TACKLING THE ECONOMIC CRISIS

Has HR Learned from the past?



TACKLING THE ECONOMIC CRISIS - HAS HR LEARNED FROM THE PAST?

TACKLING THE ECONOMIC CRISIS - HAS HR LEARNED FROM THE PAST? HOW TALENT ENGAGEMENT CAN HELP ORGANISATIONS RECOVER FASTER FROM THE DOWNTURN

IN MARCH AND APRIL 2009, HUDSON CONDUCTED A SURVEY OF MORE THAN 500 HR AND BUSINESS LEADERS IN over 30 COUNTRIES WORLDWIDE. THE SURVEY RESULTS OFFER INSIGHT INTO HOW TOP HR PRIORITIES AND CHALLENGES HAVE CHANGED FOR MOST ORGANISATIONS IN 2009. Historically, companies’ primary HR focus during a downturn has been on cost-cutting. Looking after talent was low on the list of priorities and as long as employees retained their jobs, talent engagement was not a key concern. For many organisations across the globe, HR has not previously had the opportunity to play a strategic business role. With the current downturn, however, many issues have arisen which have meant HR has been required to step up and take the lead. This report details the results of Hudson’s survey, which shows that during this current economic crisis, the HR focus of organisations across the globe is not only on cost-cutting through right-sizing, but also on talent engagement, talent development, and the retention of talent key to the organisation.



HR PRIORITIES: DOWNSIZE, AND KEEP TALENT ENGAGED

Survey respondents were asked to indicate their top priorities for 2009 compared to those of 2008. Results show that talent management in its many guises has 38%

14%

become more important due to the considerable business and personal challenges that have presented themselves during the past year, and which still lie ahead.

9%

6%

12%

4% 3% 6%

UK & Ireland continental Europe

35%

27%

30%

18%

22%

15%

13%

22%

15%

16%

10%

19%

13%

12%

10%

16%

Usa/canada 24%

23%

18%

21%

15%

11%

14%

25%

asia Australia/ new zealand

28%

28%

15%

11% 3%

13%

3% 3%

Right-sizing/restructuring

Internal talent engagement

organisational development

people development

Internal talent identification

talent attraction

talent management processes

strategic support

Notes: TM processes: Includes job design, competency profiling, job grading, performance management. Percentages are higher than 100% as respondents were asked to rate their highest priorities and many rated more than one. Please refer to Exhibit 1 in the appendix, for the full 2009 vs. 2008 results. Source: Hudson HR Survey 2009 (March/April 2009) Not surprisingly, right-sizing is a top priority in each region surveyed, followed closely by talent engagement, except in the USA/Canada where further optimisation of talent management processes and systems ranked second, slightly ahead of talent engagement. In Europe and Australia/New Zealand, however, the main priority after downsizing is clearly on engaging people. All organisations across the world focus on getting the amount of resources right first. In Europe and Australia/New Zealand companies then move to retention and engagement initiatives as they have cut so deep,



they cannot afford to lose any further talented staff, particularly potential leaders and high value specialists. This is a new key element of HR strategies; companies are focusing on staff engagement to obtain the best business performance possible.

Could it be that companies have come to realise that people staying with the organisation should receive more attention than the ones leaving?

TACKLING THE ECONOMIC CRISIS - HAS HR LEARNED FROM THE PAST?

“Cost is the first dilemma in the HR storm that is threatening businesses right now. Perhaps surprisingly, we are seeing a considered approach from many organisations we work with which know that conducting major layoffs of high value professionals may save money in the short term but losing competencies that take substantial time and cost to rebuild represents a serious cost and risk. Marc Timmerman Executive Director, Talent Management, Hudson

