There is little doubt that the downturn is beginning to bite hard. As a
consequence, we are seeing companies shifting their focus from far-sighted
strategies to short-term tactics to deal with more difficult market conditions.
This approach, while understandable, carries with it a need for firms to
refocus their people strategies when market conditions improve, which can cause
uncertainty and demands constant change management. An ongoing strategic
management process is clearly a better model – short termism results in over
recruitment in buoyant times, with the risk of valuable staff being lost to
competitors.
At Deloitte & Touche, we have not made any large-scale redundancies. Our
business plans have recognised the potential volatility in our markets and in
all our businesses we strive to avoid excessive resource build-up. As people
are our business, the ability to retain, recruit and motivate the best talent
is critical to business success at all times. We also realise that a tough
climate can provide opportunities for future growth and the potential for
gaining an edge on competitors. A motivated workforce will be best positioned
to capitalise on these opportunities.
Over the last few years we have recruited directors and partners from the
other ‘Big 4’ firms and financial institutions, bringing in talented
specialists who innovate and add to our service range. We are continuing with
this even in the current environment.
It is clear that whatever difficult decisions are taken, a business must
keep long-term strategy in mind while ensuring costs are managed effectively in
the short term. If this can be achieved while strengthening the business, then
the business will be on a good platform for growth.
Sometimes it is not possible to perform this balancing act – redundancies
can be inevitable. But, it is worth bearing in mind that redundancy programmes
are costly in comparison with other available options, such as postponing
investment programmes. Companies that make large-scale redundancies will need
to deal not only with the costs of the programme, but with motivational issues
for the remaining staff and the cost of employing new staff when there is an
upturn in the economy. A more flexible reward programme tied to corporate and
individual performance can provide an effective cost management tool.
This flexible approach is our favoured option. It works for our people and
our business. For us the cyclical nature of the economy means that when deals
drop off, other parts of the business become more buoyant. To benefit from
these economic shifts we take immediate action – which can mean aggressive
reallocation to those parts of the business doing well or strong performance
management of our staff, as doing what is right for the business cannot wait.
Clearly, there is no single formula for success, but companies which seize
the initiative early before changes are forced on them by external
circumstances will be best positioned for the future.
By John Connolly, Chief executive and senior partner, Deloitte
& Touche
