I was thinking about what would be a cool and interesting first blog post then I decided let's go with something obvious and topical - opportunities that come from market volatility and the "Great Resignation"/ "War for Talent". These are two interesting topics with a clear operating model angle which may not be immediately obvious. I plan to alternate the posts from operating model perspectives on topical matters to delving deeper into internal strategy theory, real-world applications and case studies. RJT will always aim to provide tips and practical suggestions on the topics we cover.
1 Line Summary / TL;DR: Turbulence provides opportunities and how to win the "Great Resignation" and "War for Talent" (hint it's not just money)
Volatility in Markets & Economy
Companies have been on "war" footing these last two years, to use a client CEOs phrase. Just as they might have been thinking they could relax, regroup and focus on the future and their growth strategies the real world happened. I have been talking to companies in two different modes, in the short-term how do we adjust our cost base to the new reality without harming long-term growth, and how do we pivot, as the company we were going into the pandemic isn't fit for purpose anymore and needs to change.
I think most companies took swift action to see out the last last two years but some companies used this turbulence to make strategic changes or used their experience of previous downturns to avoid past mistakes and take positive decisions that have set them up well coming out of the last crisis and into the next. This is another one of these inflexion points, and how you respond will be critical to your long-term success.
PwC for instance learnt from its experience in the 2008 financial crisis to continue hiring new graduates this time around. While they may not have work in the short term they knew they would eventually be needed, and this has been proven by their recent record revenues for FY22. This is a simple example but is just one of many, and it illustrates some important points: 1, solid, well-run companies will come through turbulence, and 2, yes, you need to make decisions for your short-term survival and profitability but you can't forget the long term as you do this. This won't be a surprise to anyone but that doesn't stop some companies from taking short-term decisions in isolation. The flip side is some companies won't be, innovations will continue and you may find yourself left behind whenever we do get "back to normal". For high-growth companies, this is even more relevant, where their financial position may be more precarious but most growth is ahead of them.
What are you doing to thrive not just survive ?
To come to my point, it is this, if you haven't already refreshed your internal strategy and ability to take short-term decisions with long-term benefits - now is the time. Some of my clients over the last two years postponed decisions as they "just needed to focus on BAU right now". Sadly, this is a trap large companies often find themselves in, it would be a greater mistake for growing companies to also fall into it.
I would be remiss if after saying do something you already know but struggle to do, I didn't then offer some help to take action. Some tips that I have seen work include:
Make It Someone's Job | Having at least one role on the leadership team which focuses on growth and the long-term first, ensures there is always a voice advocating for the long-term ramifications of decisions. Watchout - I have found when one individual tries to do this alongside other roles, which is common and fair in smaller companies, they naturally focus on the immediate, this is less to do with talent and more human nature, have a lookup of "Temporal discounting" if you want to learn more. |
Keep It Focused | Being clear on how you compete. By this I mean whilst everything you do as a company is important and necessary, it is not all equally important to your growth and long-term success. Understanding the difference allows you to focus energies on the small set of capabilities which will make the biggest difference. This reduces the collective cognitive load and means you know when you need to consider the long-term. The method RJT uses to do this is to first create a capability framework which sets out everything a company does, logically and concisely, then categorise that activity based on its contribution to long-term success. |
