Wednesday, June 1, 2011

A Good Economy Hides a Multitude of Sins

They used to say that “a good economy would hide a multitude of sins” in how a business was operated. It was not hard to be profitable years ago when the economy flourished. The business didn’t even have to run very efficiently to make money. All that being said, the economy is still hiding some sins. I would submit that “a poor economy also hides a multitude of sins”. The economy is hiding sins in how organizations are managing its employees. With the job market being tight, and candidates being plentiful, management is no longer worrying about sins in the areas of employee relations. It could also be said that a bad economy is when management shows its true colors.

In these economic times, organizations have been focused on reducing expenses, including the downsizing of the workforce. Many have downsized themselves dramatically, leaving employees with large workloads and low morale. Human capital initiatives have been eliminated as HR budgets and programs have been very low on the list of priorities. The list of eliminated initiatives include employee engagement, talent and leadership development, and succession planning. Of course, eliminating these programs from the budget also harms organizational effectiveness and productivity.

For the last few years, employers and corporations have been clearly in the driver’s seat. Regardless of how companies are treating their employees, turnover has remained relatively low. It could be said that some organizations have used the weak economy as a retention strategy. Organizations are comfortable that their employees are easy to retain or replace, and often corporate management has set aside employee development and relations as a priority. Sometimes management is so focused on short term profits, as well as their own jobs, that the culture turns toxic. Despite all of this, the downturn has kept turnover rates somewhat low.

But the game may be changing for management. The prevailing wisdom is that “turnover intent” is quite high, meaning that there are many employees prepared to leave their employers as soon as the economy recovers somewhat. As a matter of fact, human resources consultants like Deloitte Consulting and Mercer LLC report in their surveys that many employees are prepared to leave their organizations even now. Deloitte reports that overall, 65% of employees are considering leaving their companies, with Generation X leading the way at 72%. The Baby Boomers listed lack of trust in leadership as their top-ranked reason to leave their employer. Mercer reports that only half of the employees they surveyed say that they have been treated fairly by their employer, and only 29% of employees believe that their organization is well managed.

So much for keeping employees satisfied, let alone employee engagement. Many employees are feeling disengaged and disconnected from their organization. They don’t believe that their employer has their best interests in mind. Once the economy begins to recover, the expectation is that the job market will be hit by a “resume tsunami” unlike anything that’s been seen before. Turnover will spike, and organizations will suffer significant losses of talent and intellectual capital. Ironically, at a time when organizations should be benefitting from a recovering economy, their operations will instead by hampered by widespread and the high cost of turnover. With internal operations and service processes in a state of turnover, these organizations will struggle to stay focused on customers. Imagine losing customers to the competition and missing out on market opportunity at a time when the economy is finally recovering.

Are your employees engaged? Or will your talent be part of the exodus?


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