In Europe, after right-sizing, talent engagement is the second HR priority. Organisations have realised that talent engagement is key and the challenge is the retention of their key people. These are as important as the rightsizing exercises. In Asia, the demand for talent engagement has also become more pressing; previously it was sufficient to rely on super-growth to ‘engage’ employees with fast promotion and salary inflation. Now senior executives are demanding that the HR function support the business with sophisticated talent management programmes. This trend is also consistent with the substantial increase in the strategic role of HR in Asia businesses in contrast to the previous bias towards HR as a transactional function. The USA/Canada focus on talent management processes coincides with the region reevaluating existing compensation and talent structures in favour of more flexible reward systems to replace previous bonus systems which were purely based on performance. In Australia and New Zealand, organisations see a need to foster and develop talent, after the downsizing and engagement initiatives, as talented individuals who stay are asked to take on bigger and more complex roles as a result of the restructuring. This coincides with the region’s geographic isolation which means that organisations have been required to develop their own internal talent for a long time. Organisations and individuals are entering “survival mode” and many are already acting accordingly. In all regions, we are seeing a conflict between short-term cost savings such as staff reduction, lower training and development expenditures and investing in the longer-term continuity of the organisations. Companies are looking for cost-cutting opportunities and decreasing headcount is a common strategy. At the same time, however, companies are struggling to increase or maintain

performance with a reduced workforce. The results of our survey show that organisations are attempting to balance the impact of downsizing with an increased focus on talent engagement and long-term strategy. One example is a financial institution looking at the current performance of its traders. Perhaps the traders are not performing as expected right now, since the markets have moved into a very unstable phase. However, to conduct a massive layoff of high value finance/trading professionals would directly impact the long-term perspective and viability of the organisation. Losing such competencies would take substantial time and cost to rebuild and would not be the best option in the long-term. We are now seeing organisations in such situations that are reluctant to let go of high value specialists because they have considered that the expense of regaining the capability after the downturn will be too high. In addition, whereas retention initiatives have traditionally been viewed as expensive, we are now seeing some innovative ‘low-cost’ approaches, such as coaching and mentoring by peers, more widely used by a number of companies. We foresee that although organisations are often forced to implement deep staff cuts, the next phase of the crisis will see HR leaders placing even more emphasis on organisational development and people development (see Exhibit 1) as organisations become aware that they have lost critical skills or redeployed people into new roles that they do not yet have the appropriate skills to fulfil. Consequently, companies should attempt to reassess their talent mix sooner rather than later and focus their attention on top performers, high potentials, and ‘irreplaceable’ employees. Good practices focus on matching key people with key roles and putting the most competent people where they will have the largest positive impact on the final performance of the business.

TACKLING THE ECONOMIC CRISIS - HAS HR LEARNED FROM THE PAST?



CHANGES IN THE TALENT MIX: INTERNAL TALENT IDENTIFICATION AND STRATEGIC HIRING

Organisations across all regions are decreasing staffing levels in an effort to stay afloat. The recession has resulted in a global average of 79% of companies operating headcount freezes in 2009 (see table on pg. 9). Similarly, between 60% and 83% of organisations, depending on region, reported that their HR strategy now incorporates downsizing. An immediate reaction by many companies was to cut contractors as a way to stem discretionary spending. Initial knee-jerk tactics, such as ending contracts and freezing recruitment, were followed by more comprehensive cost-cutting strategies resulting in redundancies.

In the USA/Canada, the staff reduction focus is on permanent employees. Due to many workers being “at will” employees*, American companies can often reduce permanent staff as easily as contractors. Compensation of these permanent employees usually includes benefits such as health insurance, retirement contributions, paid sick and holiday time and many others not provided to contract staff. As such, paradoxically, choosing to retain a permanent employee costs the organisation more money in the short term due to benefits related expenses. Nearly half (44%) of Asian respondents are reporting headcount downsizing in 2009. This figure contrasts starkly with the trends monitored in the region during the past five years – a period in which the majority of companies have been increasing staff with negligible downsizing. HR leaders have been required to switch rapidly from talent attraction to right-sizing and repositioning themselves as strategic business partners.

Interestingly, while most organisations are reducing their headcount, a percentage of respondents in all regions still plan to hire staff. This can be explained in part by the fact that many organisations are planning to make some strategic hirings. We have seen that several sectors including public, energy and utilities and heavy engineering intend to increase staffing levels.

Even during a hiring freeze, organisations look to fill critical roles and where there are opportunities to secure exceptional talent due to market circumstances, we have seen hiring freezes thaw. The depressed market offers the chance for organisations to prey on competitors’ highly

59% of organisations in Continental Europe and as much as 70% in the UK and Ireland are planning to make some strategic hiring of newly available key talent (see table on pg. 9).

