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.

Welcome to 2009

The beginning of the new year is often followed by a review of the past and a projection of good intentions (less committed than resolutions) for the coming year. Almost everyone I have spoken to recently would rather forget 2008. However failure to learn from history dooms us to repeating it. A bit like Ground Hog Day.

We should by now be able to recognize:
- market bubbles and gold rushes
- the value of regular pruning of both our portfolios and our staffing
- the need to balance hesitation with action as the foundation to good management
- the importance of being hard on issues but soft on people if we want to retain our best talent
- the ongoing importance of ethics, governance and operating excellence
- the value of showing up and doing a good job
- the value of diversification even when it simply mitigates losses
- and oh yes the value of risk management.

Not withstanding these cautionary intentions we need to relentlessly focus on:
- our customers, clients and relationships
- innovating as the means to achieving highest form of competitive advantage
- building trust and mutual respect between teams and with clients
- taking personal risks to achieve long term goals
- fearing lack of success more than risk of failure.

With these intentions as a backdrop as I learned in college there is always Hope.

The Long Road

Listening to an interview with former President Clinton last night reminded me of the collateral damage associated with the loss of paper wealth. Government actions may be able to stabilize the economy over the next year but unfortunately consumer and business behavior is now irrevocably damaged for the next two years at least. The reason this is so is that the evaporation of paper wealth is now having an impact on personal decision-making. Consumers are deferring purchases and business are protecting hard won people capital by cutting back on expenditures in advertising and other variable expenses.

Significant government investments in infrastructure will begin to have an impact but only slowly. So for example the California state investment in high speed rail will benefit and jobs will be created but not quickly enough to produce significant change for the next 24 months. Many otherwise healthy employers will inevitably be forced to reduce staff or at the very least freeze hiring resulting in slower growth and a longer turn around picture.

My good friend Jamie Hale at WW just conducted an interesting study on workforce planning as a reasoned response to the challenging environment. When combined with employer investments in their best people, development of their skills and maintenance of their morale; cost cutting becomes a scalpel not a hatchet. Investments in people will be critical to coming out of this poised for success.

Days of Reckoning

The market continues its volatility and Washington DC as always appears to be far removed from the day to day experiences of business people on the west coast. One action that would reduce the impact of the volatility for going concerns is increasing the measurement period for analyzing pension liabilities. Congress has yet to act.

In the meantime most employers are running operationally sound businesses with depressed stock prices. The weaker competitors are being consumed by the stronger ones. Talented employees are staying put with much longer-term expectations associated with their working careers. As the downturn grinds on more will fall by the wayside and the best will be picked up by strong competitors. Dislocations like this are always difficult but organizations with the strength to survive and the wisdom to treat their employees well will come out in a much stronger position a year from now. An effective approach to managing talent will be a key to success.