Jamie Barber, senior implementation consultant, Taleo 

Unless you’ve been living on Mars (with no satellite TV) for the past twelve months, you can’t have helped but been bombarded with news of the economy. And the current outlook is not rosy. In the UK, inflation is on the rise while the economic growth charts slide downwards. Jobs could be at risk and the confidence of the business world is taking a battering. By all reliable guidelines, the good ship UK Economy is on the verge of some choppy waters.

But the purpose of this article is not to join the doom-mongering glut of media commentary seemingly determined to talk us into a – whisper it – recession. Any modern economy will go through its ups and downs; this is inherent in the nature of market forces. Some ups will be higher, some downs lower and longer. So what can HR practitioners do to try and ensure that damage is limited in the medium and longer term? More specifically, why is it so important to recruit and retain the best people even when the economy is taking a nosedive?

As a catch-all for the star performers in your organisation, you will often hear reference to the term ‘top talent’. In time-honoured tradition of linking wars with abstract nouns, what is the ‘war for talent’ and how does it affect you? Googling ‘war for talent’ results in upwards of half a million hits (and yes, this article has just added to the list). But what does it actually mean?

Firstly ‘top talent’ is not a description applied exclusively to the top echelons. Instead, your best people will be spread across all areas of your business, perhaps equating to the top 10% of the entire workforce in terms of experience, motivation and attitude. Typically, those forming part of this elite category will be driven by personal development possibilities and will attract more of their high-achieving peers like a magnet. Success breeds success. It has been suggested that focusing on stocking up and keeping the best people across an organisation should be as important as developing a new product line or breaking into a new market. But why is it particularly important to keep top talent recruitment and retention on the radar even in difficult economic times?

Four focuses for recruitment ‘n’ retention in a downturn:

1) Think of the bottom line

It is fairly easy to take the logical step of connecting a larger number of top talent performers with the impact on the bottom line. And while cold hard data supporting this assumption is currently few and far between, some surveys have sought to make this direct link. For example, an update to a McKinsey survey of 2001 found that companies scoring in the top fifth of the criteria for talent management best practice outperformed their competitors’ mean return to shareholders by 22 percentage points. Talent management best practice will undoubtedly include other recommendations, but the recruitment and retention of top talent must surely be key among these.

When you think of the direct consequences of losing top talent you should remember that as well as the straightforward loss of intellectual capital and the resultant impact on current projects and customer confidence, your replacement staff will likely experience a drop in motivation and productivity as they take up the strain. Taking a specific example in the software industry, the loss of a talented programmer with three years’ experience has been estimated at up to 900% of that key worker’s annual salary by the time all the direct and indirect consequences have been totted up. This is a convincing argument in the good times, and particularly so when profits are that bit harder to come by.

2) Look towards the future

Though no one can forecast with absolute accuracy, economic cycles are generally cyclical. Today’s downturn is tomorrow’s green shoots and next week’s surge. HR practitioners have two choices, either to prepare in advance for the next phase in the economic cycle or wait to see what happens and then try to join the party. Gerwyn Davies of the CIPD recently reported that ‘in the past, the big mistake has been too much of a knee jerk reaction to redundancies, so when the good times returned the talent was lost and they had to bear the huge cost of recruiting.’

The economic climate may also have an impact on the ‘micro-climate’ of your industry. If the current economic conditions happen to coincide with a maturing of your industry sector, you may find yourself impacted by a consolidation of key players in the form of mergers and acquisitions. In which case beware of a possible ‘brain drain’ – it has been suggested that after a merger or acquisition up to 50% of the top talent workforce could be upping sticks and moving on within 12 months. And with current estimates that it costs nine times as much to retain an existing employee (whether a star performer or not), this is a sobering thought.

Continued next week with focuses 3, 'get inside the minds of the competition' and 4, 'think globally'.