UK & Ireland Changes in staffing levels

Continental Europe

USA/Canada

Australia/New Zealand

Asia

Permanent

Contract

Permanent

Contract

Permanent

Contract

Permanent

Contract

Permanent

Contract

No change

34%

33%

35%

34%

26%

37%

41%

32%

52%

22%

Decrease

54%

57%

47%

56%

65%

56%

44%

44%

31%

52%

Increase

12%

10%

18%

8%

9%

8%

15%

24%

17%

26%

Source: Hudson HR Survey 2009 (March/April 2009)



TACKLING THE ECONOMIC CRISIS - HAS HR LEARNED FROM THE PAST?

skilled and experienced talent, which is difficult to recruit during better economic times. It is vital to remember, though, that companies must then address how to retain and engage this talent once it is on board. The perception is that organisations also have the opportunity to cull their work force while remaining competitive. Recently, we spoke to a professional service organisation whose natural turnover has neared zero, which has to lead to plans for forced exits, something the company has not had to do in a long time.

“Retention is crucial to smaller organisations. However, the feeling is the larger organisations have much opportunity to cull their work force and still retain an efficient organisation. Therefore a certain level of turnover is beneficial for most companies. The question is to find the correct level.” Graham Rowlands Managing Director, International and Emerging Markets, Hudson Europe

* At-will employment is a doctrine of American law that defines an employment relationship in which either party can break the relationship with no liability, provided there was no express contract for a definite term governing the employment relationship and that the employer does not belong to a collective bargain (i.e., a union).



HR’S ROLE IN A DOWNTURN: ORGANISATION DEVELOPMENT AND TALENT MANAGEMENT

With the exception of Asia, where talent management is seen as HR’s key focus, companies in all regions place their primary HR focus on organisational development, including organisational design, change management, communications management and governance.

issues such as performance management, compensation management and workforce reductions. However, current circumstances have seen a shift in how HR views – and acts upon – difficult times. Rather than just thinking about “now”, HR and business experts are thinking about “tomorrow”, as well as how HR should provide direct benefit to business leaders.

Senior executive involvement is seen as crucial in enabling HR’s success, illustrating that HR’s focus is on acting as a trusted advisor and business partner to top management to an unprecedented degree. In past crises, HR focused primarily on personnel management

Talent Management

Personnel Management

Organisation Development

We also see from these results that strong involvement of senior executives in talent management and organisation development initiatives is seen as crucial to business health.

UK & Ireland

Continental Europe

USA/ Canada

Asia

Australia/ New Zealand

HR priority

25%

26%

36%

44%

18%

Need for improvement

8%

13%

12%

15%

3%

Senior executive involvement

51%

44%

48%

59%

39%

Line management involvement

65%

60%

62%

78%

55%

HR priority

2%

7%

3%

7%

3%

Need for improvement

2%

6%

0%

11%

0%

Senior executive involvement

7%

15%

25%

4%

10%

Line management involvement

9%

13%

16%

15%

16%

HR priority

25%

39%

40%

33%

44%

Need for improvement

18%

17%

16%

8%

25%

Senior executive involvement

63%

69%

62%

54%

75%

Line management involvement

41%

54%

43%

46%

61%

Source: Hudson HR Survey 2009 (March/April 2009)

From highest to lowest importance

+



-

TACKLING THE ECONOMIC CRISIS - HAS HR LEARNED FROM THE PAST?

HR OBSTACLES: HOW TO ENGAGE AND RETAIN WHILE RIGHT-SIZING

multifaceted talent related challenges. Despite the gloom, businesses around the world are increasingly recognising that, ultimately, they cannot afford to lose further talented staff – particularly potential leaders and high value specialists.

