‘Don’t Panic’

Few phrases in corporate life inspire fear like the four words "We've hired some consultants." Indeed, as companies cut costs to match plummeting revenue, consultants often play a key role. In the latest in his series of interviews as part of NEWSWEEK's partnership with the Kaplan University M.B.A. program, NEWSWEEK Chairman Richard M. Smith spoke with Richard Baird, co-leader of PricewaterhouseCoopers' People and Change Advisory Service, about managing talent during this epic downturn. Edited excerpts:

Many organizations talk about people as "our most important asset." How does that square with huge layoffs?
In the past, the approach taken to head-count management has been to hire, cut, hire, cut, as the economy moved up and down. Today two things are different. The first is, we're hearing from our clients a real desire to understand where their talent really is [as they reduce staff]. Secondly, they want to do the reductions in a way that will protect the employer's brand.

Do CEOs sometimes cut a certain percentage of people just because Wall Street understands that?
Yes. Consider Circuit City. It decided to take out the highest-paid 10 percent of employees in its stores just prior to the Christmas season. The reality is, these senior people knew everything about selling high-end electronics. A lot of the junior people figured if their pal could be terminated they shouldn't stay either, so a lot of them left. Circuit City actually had to hire back individuals at a premium, and their spiral continued. [A good consultant] would have forced them to look across their entire band of experience at 600 stores, to really understand the impact these talent decisions would have.

You describe some employees as "pivotal talent." Who are they?
Pivotal talent is made up of individuals in roles where even the smallest variation in performance can have a very significant impact on the business. For example, in a pharmaceutical company, an R&D biochemical scientist is pivotal talent, since these individuals can lead to huge breakthroughs in blockbuster drugs. But pivotal talent can be found lower in the organization, too. We worked with a Fortune 500 oil refiner. We discovered it only had 18 certified welders in the whole company who could handle very specific procedures in welding pipelines together. Those 18 individuals were all over 50 years old and planned to retire in the next three years. That is pivotal talent, even though some might say they're just welders.

In such a weak labor market, why worry about losing pivotal talent?
High-performing individuals are actually more at risk of walking out the door during economic downturns. Not because they're going to be pink-slipped, but because the natural uncertainty associated with this economic environment leads logical people to say, "There but for the grace of God go I." And these are confident, well-established individuals who can always find forward-looking companies that want to upgrade their business by hiring them.

Is corporate loyalty dead?
It's been significantly redefined. Gen X and Gen Y are far more networked than previous generations. Their ability to know where opportunities are inside of a company and throughout their network is almost miraculous. Time and again, surveys say compensation isn't what's most important to them. What's more important is the relevancy of the work, self-development, training. If they don't feel that their developmental needs are being met, they won't stay around when the recession is over.

Why do companies need outside consultants to help manage talent?
Consultants are good at helping surface factual information that the company either can't or doesn't know how to find on its own. We help them understand the context of experience across multiple companies in their industry and what constitutes best in class. And we help provide the courage to get them to understand and execute. Because the execution is the most important part—otherwise the strategy is just a wish list.

What advice do you give to young people coming out of school into a very discouraging job market?
The same advice that I give to those who would otherwise hire and develop them: don't panic. Knee-jerk reactions are never the appropriate response. If they're already employed, I encourage them to be obviously productive and vocal—this is not the time to be shy about your ideas. Secondly, I counsel them that there will be a tomorrow, and things will be better.

© 2009