If the Bubble Bursts, Will You be Prepared?

If the Bubble Bursts, Will You be Prepared?
by Kay Mason
[Talent Management Magazine February 2008]

The war for talent in recent years has created an explosion of interest in talent management. Talent management programs enable organizations to develop and retain key talent without having to divert significant amounts of time from human resources staffs. According to Yankee Group, the talent management technology market will expand twofold by 2009, exceeding $4 billion. However, given recent economic developments, it's worth re-examining whether companies will be well-served by an HR technology strategy overly focused on talent management to the disadvantage of other HR functions.

Falling housing prices, waning confidence in creditworthiness, a weak dollar and perpetually climbing oil prices have led congressmen, economists and the Federal Reserve alike to express concern about the prospect of a U.S. recession. While no one can say for certain whether an economic downturn will occur, it's clear that when it does, HR priorities will need to shift.

In recent years, the role of HR professionals has transitioned from executing administrative tasks to shaping overall HR strategy. Consistent with this new strategic role, HR needs to anticipate events and develop an HR investment strategy that will serve the company well, regardless of the economic uncertainties we face.

If a downturn occurs, many companies will shift their focus to cost reduction, productivity improvement and getting the most from existing human resources. If the past is any guide, this could translate into an increased importance on processes such as budgeting, workforce planning and performance management. If they have not prepared for the downside of the business cycle, HR can find themselves unprepared and will scramble to plan and execute a recession-oriented HR strategy. Unfortunately, when a downturn does occur, it's too late to respond effectively. It's difficult to allocate the necessary funding to implement new systems, and the lengthy turnaround time to plan for and implement the same HR systems can leave the company unprepared to handle the challenges of maintaining efficient HR operations during an economic contraction.

Economic theory predicts periods of rapid economic growth to alternate with periods of stagnation. Given the uncertainties at the current stage of the business cycle, it's a good idea to have a plan for a downturn well before such an event becomes a reality.

Steps to Recession-Proofing Your Organization
While preparing your organization for a change in the business cycle requires careful consideration of your company's unique situation, here are three general observations to get started:

1. Identify a "robust" strategy for your company.
A "robust" strategy is one that will serve you well under widely varying circumstances. Scenario planning is one business planning discipline often used when companies face high uncertainty in their environment. The exercise pushes HR to develop alternative investment strategies based on different assumptions about the future (for example, company grows at current level, company growth increases and company revenue declines). By evaluating the common elements in all three scenarios, HR can identify a robust investment strategy to cope with any situational outcome.

2. Emphasize time-to-implement new systems.
In times of economic uncertainty, HR systems with long implementation times face a real risk of obsolescence. By the time implementation is complete, the business drivers that supported such projects may have changed dramatically, undermining the benefits. In evaluating alternative HR solutions, the time to implementation should be an important consideration, since solutions that can be rapidly implemented are more likely to be in touch with organization needs and will start producing an investment return much earlier. This could mean, for example, using existing vendor templates to bring systems on line quickly, rather than opting for more extensive and time-consuming customization.

3. Break up transformation projects into smaller chunks.
An HR technology vision is a vital guide, irrespective of the economic climate. However, as we face the risk of greater economic challenge, it could make sense to break up HR transformational projects into smaller project chunks with more focused and immediate goals so that later projects are funded by the benefit stream from earlier ones. In the HR outsourcing area, Everest Research sees this trend reflected in the growth of "a significant segment of buyers that primarily focus on taking cost out of HR operations but do not have the appetite to go through often complex and longer transformational HRO engagements."

Avoid an 11th Hour Panic Attack
As the U.S. economy increasingly shows signs of weakness, uncertainty about the economic future increases. No matter the size of your organization, the fallout of an economic downturn, if it occurs, will be significant. Isn't it worth it to allocate the time and resources now to plan for what seems highly possible, rather than wait for the 11th hour to the detriment of your entire company?


[About the Author: Kay Mason is president of Northgate ARINSO USA.]