Many organisations have had their business models tested and have had to quickly restructure positions and even entire business units to keep the organisation as healthy as possible through the downturn. The shift in HR priorities and focus has inevitably resulted in new and

UK & Ireland

Continental Europe

USA/ Canada

Asia

Australia /New Zealand

Key Talent Retention

21%

16%

26%

9%

30%

Talent Engagement

15%

12%

18%

16%

16%

Talent Attraction

3%

4%

7%

16%

11%

Talent Identification

2%

7%

3%

0%

8%

Talent Development

5%

9%

7%

13%

0%

Workforce planning/ Optimisation/Right-Sizing

16%

19%

26%

13%

16%

Change Management/ Internal Communication

6%

8%

3%

6%

3%

Compensation

0%

6%

0%

3%

5%

Organisational Design/ Development

0%

1%

3%

13%

3%

HR OBSTACLES

Source: Hudson HR Survey 2009 (March/April 2009). Top challenges quoted by HR/Business leaders From highest to lowest importance

+

-

TACKLING THE ECONOMIC CRISIS - HAS HR LEARNED FROM THE PAST?



Primary obstacles are the retention of key talent and maintaining employee engagement In Continental Europe and in the UK and Ireland, the top issues after right-sizing are the retention of key talent and talent engagement. Companies are concerned about the potential negative impact of the restructuring process on the talent which stays and are concerned about securing key talent and the engagement of their entire workforce. USA/Canadian companies are split between workforce optimisation and retention (26% each). As seen in the increase in Corporate Social Responsibility (CSR) as a strategic HR initiative, these organisations are focusing on alternative retention initiatives as a way to engage their people. In Asia, attraction of key talent and upgrading the competency skills of employed people remain key concerns. This is due to the ongoing structural lack of specialist skills in the region. Asian organisations also remain focused on future organisational needs given that medium and long-term growth prospects remain strong. Asian business demands are now requiring the engagement of the HR function as a strategic support partner. In Australia/New Zealand, talent engagement is a top concern (16%), after retaining key talent (30%). As previously explained, HR people fear they are going to lose some of their best people through restructuring and recognise the need to have specific plans to retain top performers. These challenges reflect not only the economic downturn ‘wave’ that impacted from West to East but also the different levels of economic and HR maturity of the regions. In the past, HR’s focus was on addressing business talent needs and getting people on board. HR was lagging behind longer term business strategy, most likely because the focus was primarily on recruiting and firing people.

“HR leaders in Asia have the twin challenges of responding to the immediate right-sizing requirements of the organisation and repositioning the HR function as a strategic function to overall organisation objectives.” Mike Game CEO, Hudson Asia



HR INITIATIVES: A VARIETY OF INITIATIVES WHERE TALENT ENGAGEMENT AND DEVELOPMENT ARE IN STRONG FOCUS

After redundancies have been made, managers find they are faced with a raft of new concerns. They are likely to find themselves in less friendly and more pessimistic work environments, while managing larger teams and additional functions with more tasks. As a result, organisations have been more resourceful in carrying out their HR initiatives.

UK & Ireland

When we look at the new HR initiatives being implemented in Europe, the focus is primarily on costcutting and related measures such as outplacement (up to 81% of organisations in Continental Europe, vs. only 74% in the UK & Ireland and 50-71% in other regions, which could be explained by the difference in legal frameworks).

Continental Europe

USA/ Canada

Australia/ New Zealand

Asia

2009

Δ

2009

Δ

2009

Δ

2009

Δ

2009

Δ

Headcount freezes

75%

50

78%

55

80%

59

78%

56

81%

62

New headcount approval procedures

69%

38

68%

38

59%

35

85%

70

81%

62

Downsizing

76%

51

83%

66

79%

56

60%

20

76%

53

Outplacement/ career management

74%

48

81%

62

68%

32

50%

0

71%

43

Strategic hiring of newly available key talent

70%

39

59%

19

78%

53

84%

68

67%

33

International talent sourcing

52%

4

47%

-6

65%

24

36%

-27

27%

-45

Increased focus on talent development programmes

72%

44

64%

27

75%

50

89%

78

78%

56

Assessment programmes to identify talent

68%

36

59%

18

52%

0

79%

57

73%

45

Brand position strengthening

70%

41

55%

11

65%

31

79%

57

70%

40

New work/ life balance initiatives

50%

0

54%

8

62%

15

58%

17

69%

38

Focus on corporate social responsibility

44%

-11

53%

6

83%

67

63%

25

60%

20

HR Initiatives

Δ represents change from 2008 to 2009 Source: Hudson HR Survey 2009 (March/April 2009)

TACKLING THE ECONOMIC CRISIS - HAS HR LEARNED FROM THE PAST?



