Unless you are a bank or an automobile manufacturer you probably are not going to have extra cash laying around your company and if you do, you want to spend it wisely. For the rest of us, we need to get creative. In my last post I gave an overview of what a company can do to prepare for preparing for upcoming economic boom. I thought to myself, what can a company do to remain viable and competitive in these tough economic times? For the banks and autos, it could be as simple as using regular unleaded in the corporate jet or maybe drinking one $1000 bottle of wine, with dinner, instead of four. For us little people, not supported by our generous Uncle, we need to go old school and review some of our college and B-school lessons.
So how does a company remain viable and competitive? The most obvious answer is to focus on bottom line earnings. When looking at the bottom line or earnings most people use EBITDA. EBITDA is earnings before interest, taxes, depreciation and amortization. Basically, EBITDA is operating revenue minus operating expenses plus other revenue. There are three basic ways to increase the bottom line.
Increase gross revenue – sell more products or services
Reduce Costs – spend less
Better utilize company assets – use your resources efficiently, do more with less.
Everything a company does to increase EBITDA falls into one or more of these categories. My specialty is human capital, basically managing your employees and talent management. Talent management according to PWC, is described as “attracting, retaining, developing and promoting outstanding talent”. I will look at the current market thru talent management colored glasses. In order not to bore you to tears and leave you asleep, drooling on your desk, I will take a brief look at what affect the current market condition are having on talent management.
Unemployment has increased tremendously in the last year; there are more people out of work than there has been in a very long time. Let’s call these people and others who are looking for new employment, the Talent Pool. The Talent Pool is extremely susceptible to the laws of supply and demand. When there are a lot of people seeking work, generally compensation goes down. There are examples of rare, in demand, skill sets that will always command higher compensation, but for the most part compensation declines in this type of economy. With so many people looking for work, a single job posting could return hundreds of resumes and applications. One can not assume that it is only the bottom percentile that makes up the unemployed. The talent pool is made up of superstar overachievers, average hard workers, dregs of corporate society and everything in between.
For employees this is also a tumultuous time. Layoffs, unemployment and the state of economy are quoted every day. When a company is not performing and is laying off employees, the people who are still employed tend to wonder if they are next. They will not want to make critical decisions or stand out from others, especially if it involves spending money. They are also being asked to work harder and longer, in order to complete the work of those laid off. For managers of employees, there is also the stress of laying off your friends and coworkers. Add to this, for a lot of people, the stress of providing for their families and possibly being the sole provider for said family and you have a scared workforce, who does not have much confidence in their current role or company. All of this leads to lower morale, a “pass the buck” mentality, and a fear of performing the tasks at hand.
Not all is bad; there are also the top level of employees and professionals who see this environment as an opportunity. These people can be regular working stiffs, top salesmen, IT, middle management…. The key is they work hard and smart, and they understand how and what they do affects the company bottom line. These employees are the heart and soul of a company and understanding who they are and recognizing their commitment to the firm, is extremely important. These folks will use this economy to seek better jobs with more responsibility and rewards. They are not afraid to make decisions and will accept the consequences good or bad. The problem is they are mixed in with everyone else.
OK – that was my very brief overview how human capital is affected by the current market. I know – there are many more affects than the ones mentioned, however, these are the biggest that a company will face. And since it is my article and the majority of readers will only want to know about the major issues, I will leave it there.
That concludes Part I. In Part II I will discuss how a company can remain viable and competitive in this market.
Mark Maiellano is a Business Development Manager for Talent Retriever. He has over twelve years in the Executive Search market, owning his own company for ten years focusing on Investment Banking and Private Equity. He can be reached via email at firstname.lastname@example.org