Rob Bernshteyn - Managing Talent in a Challenging Economy

Jim

Welcome back to People Performance Radio, you are here with Jim Matheson …

Steve

…. and Steve Hunt.

Jim

Steve, we've got a lot of stuff going on in the economy these days, huh?

Steve

We do have a lot, or maybe too little, depending on how you look at it.

Jim

Definitely, I think that's topical this week and so we were able to pull in a special interview with one of our thought leaders.

Steve

Yeah, that's one of the cool things about working with SuccessFactors is, we are so well connected with a lot of different thought leaders in this, and a lot of them actually work for SuccessFactors, and in this case we have Rob Bernshteyn, who is our Director of Global Product Marketing and Management, and he's been doing a lot of interviews, talking to a lot of people about how's this change in the economy going to affect the practice of talent management, what does it mean if you are a director of talent management, or a VP of HR, that we're seeing these major changes in the economy, and so we had a chance to sit down and talk with him a little about what he's seen, and his thoughts about how to approach it, based on talking to a lot of people in this industry who are struggling with, what's next, what's going to happen, as this continues. So a very interesting conversation and I understand, Jim, we are doing some other things in the story too. So what are some of the other things we are doing?

Jim

Yeah definitely, SuccessFactors has a Whitepaper that's now available — it's called "Winning through Talent in Uncertain Times". It's available on the SuccessFactors.com website, probably for the next few weeks, it's actually late October right now and it's on our home page at the moment, but you can always find a link if you just go to successfactors.com/podcast. The show notes for this episode will have a link to that Whitepaper, so if folks want to take a look at that.

There is also a Webinar that's coming up early in November, there's going to be a short commercial with details about that in a moment here, and just to throw out that, if you're listening to this episode after the air day of the Webinar, there will be an archive version available and we should have that and the show notes and everything, so those are just a couple of things worth checking out.

Steve

Cool, and I know personally I have taken all my money out of the market and I have invested in Beanie Babies going forward, that's the real hedge fund, so …

Jim

OK, let's jump to the interview, right after this commercial.

Speaker

Would you like to learn how strategic talent management can help your organization reassure and cultivate top talent to keep them motivated and engaged, rapidly align all your employees to the revised strategy of your company and keep communication open and transparent for increased productivity in these times of uncertainty? If so, join us on November 12th 2008 9.00 am Pacific, 12 noon Eastern, for a Webinar entitled "Winning through Talent in Uncertain Times". Sign up for the Webinar at successfactors.com.

Steve

Hi, this is People Performance Radio. This is Steve Hunt, and today I'm talking with Rob Bernshteyn, who is a fellow colleague of mine here at SuccessFactors. Rob is the VP of Global Product Marketing and Management, and he is also a fellow member of the SF Research Thought Reader network, so we have high expectations for you Rob, I'm a membe too, so this elite club you and I are part of, but Rob has been doing a lot of work recently looking at the downturn in the economy we are going through, and the sort of implications this is going to have for the practices of talent management, so we thought we would take advantage of Rob's work and his brain and have a chance to chat with him a little bit. So Rob thank you very much for appearing on People Performance Radio.

Rob

You bet.

Steve

So I guess I would start with the first question: obviously, lots of changes are going on in the economy, hat are you seeing in terms of how this is affecting talent management, and what are companies doing differently or doing the same?

Rob

Well, I think this is really just the beginning, Steve, of changes that we are seeing and we are going to see over the next year to year and a half of what's going on here globally. Just three weeks ago we saw a situation happening in the markets that is really unprecedented. We have had recessions before, we have had global recessions before that have lasted as long as a year and a half, but what we are seeing here in terms of the market volatility and in terms of the inability to get money frankly for businesses to continue expanding and running is really unprecedented, and the implications around talent management really are going to be very, very deep, but they are just at their infancy, and I think this is really an opportunity for folks that are involved in human capital management or leaders in human resources to really step up and help their executives and help the folks running their businesses adjust to this unprecedented change, and I think that can happen in a number of different ways.

For one, there are going to be some very different goals that are going to be set by CEOs for the year of 2009 as opposed to the goals they had in 2008, and you can imagine changes such as going from expansion to contraction, such as going from getting more and more customers, to retaining the key customers that you have, from expansion to cost containment, from organic growth to M & A, so all kinds of strategic changes will be happening, and HR can really be the business partner for the executives in terms of not only giving them the technology support, but also the process advice on how to roll out these new goals and strategies from the boardroom to the stockroom, so that everyone in the company is executing on these goals in 2009, and it is quite clear that companies that don't do this well will be at a competitive disadvantage.

