3 Unique Talent Dilemmas Leaders Face — And What To Do About Them

As business leaders fully realize the importance of people to their organization's ultimate success, many companies have turned to their CHROs to help them overcome the substantial threats posed by the absence of the critical talent required to execute organizational strategies and mission critical priorities.

“Given the unprecedented challenges, HR leaders must take the lead and proactively take action now,” says Matthias Graf, vice president analyst at Gartner. “Undermining the criticality of talent for business success as well as short-termism or in-the-moment-reactions can put organizations at a severe disadvantage.”

Along with heightened uncertainty for business, HR’s challenges exceed those faced in previous economic downturns, forcing leaders to weigh three dilemmas:

Digital initiatives offer key ways to increase productivity during an economic downturn. Investing in technology without simultaneously investing in talent, however, may hinder your ability to scale operations coming out of the downturn. 

For example, many global airlines moved to invest in IT and automation during the COVID-19 pandemic. Simultaneously, airlines cut a large proportion of their workforce, only to struggle to rehire sufficient numbers of workers to meet resurgent demand for airline travel in 2022. Had airlines not made such serious workforce cuts, and invested in talent alongside of or instead of technology investments, they may have been equipped to better navigate the transition back to widespread air travel. 

So far, organizations look to a variety of strategies to attract and retain talent. According to a recent Gartner survey:

• 60% of organizations surveyed offer an increase in base compensation to attract and retain. 

• 42% increased pay, without keeping pace with inflation, and many remain undecided.

• 58% removed location requirements to improve and expand talent pipelines.

Constrained organizational budgets during an economic downturn often require cost-saving measures that impinge on employee needs — such as pausing retirement matching, slowed hiring or even laying off employees. Many organizations already turned to layoffs in 1H 2022,  in anticipation of an impending downturn. 

“Even if these actions may help an organization better weather a downturn, organizations that have enacted a humanized EVP may be less able to enact these changes,” says Graf. For example, layoffs may seem especially harsh where they heard  consistent messages about how valuable they were to their organization’s success. That, in turn, could diminish employee morale and productivity, and make hiring more difficult in the future.

Gartner analyzed S&P 500 companies after the COVID-19 pandemic to see how organizations navigated cost savings versus employee needs, since the pandemic drastically disrupted consumer behaviors and the economy at large. Successful organizations preserved workforce savings early while investing, smartly, in new talent opportunities. Striking the proper balance between those needs is vital to successful recovery and long-term business growth.

Organizations that want to accelerate innovation and exploit new market opportunities during a downturn will need to invest in more — and different — talent than organizations that solely prioritize weathering the downturn. Such increased investment raises risks, particularly when those innovations may not pay off; however, emphasizing stability may leave organizations lagging dangerously behind their peers coming out of the downturn.

HR leaders should work closely with their talent strategy and risk management teams to identify additional, organization-specific dilemmas they will confront by leveraging internal and external data sources, scenario planning and similar future tools alongside their traditional risk identification activities.

Data empowers HR leaders to more confidently manage these talent dilemmas, and carefully examine or rethink organizational values to make better informed decisions. Data ensures: 

1. Decisions are based on evidence, not unconscious biases and fear

2. Decisions align with previous promises and employee expectations

3. Genuine explanations for why decisions were made

4. More compelling recommendations to the board and C suite regarding necessary talent actions

In short:

• A unique “triple squeeze” — inflation, scarce/costly talent and disrupted/constrained global supplies — represents a new combination of economic pressures.

• As a result, HR leaders face a number of heightened challenges and dilemmas that exceed what they faced in previous economic downturns.

• HR leaders can use data to more confidently manage these talent dilemmas, and carefully examine organizational values to make informed decisions.