Get Costs Under Control ASAP | Building on the point above, quick and effective cost-cutting can put you on a more sustainable path, and the faster you do it typically the less drastic the decisions you need to make. I see it like personal fitness, it is something you know you should always keep on top of but for various reasons that can be hard. So let us take 2 scenarios, you are broadly ok but about to go on an all-inclusive holiday where you know you will eat and drink without restraint, you could do a little bit more exercise coupled with healthier eating for a period leading up to it or you could think about doing that but in reality do nothing. Now on your last day, you break your leg and need surgery, but after all that indulgence, you are told to make the surgery more successful you need to lose some weight. In the first scenario, you don't need to do too much, but in the second you have to go to extreme measures. This is clearly overly dramatic but does reflect what I see in companies, either they are proactive but then struggled to take the decisions to get into shape or they wait too long and the decisions get tougher or more drastic. For example, if you cut costs at the start of the year, not midway you get double the benefit in that year. |
Get Help | Sometimes you might need some outside help. No matter how brilliant you are, and most of my clients are great at what they do, that doesn't mean they never need or use external support. Look I was never a fan of consultants when I was on the other side, but now having learnt more I can see the cases where they add value or otherwise, I could go on but I think that should be another blog. So back to the topic, there are 3 different ways an advisor can help here: 1, bring capacity, an interim position or advisor can be the person in point 1 above for as short as you need or to show the value of having that role to the leadership team, 2, bring experience, having seen it and lived it they can help you avoid the pitfalls, 3, bring expertise, help your thinking as you plot your course, stress test your decisions to lower your risk, lead you through the cost reduction approaches (and it is not lets cut everything by 10% - "the salami slice approach") and work out point 2 above with you. Typically they bring a blend of all three, and a short-term advisor can be a cost-effective, immediate and valuable addition to your company's capabilities to enhance your long-term success. |
Why the "Great Resignation" & "War for Talent" isn't all about Money
There is a clear interrelationship with the above and at a surface level it might seems a bit counterintuitive. Or at least it did to me, we just talked about all the uncertainty in the economy and the classical view is people stay put in recessions. This time feels different and I don't think we can wish it away and I am not sure we should want to. I think companies should embrace the war for talent and welcome the fact people are choosier where they work to see the great opportunity this presents. For high-growth companies where you need to hire, you hiring pools just got bigger, even for companies struggling with retention this is an opportunity to connect with your people enhance moral and therefor performance and productivity.
The nice thing is people are telling you what they want with their actions and feedback. The included charts from recent PwC and McKinsey publications support what RJT are seeing at clients, with the added benefit of surveying 10,000s of people, which is that whilst compensation is important it is not the only factor to consider. Even on this measure, the phrasing of the PwC question "I am fairly rewarded financially" is quite telling as that at 71% (very or extremely important) versus 36% for the McKinsey "inadequate total compensation" question, leads me to suspect that the total compensation is less important than the relative compensation and perceived fairness (above a certain point). Why am I nit-picking? Well fairness doesn't cost money, in fact, it is less about compensation than about the processes that led you to set compensation and the conversations you have. I am sure we can all recognise the examples of external hires coming in at the same grade as existing employees but paid significantly more, or juniors overpromoted or paid in line with their managers - these have always happened but now the frequency and disparity are worse. So whilst an employee may have been broadly content with their total compensation before, now they are unhappy with their relative compensation and the fairness of the situation. The simple solution is to increase their pay and the situation spirals and you are losing control....
This 2nd chart is also quite interesting, as it shows the disconnect between what employers think is valuable versus what employees actually value, the blue shaded area. All of these don't cost much, and to go further I would argue they are critical to any successful company, as they allow you to truly get the best from your employee, not just the minimum (i.e. they don't quit).
So what should you do? Well, I am not going to talk about pay or benefits packages as other people are better qualified and frankly it is obvious more is better. So let's talk about some of the less obvious things and how having a thought-out operating model can help you get ahead. This will allow you to not only reduce your attrition but get the best from your people, which in turn makes you a magnet for your competitors' top talent.
