After two years of uncertainty, 2010 offers renewed optimism about prospects for economic growth. While the recovery is welcome, it is the start, not the end, of a new journey. Following our worldwide survey of senior managers, it is clear that the post-recessionary environment will require businesses to concentrate more on people and on their business talent – and do so urgently – or risk experiencing deep talent erosion and sustained underperformance. This is the time when the HR function can, and indeed needs to, prove its strategic role within the business.

Our survey, the third in a series of annual studies on talent management, conducted by the Economist Intelligence Unit, explores the HR Challenges faced by all organisations as they recover from the worst recession in decades. The subsequent report, entitled ‘Companies at the Crossroads’, looks at the damaging effect two years of cut-backs have had in undermining workplace trust. It also highlights the potential Challenges that will emerge as some HR directors and companies face implementing successful recovery strategies with a lack of talented, motivated staff.

We found that nearly one third (29%) of business executives said employee engagement is low in their organisation and that they expect to lose key people as talent demand grows. 41% of all respondents agree that they already have a shortage of talent in their organisation.

With employee engagement so low, employers need to be aware of a potential talent drift and recognise that their most capable employees could be lured to new jobs by competitors or other organisations. Within this context, HR directors find themselves in a uniquely powerful position. As companies realise the necessity in retaining this key talent for effective business recovery, HR should help the board make business critical decisions fast on who to fire, hire, reward or redeploy elsewhere in an organisation.

The issue of engagement is compounded by the evident lack of communication within organisations, and the skewed perceptions with which some senior decision makers are operating. Worryingly, 40% of line managers reveal that levels of trust in their organisations are quite low, with just 16% saying that their employees are engaged, yet 38% of chief executives, presidents and managing directors still believe that trust is ‘high’. This poses a real Challenge for the HR department; as such a disparity between staff poses a major obstacle to introducing company-wide measures to engage employees and help retain talent.  

Those HR departments that have not implemented the right talent strategies risk facing a major skills shortage. At a time when the energy and commitment of employees is needed the most, HR staff and companies alike are effectively at a crossroads when it comes to workforce talent. They can either take steps to create, maintain and develop global talent pools, or ignore the warning signs from surveys, such as ours, and suffer gradual talent erosion at all levels that will inevitably lead to underperformance. 

Our Results, however, do show evidence of organisations’ intentions to prepare for the future, and companies should take note of the increasing amount of resources available to assist the management of their talent – many of which are web-based and free to use.

For example, we've developed the Talent Strategy Assessment, Performance Management Assessment and Business Case Builder tools – all of which can be accessed online at no extra cost to help develop an organisation's workforce. In terms of the key areas of talent investment in 2010, our survey found that the top three priorities for talent investments over the upcoming year are performance management (voiced by 46% of respondents), leadership development (voiced by 41% of respondents) and training and development (voiced by 36%nof respondents).

However, those looking to implement these measures will need to cover the contrasting attitudes contained within an age-diverse workforce – one that is increasingly dominated by older staff, whose motivations for staying with an employer will be different to those of younger workers. This makes talent retention even more of a Challenge. For example, 50% of younger workers cited career development as their biggest priority, but this dropped to just 1% for those who are over 50. Similarly almost 40% of older workers cited non-salary Benefits as important, something which dropped to just 2% among 20-30 year-olds. Initiating a talent strategy that caters for both the old and young, and the differing priorities across these groups, will be vital in retaining an organisation’s workforce in the future.

Ultimately, our research among global business leaders shows that they understand the need to focus on their talent, but that greater, considered action is needed today to create talent strategies for the future. It is particularly worrying to see low trust among middle-level employees going hand-in-hand with low graduate recruitment and an ongoing demand for senior executive talent. 

From an HR perspective, now is the time to regain control of its responsibilities during a time of business adversity. Left unaddressed these problems constitute a perfect storm for businesses, as the most capable employees had for the exit and fresh talent is not recruited. These trends have serious, long-term implications for any business in a recovering economy and they require urgent attention.

The survey polled over 400 senior managers primarily in major corporations in the US, Europe, and Asia-Pacific. 87% of the respondents operate as board members, CEOs and other C-level executives, or as senior vice-presidents, heads of business units and heads of departments. The sample also represented all key employer sectors, including financial services, professional services, IT and technology, manufacturing, healthcare, and consumer goods. The organisations that the respondents worked for included the world’s largest companies: 26% had annual revenues between $500m and $10bn, with 20% generating revenues of $10bn or more.

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