Retaining the best employees is a priority for senior managers around the world also during the crisis

Teet Tender,

PricewaterhouseCoopers

Advisory Service Line Leader

Retaining the best employees is a priority for senior managers around the world also during the crisis

The PricewaterhouseCoopers’ (PwC) Global CEO Survey presented at the World Economic Forum in Davos at the end of January showed unprecedented pessimism among the world’s business elite in regard to the foreseeable future of their companies. The survey conducted at the end of 2008 summarised business leaders’ assessments of key business issues, including risks, challenges and short and long term objectives. One of their main concerns was how to find a balancing point between cost cutting and personnel management – how to find money to recruit and retain the best employees.

Of long term objectives, retaining and recruiting the best employees is the top priority for senior managers (72% of the respondents consider it to be of critical importance and 25% very important), followed by cutting energy and raw material related costs and increasing the value of corporate brands.

Although in the short term managers consider the diminishing demand for goods and services and the disappearance or increasing cost of financing options as the main challenges, nearly half of the respondents (46%) thought that the recruitment of employees with sufficient skills was an important challenge as well (a year ago, this ratio was 61%). The ratio of managers planning to reduce the number of employees in their company was only 26% a few months back.

In the comparison of geographical regions, Central and Eastern Europe (incl. Russia) were the only places as at the turn of the year, where company managers foresaw a reduction in the number of employees during 2009.

Note: A positive number on the above figure indicates the number of companies in the respective region whose senior managers think the number of employees will rise in 2009 in excess of the number of companies whose managers believe that the number of employees will drop. Central and Eastern Europe and Russia is the only region, where those believing that the number of employees will drop was higher already at the end of 2008.

The majority of senior managers hold that cost-cutting is doubtlessly an efficient method for strengthening competitiveness in tight economic conditions, but cutting costs from personnel expenses involves a risk of losing unique competitive advantages and impairs the company’s readiness for the next economic upturn.

Many senior managers feel that making decisions today is reminiscent of a brain surgeon working by candlelight. They have no integral picture of their employees, their knowledge and skills critical to business activities and the resources needed for maintaining the workforce, and therefore fail to sense the possible effects of reducing the labour expenses. Thus, for instance, 94% of the respondents place great importance in information concerning the wishes and opinions of their employees, but only 30% have a sufficient amount of such information. It is clear that in order to achieve the aforementioned balancing point between cost cutting and recruiting and retaining the best employees, senior managers will have to improve the collection, interpretation and implementation of information concerning their employees.

Cutting budgeted expenses, including payroll is relatively easy. The bigger problem is how to not damage the competitiveness, sustainability and employee motivation of the company. At present, one of the most complex managerial tasks is how to create motivation for employees who wish to take their next step on the career ladder in the conditions where no such option is available - no new positions are being created and no corporate expansion takes place under the dwindling economic conditions.