Now, I think another area where HR can certainly help is, in times like this, folks tend to get nervous and they tend to consider other job opportunities or different ventures they might be involved in, if they see that their company may not weather the storm, they will be looking for a safe harbor somewhere else, so this is a time when HR really wants to make sure that the best human capital that they have in the company is in fact retained and energized and motivated to help the company to get through the downturn, and so that as well is a very key area of partnership that can happen here.

And the last, there are many more, but if we were to talk about three, the last is simply that, if there is going to be cost—cutting, and there certainly will, we are seeing it in Silicon Valley, already there are quite a few websites that track lay—offs in the Valley, and they are beginning to pick up and I think will continue to pick up in terms of amount of lay—offs, HR can help executives and line managers figure out who to keep and whom to actually let go, where they can get that cost savings that the company may need to have a longer run rate, and weather the storm.

So I mean these are just three areas, but I think prudent leading HR leaders in companies can really get around these three areas and more and help their executives weather this thing because it's not something that is going to go away in a couple of weeks, that's for sure.

Steve

So that kind of thing is interesting, I heard you say, really three things: one is that, I can say a contrast is, because typically in downturns often what you think is with HR, they go, "Oh no, our budgets are going to get slashed, staffing freezes, training freezes" — all these things typically that's what I think is the natural reaction for HR when you have economic downturns, "Oh, how are they going to cut our budget?" — but what I am hearing you say is this is really a time for HR to step up and say, "Look, three things are going to become really critical: one is we have got to really good about execution, we have to maximize the productivity of the talent we have, because we can't get away with wasted human resource. The second thing I am hearing that you said, just to cap back on that, is that we have to make sure those high—performing people are fully engaged, because if they think the company is not doing well, they are likely to jump ship and try to find a more stable company, and the third one is the reality of this downturn is, not matter what company you are, you may have to face some reductions in force and you want to make sure you do those intelligently in terms of, say who can we, who do we need to let go, who's providing the most return on investment with the company, so those three different areas, did I accurately capture those?

Rob

I think that's exactly right, and I would add that, to your point about HR stepping up, if you think about the last 20, 25 years of, what has the conversation truly been in HR before personnel? I mean, it's about taking this initiative of owning human capital management in the company to the next level, it's becoming a strategic partner of the business – well, what better time than now? What better advance than now to step up and do that? In many ways, this is a very negative thing that's going on in the world, but this is where people get tested, so do you refer back to the things you did well, which is some of the administrative elements of human resources, or do you take this opportunity to step up as a leader of HR and actually tie in with what the changing agenda will be of the executives in your company, and I am arguing for the latter.

Steve

Yeah, I agree, I think one of the things about HR is you can get away with sloppy practices when there is an abundance of resources, but when there is a scarcity of resources that's when you really find out who are the people that have gotten really effective of maximizing the resources they have, which is so critical in this economy.

May we talk a little about the three areas, I would like to first talk about what you were saying around goals, I think that is really true and HR people often don't think about themselves in terms of the role they play in actually getting people to do what it is the CEO wants people to do. How do you see HR acting differently now than maybe in previous recessions, because now they have two roles available to them that they didn't have, because you said the field's changed since our last big recession. What can HR do now to help in this area of execution?

Rob

Absolutely, I mean if you think about a company, let's say you know a manufacturing company that's been around 15, 20, 30 years, if you think about the goals that the folks in that company have had over the last five years, arguably they were probably relatively consistent, right? — they were looking at continuing to expand their top line, they were looking to get more profitability out of the current products that they're producing, they're looking to shrink their cycles, they're looking to collect quicker from customers, I mean they're looking to do the traditional sort of day in, day out business management of what it takes to be a manufacturer, so their goals, from the CEO down to every employee in the company, had some level of consistency between them. I mean you would argue that a goal plan in 2005 didn't look that different than 2006, unless they were a manufacturer some sort of very hyper competitive environment.

