Tough Economic Times Ratchet Up Need for Investing in Employee and Leadership Development Services | Article

economic recessionOne doesn’t have to look far in these times of global economic crisis to see the difficulties facing companies in prioritizing where to cut costs and invest in capabilities. Trying to accomplish more with less and facing rising operational costs including employee benefits and compensation, the CEOs and business owners of even the leading companies today wonder how to address the challenge of getting employees to be more productive and efficient. But the economic crisis is not sparing learning and development initiatives.

There is an escalating need for development in the leadership arena because baby boomers are retiring and there’s a shrinking population of ready leaders. And the demands of a younger workforce expect employers to invest in developing their skill sets – or the best talent will go work someplace else. Despite these business demands, many companies are moving their learning and development plans to the back burner. That’s a mistake, says Mary Gorski, president of MG Assessments LLC, a Minnesota-based HR consulting company specializing in tools and consulting for hiring, managing, and retaining employees.

Gorski points out that business owners need to recognize that human capital needs don’t go away in a recession or difficult times. “In fact, often the best time to invest in workforce development is when there are challenges,” she advises. “Companies should always be investing in this, but human behavior tends to ignore barriers when things are going well. When things are not going well, it forces us to address issues.”

“In bad economies, it’s even more critical to get employee and leadership development right, because when the economy turns around, a company won’t be able to compete and survive if it doesn’t retain the best talent and invest in those people,” she continues. “In a downturn, when everyone’s facing the same challenges, that’s an opportunity to re-evaluate and invest in how to come back even stronger with a competitive edge.” Gorski says addressing workforce challenges starts with assessing what’s working and what’s not and diagnosing what the real issues are.

Figuring out the real issues behind his company’s situation was on the mind of Erik Thorsell, president of Success Computer Consulting, an IT services provider, when he turned to MG Assessments for help.

From near-failure to a thriving business

His company in 2005 was struggling with client dissatisfaction but these days is a thriving, profitable company that just finished its greatest growth quarter ever – even in this tough economy. “Now we have a staff who are engaged and care about our clients. They work hard, and our clients are really passionate about us now. We get great feedback and have a huge amount of recognition in our marketplace,” says Thorsell.

He credits the outstanding turnaround to the “remarkable team of people on our staff.” But he adds that, until the training and development services of MG Assessments over the last three years improved the company’s situation, the workplace environment was frustrating, employees were unhappy and felt demoralized, and the company had an annual turnover of 30 percent.

He says he couldn’t figure out why his efforts at leading the staff weren’t successful.

Through the consulting services, assessment tools, tough questions, and forced accountability that MG Assessments’ services provided Thorsell, he came to realize the real issues at his company. It was, in part, a leadership problem; but he says he also learned his company “didn’t have some of the right people on the bus.” That idea from the book “Good to Great” (which he read during the leadership coaching services through MG Assessments) really resonated.

Gorski helped Thorsell begin the initiative of getting the right people by using assessment tools that helped him identify and understand characteristics of employees “who could move the ball forward on their own” and then understand how to use them as models for hiring. Then came coaching on interviewing candidates more effectively.

Thorsell says they started hiring people based on the new criteria and “wound up having people who could really work well with another in a way that I’d never experienced before – people who seemed to understand their role more clearly because they were more wired for it than the people we’d hired before. We got people who really were a fit for the kind of company we are.”

“Sometimes it’s the most basic lessons you learn that are the biggest light bulbs,” he adds.

MG Assessments’ next area to tackle was leadership development and performance management – first with Thorsell and then with a newly selected management team. He and the four managers used MG Assessments’ tools and consulting to identify areas where they could interact more effectively and with more integrity with employees, how to give feedback, and how they could manage employees in a way best suited to their needs.

When companies reach a certain size, they need a structure and processes in place to help support human capital needs, whether it’s for leadership development or employee development, or both, says Gorski. They need to evaluate where their workforce strengths are and how to give people what they need to be more engaged and more productive.