Other areas in strong focus include talent development programmes. In the USA/Canada, we see a strong emphasis on corporate social responsibility and strategic hiring of newly available key talent (83% and 78% respectively). In Asia, a key focus in 2009 is on talent development (89%) and strategic hiring of key talent (84%). In Australia/New Zealand, after cost cutting measures, the focus is on talent development programmes and creative engagement programmes utilising salary packaging and non-financial reward programmes.

“There are positive initiatives to balance the necessary cost cutting programmes, headcount freezes and accompanying outplacement. The importance of other key programmes around talent assessment, and talent development, show that organisations are taking sophisticated approaches and are implementing actions to limit risks and optimise their strength for the next upturn phase.” Marc Timmerman Executive Director, Talent Management, Hudson

10

Psychological contract and engagement in a downturn There is often the belief amongst managers that employees who keep their jobs during difficult times are content with the situation. We know that in many cases this is not the case. Job security is only one aspect of the psychological contract and employers must fully examine all facets to understand how to best engage their talent. While the written employment contract defines job terms and conditions, the psychological contract represents the perceptions and informal obligations between employees and their employer. It recognises the employment relationship as a two-way deal, examining whether promises made have been met, and whether they are fair.

Employer Expectations

T

Performance

EN

EMPLOYERS EXPECT

EM

Collaboration

EN

G

AG

Flexibility

US T

&

Loyalty

M

UT

UA L

Ethical Behaviour

Training Job Content Security Social Atmosphere

TR

Employability

EMPLOYEES EXPECT

Financial Rewards Employee Expectations

Work-Life Balance Career Development

During a downturn, this two-way deal takes on a different dimension because parameters such as job security or social atmosphere acquire a higher level of importance. Understanding the nature of the contract can result in increased team performance and employee retention. In the relationship between an employee and an employer, financial rewards, work-life balance, performance, career development, collaboration, employability and social atmosphere are just some of the crucial dimensions that play a role in the forming of this psychological contract. Not meeting the expectations or not knowing them can lead to a breach of contract, whereby people will either disengage or leave.

TACKLING THE ECONOMIC CRISIS - HAS HR LEARNED FROM THE PAST?

11

firm

STRONG

• Employees expect a lot but don’t give everything

• Employee promises a lot & expects a lot in return

• Will meet expectations but not go the extra mile

• Contract type works once expectations are met

• Often relates to those in a role for an extended time

• Often ‘Engaged’ and/or ‘Ambitious’ employees

• Often high performers without significant effort

• Positives often include high commitment & loyalty

• Can be under-utilised and/or stagnating in role

• Dissatisfaction likely if high expectations not met

• Often appropriate for vocational or structured roles

• Ideal for sales, management, & innovative roles

WEAK

LOOSE

• Employees neither promise nor expect a lot

• Substantial effort with low long-term expectations

• Only the formal legal contract creates a connection

• Challenge & job content are key drivers

• These people will do what they have to but no more

• Often deep specialists or new starters

• Performance is often below employer expectations

• May be the “new generation” of contract

• Turnover tends to be higher than normal

• Difficult to retain once the challenge is gone

• Can be appropriate for repetitive & lower level roles

• Appropriate for challenging & project-based roles

low

EMPLOYER COMMITMENT

high

Different types of psychological contracts

low

12

EMPLOYEE COMMITMENT

high

TACKLING THE ECONOMIC CRISIS - HAS HR LEARNED FROM THE PAST?

