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The Upside of a Downturn

March 03, 2008

Smart “investors” in talent markets find bargains during a business slowdown.

The Engagement Cycle helps employers take advantage of candidate psychology during a slowdown to attract top talent for the long term.

A slowing economy has tangible burdens, as employers become cautious in hiring (or even lay off workers). More subtle and insidious is the way even a gentle slowdown in consumption can trigger a well known vicious cycle: Lower corporate revenues lead to job insecurity, which causes consumers to tighten spending, which hurts revenues, which causes more corporate belt-tightening, and so forth until something (government spending, easier credit, unforeseen demand) halts the cycle.

This cycle offers a break in the fevered efforts to attract and acquire the most talented employees, a chronic problem that has beset booming economies for the past decade. To take advantage of a temporary lull in the chronic shortage of top talent, managers in HR and executives leading companies must adopt the longer-term practice we call the Engagement Cycle.

The Engagement Cycle is a long-term practice combining employer branding, relationship management, and communication. It recognizes that an employer must continually attract, acquire and advance talent as brands attract, acquire and gain loyalty with customers over time. The Engagement Cycle creates strong bonds between employers and potential candidates before, during and after the brief period we call “recruiting.” Its practices ensure that when the economy strengthens – and talent once again becomes scarce – an employer has built a “bench” of talented individuals who are interested, open to discussion, and even grateful for the attention.

Poor hiring is like poor investing

Economic slowdown means top talent, usually rare and expensive, is briefly abundant and more affordable. Typical hiring techniques, however, won’t attract these talented individuals for the simple reason that they, as individuals, have become more risk-adverse, and those who are employed are less likely to switch employers.

A slowdown exaggerates fears of scarcity (scarce money, scarce security, scarce jobs). Typically, hiring managers and executives hunker in the bunker, cautiously cutting budgets and limiting new initiatives. Corporate leadership which chased valuable talent with increasing salaries just a few quarters prior to the slowdown turns 180 degrees, and treats talent as an asset to be stretched. Hiring budgets decline, and employer branding efforts stall until corporate profits return to robust health.

This corporate behavior is reminiscent of the amateur investor who sells his stock holdings into a bear market, then tries desperately to catch up when the market turns north. Successful investors, on the other hand, view market corrections as opportunities to acquire high-quality stock at a bargain price.

Similarly, a “bear market” in talent (e.g. higher unemployment) is an opportunity for managers and investors to gain the attention of top talent. Even when employers can’t load up their workforce during a slowdown, they can build up their portfolio of relationships with the best potential employees by reaching out to the best

Relationship trumps transaction

Say things get really bad, and the unemployment rate reaches 10%. Barring catastrophe, the most valuable talent stays employed. The 90% hold onto their jobs. But the attitude of those people changes, as they become a little less secure and more receptive to a long-term recruiting message. (Significantly, Monster research shows that 70% of employed people are open to new offers at any time in the business cycle. We call them “poised” employees.)

It is this long-term relationship to talent that counts when the time comes to hire again.

For the companies who believe that a talented workforce drives success (and that’s almost all companies), the current slowdown offers a rare opportunity to improve their positioning in the marketplace. Inexpensive actions taken today will make a firm more attractive in the long run to top candidates, and boost retention of the best employees.

Mediocre hiring is transactional, as a position comes open and recruiters scramble to locate candidates in a short-term burst of advertising. Whether the transaction takes place on a sophisticated Internet recruiting service or with a sign in the window, it’s based on simple supply and demand: Get the best person available today. Transactional hiring takes place in a narrow window of time, limiting by its very nature the pool of available candidates.

Now is the time to break free of transactional hiring and improve a company’s ability to attract, acquire and advance the top talent that means success in good times and bad. Employers who change their practices – whatever their current level of spending – to these techniques will reap the benefit in lower hiring costs and a higher level of talent in the years to come.

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