Company Culture | Ok, so this is still pretty obvious. But I would challenge you on how well you know your culture. Not what is written down in the company handbook, or developed at a jazzy leadership offsite. The reality of your culture on the day-to-day, how your people actually feel it, and how it drives behaviours. One of my clients had an amazing culture (so everyone told me) pre Covid, pre-listing, pre-xyz happening. What they wanted it to be was indeed great, but that wasn't the reality. That wasn't what the junior staff or new hires felt. So even if you have a clear vision of what you want, what are you doing to reinvigorate it? A great culture doesn't just happen and you can't pretend the last two years didn't happen either, the paradigm has shifted - how have you? One of the key things I do when I go to a new client is to talk to as many people in as many positions as I can, and I mean everyone, the baristas can really tell you the mood of an office. I am trying to gauge what the culture really is and how people are feeling, you need a true baseline to then start working out what to do. |
Role of Managers | So I think most people would agree that the role of managers is critical to a happy workforce. But again my question is what are you doing to ensure it? At high-growth companies, it is great to offer people rapid advancement, but it is commonly because they are great at their current job which doesn't automatically make them great managers. Overpromoting can keep 1 person and piss off 5. From my personal experience, new managers can lack the softer skills of management, and often as they are intellectually capable this can mask problems. So focus on these things: coaching, mentoring, role modelling, leadership development programs, having a clear career path for how people gain management expertise and finally being clear on what the role of a manager is. It is not just for new or less experienced managers, this needs to be continuous learning for all managers. |
Organisation Design and Ways of Working | Linked to the above, is the more structural underpinning - how your organisation is set up and how managers are empowered to take ownership and make decisions. I see examples in high-growth companies where they start informal, the "start-up culture", and this works great, it supports innovation and growth. Then they grow and the innovative, collaborative ways of working turn into bureaucracy, with everyone involved in everything, a lack of decision-makers, and an overreliance on key people, typically founders. This can be coupled with small managerial spans of control (managers only managing a couple of people), which can then lead to many layers of management. When you add inexperienced managers into the mix it can lead to micromanagement and driving out talent and diversity, and ultimately inertia and groupthink in the worst cases. If any of this sounds familiar, the first step is to do an organisation effectiveness review to understand what is going on. |
Performance Management Processes | More rigorous performance management may seem counterintuitive to a happy workforce but I don't mean tougher, I mean the process is more rigorous, transparent, it gets to the right outcomes and is trusted by those involved. If you recall the point above that fairness and relative salary could be more important than total salary - this is the key process which addresses this. It is not just about money or promotions though, I find good people typically want to work with good people. I have seen examples where the new hires are held to a high standard but the more tenured employees who 'grew up' with the company are basically given a pass on performance. |
Alignment to the Company Vision and Purpose | Most companies now seem to be on the purpose bandwagon. I am not belittling purpose work but it has to be true. From the survey results above it seems many people agree with my sentiment. Another aspect that I think can get lost is how you connect individual roles to that overall vision, are people clear on their job, how they personally deliver value, how what they do contributes to that larger purpose and what is success is for them? To illustrate, one senior exec who recently changed companies told me he'd love to stay at his previous company but he'd completed the original goals and more, his LTIP (long-term incentive plan) was falling and he wasn't confident or sure how he fits in the future, so he found a more exciting opportunity. Your best talent is thinking about their career, not just the year or two ahead. If they love their job, are developing, see long-term growth in the company, and have a great team and boss who supports them, will they leave for that extra 10% or 30%? Maybe. But you have a much better chance of keeping them if they understand the company's vision and can see how their personal growth aligns to this. |
Attrition is healthy, People move | Finally, don't overreact. As in the first section above, keep the long-term in mind. I see companies making poor decisions which will cost them for years to come. If you overpromote and overpay someone they have nowhere to go, so they will likely begrudgingly stay for years - and now you have a high-cost low performance manager who is unhappy and bringing down morale. These people often don't recognise themselves as such so they can become bitter at not being promoted again (you set that expectation) and not getting pay rises (they already earn the most). The key piece of advice is to have a clear people strategy, so you know the true cost of your people choices and you make exceptions for the exceptional. |
Please reach out below to discuss any of this or leave a comment here or on LinkedIn. We hope this has been informative and given you some ideas to think about. Next time we will do a case study of a recent project, showing you what an internal strategy project really looks like and the value it can bring.
Further reading or articles quoted:
Comments