There's A Talent War & The Ceasefire Is Over.

ceasefireWith so many companies focused on simple survival during the downturn, with so much job loss and anxiety among those who survived, it was easy to forget about the war for top talent. But the downturn was just a temporary truce; the battle is about to erupt again in full force. And ironically the companies are the most at risk of losing their best leaders are ones that responded most vigorously (but often misguidedly) during the recession. By Michael Watkins at Harvard Business Review.

Why? Because there is tremendous pent-up demand for new opportunities and advancement among high-potential leaders. According to a recent study just 10% of high-potential leaders lost their jobs during the recession (with many quickly securing new opportunities). But fewer than usual received promotions or moved to new companies. So at the first sign that the job market is heating up, many will be dusting off their resumes and seeking greener pastures.

Companies that did a clumsy job of managing cost-cutting and restructuring during the downturn are particularly at risk of losing their best talent as conditions improve. Given plummeting revenues and the need to get costs under control, many firms rightly went into crisis mode. But the way they went about making the reductions varied greatly. For some, it was a process akin to taking a meat cleaver to the organization, with rapid, often indiscriminate cuts, and the attitude that virtually anything could be demanded of the survivors (longer hours, reduced salaries) because things were so dire.

These same survivors, especially the most talented of them, understandably feel absolutely no loyalty to their current employers; they will jump ship the instant they feel it's safe to do so. In fact it's a wonderful time for strong companies to consolidate their positions and accelerate out of the downturn by cherry-picking the very best talent out of competitors who have (probably irreparably) damaged their corporate cultures. Some attention to effective on-boarding is also warranted as it will help you to retain the talent you hire.

If you are leading a company that fell into this trap, what can you do? If you aren't already highly focused on how you will retain your best talent in the next couple of years, you should be. In part, this means launching immediate efforts to rebuild the culture and restore trust. This may, unfortunately, require that you bring new top leadership that hasn't been tainted by what was done while the business was in survival mode. Beyond that, you should be looking hard for any sign that the job market is heating up and anticipate what you need to do to rapidly adjust compensation and benefits. Above all, you should have a clear view about who your top talent is, be communicating actively with them about their potential, and charting attractive pathways for them within your organization. And you should be doing these things now, because if you wait six months, it most likely will be too late.

What about companies that did a good job of managing talent during the recession? Are they in the clear? Well yes and no. One very fine company that I work with, a Fortune 100 firm, is a case in point. It did virtually all the right things during the downturn by moving quickly but deftly to reduce costs. Executives took the lead in pay cuts, job losses were managed through attrition to the greatest extent possible and then via merit. Alternatives were offered to displaced workers where possible. Above all, the company did a wonderful job of communicating through the whole organization why it needed to do what it was doing. And it continued to invest scarce resources in the development of its best leaders despite enormous pressure not to do so. The net result has been minimal damage to a people-focused culture, and the company is beautifully positioned to accelerate out of the recession.

So the good news is that this company's high-potential leaders harbor strong loyalty and are inclined to stay. The bad news for the company, and others like it, is that they will be very attractive recruiting grounds for firms that didn't do such a good job during the dark times. And the desperate need for those firms to recruit leaders to replace the ones they've lost — or are about to lose — is going to rapidly bid up compensation and benefits. As is usually the case when it comes to talent, no good deed goes unpunished.

Michael Watkins is the author of, most recently, Your Next Move.