How the Recession Is Changing Talent Management

tammy-erickson-110.jpgTammy Erickson is a McKinsey Award-winning author. Her blog Across the Ages can be found at HarvardBusiness.org.

By now we've all heard the phrase that a recession is too precious to waste.

Recessions are times when we make changes in the way we do things — consciously or not. Although it would be smart to do it consciously, probably some of the most significant changes have just, well, happened.

The shift underway today, embedded in companies' responses to this recession, will have major unintended consequences for the relationship between organizations and the individuals who perform work (I hesitate to even use the word "employees"). As msnbc reported recently, there's been a "furlough frenzy" in corporate America lately.

We're on a slippery slope.

Recent history illustrates how significant shifts in the nature of the relationship between organizations and workers have resulted from practices put in place during a recession. For example, it was during the recession of 1981 that the idea of a "layoff," meaning a permanent separation with no prospects for recall, came into widespread use. Prior to that recession, the idea that an employer would dismiss workers permanently was so rare that the Bureau of Labor Statistics did not even keep track of such cuts! Furloughs, with the clear commitment of a return when business picked up, were used instead. The reality that jobs were no longer "for life" sunk in.

The recession of 1991 saw another substantial change: many individuals became contractors out of necessity — and a significant proportion chose to continue to work as contractors even after "permanent" jobs became available. We accepted the idea that some people may never be full-time employees again and began our evolution to a "free agent nation."

This recession is ushering in a return to furloughs. Hewitt Associates recently surveyed 518 U.S. firms and found that 70 percent had implemented or were considering implementing furloughs. Major companies such as Dell, American Airlines, and DuPont already have announced plans to send workers home for a few days or a few weeks without pay as a way to cut costs.

Much of the attention paid to this trend has focused on the cost-savings opportunities for employers and worried about the economic hardships and potential rights violations to employees. Employers who use temporary hiatuses rather than layoffs save on severance costs, as well as future rehiring and retraining expenses when an economic turnaround eventually comes. Employees, in theory, suffer through some hardship, but not as much as would have occurred with a layoff. Yes, but . . .

This practice is further changing — in irrevocable ways — the relationship between employers and employees. This practice is reframing, perhaps even severing, the idea of "full-time" as many of us have understood it for years.

When I took my first job out of graduate school, my employer had me sign an agreement that whatever I did — whatever I created, invented, wrote — whether or not it occurred during some official forty hour period, was the property of the company. Since then, I and most of us in professional or managerial roles have viewed the work we do as only loosely related to any particular hours. We work nights and weekends. We grumble about work-life balance. We accept that the deal we have had with our employers was all encompassing.

But the idea of furloughs, particularly for managers and professionals, is planting the seed of a new way of looking at work in our minds. Suddenly companies have asked us to work, say, 32 hours a week rather than 40. Hmmm. What does that really mean? Most of us were never working 40 hours — we might have been working 50 or maybe even 60. We were answering emails at odd hours, writing in the early hours, calling Singapore at night. Does this mean that we should now work 20% less than we were before . . . or does it mean we should work literally 32 hours?

For many, I believe the conclusion will be that we should work the hours specified by the company and perhaps do other things — start new businesses on the side perhaps, sell stuff on eBay, take another job, go back to school, whatever — with the other time.

In this shift, companies will lose far more than the number of hours they think they've cut back. Companies will lose that sense of total dedication — the sense that what I produce on my own time is theirs, that I have a responsibility to answer emails whenever they arrive or participate in odd-hour phone calls.

This shift sits well with many in Gen X who have already tended to bind their involvement more carefully than have the all-out Boomers. But for both generations, it will be a new way to look at work — another step on the slippery slope of recessionary lessons moving us from (1) you don't have a job for life, to (2) you may never find full-time work with one employer, to now (3) even a full-time job is really only a contractor job in disguise.

From a talent management perspective, it's essential to recognize that decisions you're making this year are likely to set the tone for the relationship with employers for decades to come.

I hope you'll share your thoughts and experiences.

By Susan Jackson  |  June 23, 2009; 10:25 AM ET
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