“We see that job security is becoming a much more important part of the psychological contract between employees and their employer than it was before the downturn. This is leading to sectors such as public and semi-public becoming more attractive to candidates. The question is then – how long will these people stay once the economy picks up?” Marc Timmerman Executive Director, Talent Management, Hudson

OUR RECOMMENDATIONS

Organisations across the globe are feeling the effects of the tough economic environment, although some countries and sectors are feeling the crunch more than others. According to the OECD*, unemployment is expected to continue rising across EU-15 through 2009. During this time, making the right talent decisions will be critical to future business success. Here are some areas that companies should keep in mind as they look to weather the storm:

1. Consider long-term needs It is easy to be distracted by short-term pressures. Short-term initiatives need to be balanced with long-term thinking to ensure continuity. What talent does your company need in the current situation and in the future? What do your customers value and who are the talent who provide this value? Companies must continue to consider longer term talent strategies and should not think in a linear way about right-sizing; rather they need to take a close look at which people should stay. Short-term decisions based on age, probation period or performance are examples of how not to handle right-sizing. Is your company prepared for the end of the recession and the resulting talent needs? It is important to retain critical talent and keep an eye out for external talent as well as talent poachers while considering long-term returns.

2. Provide clarity and transparency During good times and bad, employees need to know where the organisation is headed and how they fit into the larger picture. It is also crucial that employees know sooner, rather than later, if they do not have a

future with the company and how the organisation will support them in this transition. Be honest and authentic in communications and encourage people to raise questions and contribute ideas. It is especially important that employees feel it is safe for them to raise issues and suggest innovations. Specifically, organisations with a large number of young employees will see a definite need for and will also be judged by the degree of openness in their communication. Doubt and uncertainty will lead to disengagement, fear and rumours which will only decrease the performance of the organisation. Treat your people as adults.

3. Segment talent Market segmentation is something that marketers have been doing a long time to understand and better serve customers. HR needs to follow suit and understand that “one size fits all” no longer applies when it comes to addressing the needs and desires of employees. HR must learn to mould talent management offerings to be flexible enough to cover different employee value propositions. The requirements of a high potential are not necessarily the same as those of an irreplaceable professional. Comprehending and acting on these differences will go a long way towards engaging and retaining different critical talent groups in your organisation. During any kind of economic situation it is the ‘engaged’ people who make the difference in customer satisfaction and business performance.

*Organisation for Economic Co-operation and Development, Impact of the economic crisis on employment and unemployment in the OECD countries.

TACKLING THE ECONOMIC CRISIS - HAS HR LEARNED FROM THE PAST?

13

High Potentials

Potential

Acknowledged Talent

Too early to judge Problem Cases

Effective performers

High performers Irreplaceable professionals

Meeting the requirements

Source: De Witte & Morel – Hudson Belgium (2001- 2003)

4. Identify critical players and put them in critical roles Organisations that have already made an inventory of available competencies and human potential, through systematic assessment of their internal talent have a strong advantage over other organisations. They have the capacity to make better choices in their exit decisions and in their workforce and succession planning. They also have a clearer view of how their entire talent pool is segmented. However, it also remains necessary to acquire a clear understanding of which roles are the most critical in the organisation based upon the complexity of the role (time for internal development, difficulty to find replacement, degree of expertise needed, for example) and the impact the role has on the final results of the organisation. Ideally, employees with the most potential will take care of the high impact roles and your high-value specialists will fill the most complex jobs. But is this the case right now and do you know where the most critical roles lie within your organisation?

5. Consider job redesign Cost-cutting is a perfect opportunity to reassess and revamp jobs and role structures, so that organisations secure their core business, make jobs more interesting and engaging for employees as well as provide more efficiency, productivity and secure a competitive advantage for the organisation.

6. Consider non-traditional costcutting methods

Performance

vote on whether to take one day of unpaid leave per month or face redundancies. Usually, the employees overwhelmingly decide to take unpaid leave and take advantage of longer unpaid sabbaticals. This is a good example of how to:

• reduce costs thereby addressing the right-sizing

challenge (because right-sizing is ultimately about cost);

• engage employees by giving them a say in how the organisation deals with the economic challenges;

• retain employees since they decided to remain with the company and work fewer days

• increase work-life balance through the employees having more personal time;

• address change management and internal

communications by making decisions transparent and letting employees decide for themselves.

7. Provide career guidance Organisations realise that redundancies can have a tremendous impact on their employees’ morale and engagement, depending on how such events are handled. The results of this study show that for many companies, treating employees right even in the most difficult times is a key focus. We recommend that organisations plan for transition initiatives that are in line with their corporate values, reduce risks associated with change and protect their brand. Specialist services can mean that change is handled effectively for both the ones who have to leave, and the ones who stay.