The goals for 2009 are probably going to look very different, maybe they are going to seek to do some acquisitions of manufacturers that are in ancillary space of theirs, maybe they're going to not take on as much inventory in their warehouses this year, maybe they're going to focus more strongly on getting more share of wallet from their existing customers where they have deep relations that they've built over the last you know five to ten years. I mean these are very, very different strategies, so where does HR come in? Well, HR can put in place, one, the processes for getting these goals up from the highest level of executives down to every employee in the company, and tracking progress against those goals, and they can employee some of the best and class technology solutions. Obviously we believe SuccessFactors is one of them, if not the very best, at this particular process for giving visibility to goal alignment, for tracking metrics against goals. So this is where HR can really step up now, when they really didn't have that opportunity five or six years ago, it was still Word docs and spreadsheets, and a lot of sort of town hall meetings, but nothing was truly tracked.

Steve

Yeah, I think that's true, and I think now there are tools and technologies, and it's a good time for HR to say "Hey, we have been developing this stuff and it is exactly for this sort of storm. We have been creating these kinds of tools to really get employees to do what we need them to do".

I think the second one that you talked about was this idea of hanging on to your high performers, and I think this is very counter—intuitive, but a great observation that actually, when you run into a down economy, retention becomes a big issue, because I think people falsely think, "Oh well, there's no jobs out there", but there are always jobs for highly skilled people, those always exist, and the people, if your company is struggling, the people that are likely to jump first are the people that have opportunities elsewhere, who are probably the people you least can afford to lose. What do you think companies need to do to sort of say, "Hey, as an organization we are going to face some tough times that are maybe somewhat out of our control. How can we convince the real high performers in our organization this is the time to double down on our company and not start looking around for another ship to jump onto?"

Rob

Sure, well I think there's a number of ways to approach that, for one I think this is a rallying point for pulling in your best people and talking to them about what's happening in the marketplace and what's happening in the world, and how as executives there is a certain level of confidence in an ability to weather that. I think you can gain a lot of favor with those strong performers by being very, very decisive on letting go some of the folks that might not have been cutting it, or some of the fat that you might have built over the last, in your company over the last three to four years, that you feel now is the time to let go, that actually relatively makes high performers feel very good, because everything frankly is relative.

And the third thing is really around compensation, a lot of folks that are high performers are looking for more than just a strong salary and a bonus, they're in the equity game, and frankly a lot of the stock options that certainly in the Valley that have been distributed are underwater at this point. So this is a chance to put in place some processes for refreshing some of those things, and again technology helps you. With SuccessFactors we have a compensation management module that allows you to give line managers some discretion in stock and stock option allocation, bonuses, merit increases, so again there's technology solutions that could help you, but it's really about taking the initiative to look at. who are the best people, who are the in the top right hand quadrant of the nine box, and get them rallying with you around the future of the company – "Where we're going to go, why we are going to succeed, and how we are going to incent you to stay with us so that you're along for the ride."

Steve

So now's the time to recognize those people that are critical for your organization and let them know they are critical and show them a path forward, I think it makes a lot of sense and it really is counter—intuitive, because people don't think about turnover as being a greater risk in a down economy, but it really, it hurts you even more in some ways.

Rob

I would add to that point, we all know in HR about the peanut butter spreading of merit increases, it's kind of the 3% to everyone is spread evenly. The risk here is in downturn it's going to be the peanut butter scrapping, you can hear the peanut butter being scrapped evenly off of the toast, and that's going to lead to the exact opposite phenomena where you threw away the baby with the bath water, and a lot of the key folks that had the potential to be high performers in your company might be thrown out with the low performers, and that would be just horrible. This is the time to work it through and not do the opposite of peanut butter spreading.

Steve

Yeah, like the whole general cutting, which gets to the third thing you were talking about, which is reductions in force, which are the reality of a downturn. What do you think if an HR organization is facing that? What should they be doing to prepare for that? There has been — and its interesting, because I think for a lot of people in HR, maybe especially people newer to this career, don't remember the last time we went through this was about seventeen years ago, we went through a major series of reductions in force with the last recession. What do you see people need to think about in that area of lay—offs?

Rob

Sure, well I mean I think one, and there's a number of best practices around this, but I think one obvious point is make sure that who you are letting go is truly a low performer, that's number one, and so in order to understand that, again there are systems in place like ours that can help you do that. I mean, who are on the bottom left hand quadrant of the nine box who have shown over a course of time that their learn agility is not where you want it to be, who are below the you know the mean of the kind of caliber of talent you want in your company. So HR can present that information to its executives and present some scenarios of what it would look like to do a 5%, 10%, 15% cut, so that those executives are empowered with what they need to make those decisions, because they could easily understand what impact that has on the income statement and the value of the company over time.