Thorsell says he didn’t set out specific financial return-on-investment goals for the engagement with MG Assessments but that the amount his company pays for the services is minimal compared to the financial benefits. “We were a loss-making business. Now we’re now able to scale our business up, we’re twice the size we were, and we’re profitable. We have a strong team of people really looking out for each other, a huge amount of momentum, and we’re hiring. The services have been transformative for our business.”

Leadership development and staffing selection were the first priorities and remain an ongoing service with MG Assessments at Success Computer Consulting. Now they’re also starting to work together on making sure that performance management is integrated with business processes and is more connected to the day-to-day work that the people are doing. Employees write plans for their individual accountabilities in the tactics the company implements to achieve its strategic goals. Some even include personal work/life balance goals so the team can be respectful of each other in those efforts.

Their individual plans also include professional development goals – something so critical in the IT business where technology changes rapidly and employees must acquire ever-increasing competencies.

Thorsell says performance management starts with each person defining in their plan the commitments they make to each other and the business. It also includes one-on-one meetings between managers and coworkers at least monthly if not every other week to review where an employee is struggling and where they need to adjust the plan.

Gorski warns of the importance of companies taking the approach that Thorsell used. “Increasing employee productivity and effectiveness is not as simple as deciding there’s a need and then seeking a training solution to fix that need,” she says. “HR and a company’s executives should push back if there’s been no pre-assessment to first figure out what the need really is.” Maybe it’s not a learning need. Maybe the right people aren’t in the right seats or maybe the company hasn’t defined the job well enough. First do some assessments and analysis to discover what the true need is and whether a learning/development solution is appropriate, she advises.

Barriers to effective decision-making about learning and development

Thorsell comments that not having a satisfied, productive workforce is “a huge ongoing resource drain to have to worry about, manage, and accommodate.”

He describes the starting point for building such a more effective workforce. “Business owners and CEOs first need to be willing to take action to make sure they have the strongest team they can have. Then they need to be willing to provide strong leadership that sets a direction and performance management initiatives that help employees get there.”

Gorski says many CEOs and business owners look at their employee population these days and know they need to do something to get them engaged and more productive. The forward-thinking companies are taking those steps, even in a bad economy. But some aren’t taking these steps even though they know they’re losing talent right and left and also haven’t adequately trained leaders. Sometimes they base this nearsighted mindset on the idea that something else is a greater priority. Or the company does not retain a training/development budget. Or the top executives have an attitude of “let’s get some sales first, and then we’ll figure out how to retain and develop employees.”

But Gorski’s take on the situation goes further than financial restraints. It’s a problem of recognizing the business case – the value return on investing in learning and development so a company can grow despite business and economic shifts. HR, she says, needs to be a strategic partner and identify for the CEO how investing in learning and development initiatives will help the company increase revenue because of its performance-driven culture.

HR must not only make the business case and provide the data on why learning and development matters but also needs to point out the level of risk if the company decides not to undertake such initiatives. But HR historically has been very tactical and often doesn’t think from a strategic partner’s perspective. She adds that CEOs also fall short; they often don’t recognize how important the human capital needs are and connect that with the success of the business.

“The need to invest in developing employees and leaders is not going to go away. Talent matters now that we’re in the Knowledge Transfer Age,” says Gorski. “People are critical. Differentiation today and tomorrow is less about a company’s products and more about its people.”

Lessons from the Outsourcing Journal:

  • There is an escalating need for companies to invest in learning and development initiatives because: (a) baby boomers are retiring and there’s a shrinking population of ready leaders, (b) a younger workforce expect employers to invest in developing their skill sets, (c) talent matters, and people are critical differentiators among companies.
  • Tough economic times are an opportunity to evaluate weaknesses in workforce capabilities and invest in learning and development services that enable a company to come back with a stronger competitive edge when the economy turns around.
  • HR and a company’s executives should push back on investing in learning and development plans if there’s been no pre-assessment to first figure out what the need really is.
  • HR needs to be a strategic partner and identify for the CEO how investing in learning and development initiatives will help the company increase revenue because of its performance-driven culture. HR must also point out the level of risk if the company decides not to undertake such initiatives.

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