Reducing the workforce is not the only way to cut costs. A number of organisations are having their employees

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TACKLING THE ECONOMIC CRISIS - HAS HR LEARNED FROM THE PAST?

CONCLUSION: HR HAS LEARNED FROM THE PAST

We are seeing a learning effect from past crises; organisations now realise that talent engagement is important and the challenge is the retention of their key people. These are as important as the right-sizing exercises. The economic recession will be followed by a talent crunch crisis. Businesses must recognise that short-term initiatives need to be balanced with longer-term thinking in order to guarantee continuity and success on the other side. Some organisations are taking into account that in order to secure the continuity of the organisation they should hang onto and invest time and energy in the retention of the most critical talent groups. We urge more businesses to follow this example. Engagement is the key to organisations emerging from the crisis stronger Apparently many HR and Business leaders have realised that the talent crisis will outlive the economic crisis. Companies need to step back and consider the big picture to identify opportunities, balancing them with the necessary short-term management actions. Engaged people drive innovation, productivity and performance. Companies need to be creative about reducing payroll cost and retaining critical talent. While costs need to be reduced today, successful companies are those that build for tomorrow while others are focused on today.

Engagement in a downturn A herd mentality occurs during difficult times and remaining employees often fear for their own jobs. With a lack of appropriate engagement programmes, employees may stay not because they want to but out of necessity. Remaining employees will not forget how leaving employees were treated. When the economy picks up again, which is inevitable, employees who saw their colleagues treated badly by the organisation will leave for greener pastures. Those who saw their colleagues treated well will know that the organisation values people and they will have a stronger or firmer psychological contract as a result. Engaging employees will be crucial throughout 2009 and beyond. Organisations often fail to realise that without any accompanying measures, cost cutting and reducing bonus allowance lead to people becoming disengaged, which directly impacts productivity and performance. A breakdown in communication can happen very easily if an engagement plan is not in place. As the market recovers, individuals will seek alternative employment because the psychological contract between employee and employer has been broken – unbeknownst to the employer. We see that many organisations have become aware that retention of their key people is as important as right-sizing exercises. This is a new evolution. The erroneous idea that employees who remained automatically felt secure and/or were motivated (by fear) is becoming something of the past.

Build for tomorrow while others are focused on today:

• Reevaluate talent to address current and future requirements

• Assess the most critical roles in your organisation and secure continuity

• Hire and secure your critical talent now

• Balance the short-term actions with long-term strategies

• Avoid linear exit policies – make the tough but necessary decisions based on rational facts

• Communicate openly and keep your people engaged

TACKLING THE ECONOMIC CRISIS - HAS HR LEARNED FROM THE PAST?

15

Most organisations now recognise the value that engagement, development and retention of employees delivers versus the high cost of losing high potential and high performing employees. If organisation-wide training and development is not an option, HR experts are focusing on at least keeping their most critical talent groups engaged and on a constant learning path as much as possible. Not only has creative cost cutting, reward and benefit rebalancing, talent management/retention/ development become vital in keeping business profitable but communication, engagement and morale building have become major contributions driven from HR. A final word of warning: We have found that many organisations look at retaining talent as their first challenge, before considering how to try and engage all staff. In our view, this process should be reversed. If organisations invest in engaging their talent, performance will increase and retention will be a natural consequence. Engagement should always be a top priority for HR – but in difficult economic times, talent engagement becomes crucial for organisations wishing to endure. As a conclusion, we can safely state that the maturity of HR as a business process is still increasing globally and that HR has learned from past crises. Evolving and improving faster is often a painful process for human beings and thus also managers. But on a positive note, it means that HR Management, as a business partner to strategic decision makers, has begun to take the right steps, now more than ever.

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TACKLING THE ECONOMIC CRISIS - HAS HR LEARNED FROM THE PAST?

