THE “global war for talent”, which became the byword of human resource (HR) management in the 2000s, appears less urgent as unemployment surges in the wake of the world recession.
Jobless rates in the Euro zone and the United States surpassed 7% at end-2008, and will approach double digits in 2009 as companies slash their payrolls.
Unemployment rates in the BRIC (Brazil, Russia, India and China) countries and other emerging markets are also rising, creating worker surpluses in what were recently tight labour markets.
The weakening of the global labour market affects a broad spectrum of industries and occupations.
Attention divertion
Under these circumstances, corporate managers have a strong temptation to divert attention from the global war for talent (driven by competition for skilled employees amid labour scarcity) to downsizing of the workforce (impelled by falling output and declining revenues).
HR management becomes a target of discretionary spending cuts as companies struggle to boost flagging earnings.
HR managers face a weaker imperative to retain talented employees, whose bargaining power and job mobility have diminished in the slack labour market.
Companies that yield to short-term disturbances in the global labour market risk losing their long-term competitiveness.
The structural factors underpinning the war for talent remain intact despite the economic downturn:
Globalisation heightens the importance of human capital as a competitive asset, particularly for companies based in high-income economies that rely on productivity gains to neutralise the labour cost advantages of emerging market competitors.
Demographic patterns clearly point to future labour shortages in North America, Europe and developed Asia, where fertility rates are low and aging workers are approaching retirement.
The increasing technological content of global services and manufacturing raises the premium on highly-talented employees, who enjoy high international mobility and multiple professional options.
Deficiencies in production of university-trained scientists and engineers in Western countries widen gaps between workforce capabilities and enterprise requirements, compelling many American and European companies to tap the labour-rich emerging markets for skilled workers.
The entry of growing numbers of Generation Y members into the global labour market in coming years raises new challenges for corporate managers, who must compete globally for talented young professionals bringing different values and expectations into the workforce.
Nothing in the current economic downturn indicates a diminution of these long-term drivers of the global labour market.
Accordingly, companies that sustain investments in human capital during the recession will enjoy a strong competitive advantage over companies that neglect HR management.
The traditional model of HR management focuses on administrative functions – application processing, benefits, compensation benchmarking, dispute resolution, employee grievances, performance review and rules compliance.
HR professionals typically spend the bulk of their time absorbed in these day-to-day tasks, disengaged from the organisation’s broader objectives.
The HR curricula of business schools reinforce this tendency, producing HR professionals well trained in administrative processes but lacking a firm grasp of the links between human capital and corporate strategy.
The HR profession is undergoing a migration from this tactical model to one that treats HR management as a core strategic activity.
Graduates of elite MBA programmes, who previously shunned unglamorous HR jobs to take positions in corporate finance or management consulting, are now pursuing HR careers.
Factors driving new HR
Several factors are driving the rise of the new HR:
Growing recognition by senior executives of the centrality of human capital in corporate strategy, especially managers of companies situated in global industries where strong HR management is a competitive differentiator.
Increasing complexity of global HR management, which demands HR professionals able to recruit employees with varied backgrounds and to navigate diverse geographies and cultures.
Exhaustion of productivity gains from investments in new plant and equipment, which heighten the importance of high-quality workers as drivers of productivity growth.
Expanding opportunities for outsourcing of HR functions (e.g. benefits administration) that free up corporate resources to engage the strategic dimensions of human resource management.
Changing attitudes toward work by Gen Y individuals, whose recruitment and retention require an integrated approach to professional development and careful attention to the entire employee “life cycle”.
These factors heighten demand for HR professionals possessing a strong strategic acumen, a global perspective, an embrace of workforce diversity as a competitive asset, and a capacity to identify and develop rising stars in the organisation.
They highlight the need to align HR practices with labour force dynamics: e.g. forecasting future workforce requirements; assessing leadership pipeline trends; and devising performance metrics that address both the “hard” and “soft” skills of employees.
And they underscore the imperative of continuous and visible engagement in HR management by senior organisational leaders – articulating the links between human capital development and corporate strategy; mentoring and coaching young employees with leadership potential; surmounting organisational silos to expand lateral opportunities and optimise deployment of the company’s human assets.
HR management in a global recession
Investments in human capital are not likely to be a high priority for companies whose very survival is threatened by the global downturn. But for companies with strong balance sheets and compelling business models, the economic downturn presents important opportunities to strengthen their HR management capabilities and position them for the inevitable rebound:
Utilising slack time to engage employees in professional development and technical training programmes, which serve both to sharpen skills and to preserve morale during tough times.
Opportunistic hiring of talented individuals caught in downsizing at weaker enterprises, which augments the company’s human capital base for long-term growth.
Promoting cross-divisional and cross-functional collaboration, which improves utilisation of HR and encourages teamwork between employees who previously had little or no contact.
Redefining and expanding spheres of authority and responsibility of star employees, which permits assessment of the leadership potential of individuals who may eventually occupy executive positions in the organisation.
Few companies are escaping the fallout of what now rates as the worst global economic crisis since the Great Depression. As a result, even robust enterprises are downsizing.
How companies manage downsizing is an important component of HR management.
Generous treatment of departing workers – including high-quality placement services and severance packages – not only creates goodwill among former employees who will speak favourably about the company and who may indeed return as “boomerangs”, it also burnishes the company’s image as an attractive workplace and thereby strengthens its capacity to recruit and retain talented persons when the economy recovers.