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Executive Interviews: Interview with Elaine Eisenman on Managing Downturn without Downsizing
June 2009
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By Dr. Nagendra V Chowdary
At the beginning of this century,
everywhere there was talk of talent
management prophesying time and
again that people are the key assets.
And everyone complained of talent
crunch. Now that there is cash
crunch, in the name of either
managing a downturn or
restructuring, every company resorts
to sacking the employees mercilessly.
In fact, some CEOs advocate their
divisional heads not to be emotional
and sentimental and take a knife and
chop off. Why this U-turn?
There is not a simple answer to this phenomenon. I do not believe that it
is a U-turn in thinking about talent; I
believe that it is a knee-jerk reaction to
feeling out of control of the
environment and using a classic
means for regaining control – layoffs –
since salaries and benefits are
typically the source of greatest cost
within a company. It is, however,
important here to distinguish
between companies that are slashing
because they have so little resources
remaining that the wholesale firing
represents a last- ditch effort to ward
off bankruptcy, and those companies
that are being far more judicious and
strategic in their restructuring
attempts. I will focus on strategic
cutting where there are alternatives.
Companies that have the cash
resources and necessary lines of
credit and customer bases to be
strategic and planful are stepping
back and taking a tough look at all of
their assets, employees included, in
order to decide how best to survive
during the downturn. Unfortunately,
in good times, companies tend to over
hire and are less worried about
overstaffed divisions that, in truth,
may not be strategically important to
the company. When all is well,
average performers, and even poor
performers, may be tolerated far
longer than should have been the
case. Suddenly, a downturn enables
executives to take the action that they
were reluctant to do in the past. Inmy
consulting, I see many situations that
existed because the executives were
too tolerant and were not forced to
make survival decisions. Now they
have no choice and housecleaning
begins. This can also occur when a
new executive is brought in and takes
a tough look at what exists in order to
better position the company to
achieve new objectives. While this
can be seen as ignoring the
importance of talent management, it
may be exactly the opposite. When
viewed strategically, allowing poor
talent to continue to hold jobs and block the progress of top talent may
have been the bigger problem for the
company. Smart companies who are truly
poised to take advantage of this
downturn will fully evaluate how
well they were positioned for the
future before the downturn, and use
the answer to determine if the right
talent is in place. After all, the right
talent in the right place at the right
time is the only competitive
advantage that a company can have
over its competitors. There is no other
resource that cannot be matched or
copied. Babson’s research on talent
leadership demonstrates that the
companies who are poised to win in
the future are the ones who know this
and understand that the talent
question is part of a broader
organizational readiness question that
focuses on the integration of culture,
strategy alignment, governance,
processes, and technologies. Even while giving the benefit of
doubt to the companies pursuing lay
off policies, what happens to the
morale of all thosewho fortunately get
managed to survive (because they
happen to be the ‘best’ employees)
and hold on to their existing jobs?
Can companies expect best
performance from their ‘best’
employees?What happens to all such
companies resorting to massive
layoffs as regards to image and longterm
standing? Do you think people
would excuse them for being treated
as inanimate objects especially during
such traumatic times?
There is no one-size-fits-all answer to
this question. At base, it is
inexcusable to treat employees as
inanimate objects, regardless of the
work situation. In my experience,
companies that care about their
employees care about them in good
times and bad. Rarely does a
company suddenly change its
philosophy of how employees are
treated. More and more, company
values are a critical selling point in attracting top talent, so image can
determine future success. Employees
will not commit to high performance
in firms that do not treat them with
dignity and respect. That said, much
of the employee and future employee
response to layoffs is a reflection of
three factors: the communication by
senior leadership about the reasons
for the layoff as well as reassurance
that there is a long-term goal for the
company’s success; the way in which
decisions are made as to who stays
and who goes; and the way in which
the layoff itself is handled.
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