ABOUT HUDSON

Hudson (NASDAQ: HHGP) is a leading provider of permanent recruitment, contract professionals and talent management services worldwide. From single placements to total outsourced solutions, Hudson helps clients achieve greater organisational performance by assessing, recruiting, developing and engaging the best and brightest people for their businesses. The company employs nearly 3,000 professionals serving clients and candidates in more than 20 countries. More information is available at www.hudson.com.

TACKLING THE ECONOMIC CRISIS - HAS HR LEARNED FROM THE PAST?

17

appendix SURVEY DEMOGRAPHICS Region

USa & Canada 17%

Europe 64%

Australia & New zealand 11% Asia 8%

organisation Type

Publicly listed 39% Public sector 7%

Other 9% privately owned 45%

size

20-49 4% 10,000 16%

200-500 14%

5001-10,000 6% 501-1000 14%

1001-5000 20%

505 respondents in 32 countries from over 21 industry sectors

18

TACKLING THE ECONOMIC CRISIS - HAS HR LEARNED FROM THE PAST?

appendix SURVEY DEMOGRAPHICS Department

79% Human resources 1% Technical, Operations,Engineering 2% IT 3% Other 3% Finance/accounting 4% Sales & marketing 8% General management

position level

12%

36%

5% 2%

2%

10% 33%

Senior management (director/vp) Senior management (Coo, CFO, director/svp) Senior management (Ceo, head of organisation) Owner Board Member Other Middle management (manager)

TACKLING THE ECONOMIC CRISIS - HAS HR LEARNED FROM THE PAST?

19

appendix

Exhibit 1. HR Priorities in 2009 “Please rank your highest HR priorities in 2009”

Europe

HR Priorities

USA/ Canada

2009

Δ

2009

Δ

2009

Δ

2009

Δ

Right-Sizing/Restructuring

36%

27

30%

23

24%

17

28%

28

Internal Talent Engagement

23%

7

18%

3

23%

7

28%

10

Organisational Development

18%

12

15%

8

18%

7

15%

15

People Development

17%

10

13%

6

21%

7

11%

7

Internal Talent Identification

15%

9

15%

13

15%

9

3%

-3

Labour Relations

11%

4

7%

5

7%

7

6%

6

Talent Attraction

11%

-12

10%

-15

11%

-12

13%

-10

Talent Management Processes

9%

4

19%

12

14%

7

3%

3

Strategic Support

9%

7

16%

13

25%

18

3%

3

HR Administration & Payroll

7%

3

12%

9

7%

3

3%

3

Employer Branding

7%

-1

7%

0

7%

7

11%

11

HR Systems

6%

1

7%

0

11%

11

7%

7

Governance & Social Responsibility

5%

-1

10%

3

17%

10

6%

3

Time Management

5%

3

2%

0

7%

3

6%

6

Remuneration, Legal & Fiscal expertise

4%

-5

3%

1

14%

0

3%

3

Percentage of respondents quoting as their highest priority Total > 100% as respondents ranked several highest priorities Δ represents change from 2008 to 2009 Source: Hudson HR Survey 2009 (March/April 2009)

20

Australia/ New Zealand

Asia

From highest to lowest importance

+

-

TACKLING THE ECONOMIC CRISIS - HAS HR LEARNED FROM THE PAST?

appendix

Exhibit 2. HR Priorities in 2009 UK & Ireland vs. Continental Europe

UK & Ireland

Continental Europe

Right-Sizing/Restructuring

38%

35%

Internal Talent Engagement

14%

27%

Organisational Development

9%

22%

People Development

6%

22%

Internal Talent Identification

12%

16%

Labour Relations

5%

13%

Talent Attraction

4%

13%

Talent Management Processes

3%

12%

Strategic Support

6%

10%

HR Administration & Payroll

3%

9%

Employer Branding

6%

7%

HR Systems

6%

6%

Governance & Social Responsibility

4%

6%

Time Management

6%

4%

Remuneration, Legal & Fiscal expertise

0%

6%

HR Priorities

Percentage of respondents quoting as “highest priority” Total > 100% as respondents ranked several highest priorities Source: Hudson HR Survey 2009 (March/April 2009) From highest to lowest importance

+

-

TACKLING THE ECONOMIC CRISIS - HAS HR LEARNED FROM THE PAST?

21

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