in incentive design "be careful what you ask for because with incentives driving behavior you will get it"; now carries the risk of noncompliance with a federal mandate associated with use of government funds. This small wake up call is a good reminder about the importance of process and identification of risk potential in incentive design whether or not TARP funding is involved.

Relying on competitive information about program design won't be sufficient. A process needs to be in place that includes a disciplined review and documentation of an analysis of the rationale for the program design. Anticipated outcomes and risk mitigation factors should be clearly identified. The challenge as always will be one of balance - sufficient incentive to promote entrepreneurial risk taking moderated by incentives designed to protect shareholders and the enterprise from significant negative consequences. After all that is exactly what shareholders are expecting of management.