I think secondly, and again this is a best practice of play offs, but these things need to be done quickly and they need to be done in a one shot kind of way, so that the day after these things get done, the right folks, the key talent in your company that now has the objectives and goals, they need to move forward are energized by the fact that you've cut where you needed to cut, you're done with that now, and now you are moving forward, rather than them thinking that there's another one coming, there's another one coming, I am just going to cover my bases.

we've seen a lot of companies make these mistakes in previous recessions, Steve, I mean either they wait too long, and they think this thing will go away, and that they can ride those folks out, or they do it in a sloppy way where they trickle out two, three, four, five percent over time, and we've seen companies that do it well, they take it they take the hit, they pull in their key people, they get them aligned around a common set of goals and objectives, and they move forward into taking advantage of this opportunity, and I think we'll see new winners, new winners in many industries, because they did this right.

Steve

Yeah, I do think one thing too about like doing these lay—offs, a lot of research on it too that you're getting into is that you need to do it swiftly, but also you need to follow a very consistent practice, there's a lot of research on what's called justice theory around people's perceptions about lay—offs, so people can accept that lay—offs will happen, but what really bothers them is if they think it's done in an inconsistent, capricious fashion based on who you know as opposed to what you achieve, and that's not just important for the person being laid off, it's also really important for the people that are staying around. As you said, they're going to be thinking, what's the next thing to drop, and if they don't know how that decision was made, they're going to wonder if they're next, and the other thing I think is important is to remember that you may be getting rid of people that you think are low performers, but they're probably also friends of the people that are staying, so treating them in a very consistent fair manner is really critical form an employee engagement standpoint, for the survivors of the lay—offs, as they put it.

Rob

Absolutely.

Steve

So, you've covered three, I think, really interesting things in terms of this time to step up the execution, the time to really get retention of high performers, the time to deal intelligently if you have to reduce some of your workforce, so are there any other things that you would like to share that you have learned from really looking at how the economic downturn is going to impact talent management?

Rob

Sure, I mean I think that the key thing to remember here and to understand is that what we went into here about a month or a month and a half ago, it's not something that's going to go away in a month or month and a half. The level of confidence in the global marketplace has been significantly impacted and so that's going to take a significant amount of time to work its way out. What I have seen in the past myself, and having obviously read about previous recessions and how companies have handled them, this is a time of significant change, and if companies think they can ride through it with the same strategy and the same set of directives, the chances are slim that that will work, and this is really an opportunity for the people that own approximately 70% of the operating expenses of a company, and that being the human resources department, to take this chance to step up and not wait for a directive from their executives, but rather come to them with insights that they could use now more than ever, and again insights on how they can now very easily get folks aligned to a common sets of goals and they could be a more dynamic organisation through the tools and best practices HR has come up with, how they can engage with them on ensuring that the best talent doesn't leave the company, how they can engage with them on initiatives to cut expenses quickly and fairly, as you put it, Steve.

So this is not a time to think through, well, maybe nothing will happen and maybe it'll pass in two to three months; this is a time to be proactive, because a year and a half from now, for those HR leaders that do that, they could find themselves in a very, very unique and powerful position in the company where they truly have a seat at the table like they never imagined before.

Steve

I think that's a good point, it's like the storm has hit, now is not the time to keep sailing as normal, but here's a chance to really demonstrate what a good sailor you are, so to speak, to get out there and approach it the right way.

Well thank you Rob, I really appreciate the insights, it was very interesting talking with you. I look forward to having you again on People Performance Radio, and thank you again for appearing on our show.

Rob

Thanks Steve

Zoe

Hi, this is Zoe. Coming soon in the UK a new series of podcast interviews focused on talent in uncertainty. Tune in to find out more on how Cable and Wireless, Premier Farnell, Lloyds TSB and the Lancaster Hotel Group are using SuccessFactors to address their business challenges.

Speaker

If you would like to be a guest on the show, or sponsor, please drop us a line at podcast@successfactors.com, or you can leave us a message at 650-425-7474. This podcast is copywritten by SuccessFactors. The views expressed are the individual’s own, and do not necessarily represent those of SuccessFactors, SuccessFactors’ partners or customers. See you next week.