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Recession Impacts on Jobs, Incomes and Employee Engagement

October 12 2010 - Most European businesses are finding it difficult to attract and motivate the skilled individuals needed to recover from the economic crisis, according to research from global professional services company Towers Watson. Cost-cutting has also had a negative impact on existing employees and organizations are looking afresh at how they attract, motivate and engage their workforces.

In fact, the Towers Watson Global Talent Management and Rewards Survey, prepared in conjunction with WorldatWork, the international association of HR professionals, shows that businesses worldwide are finding that attracting critical-skill employees is a major issue. 65 per cent of organizations surveyed around the globe reported problems attracting critical-skill employees. In Europe, 58 per cent of respondents were experiencing these problems to a great or moderate extent and 61 per cent also said they had similar difficulties attracting top performers.

Globally, the economic crisis had forced businesses to cut costs. In Europe the top three actions were:

  • hiring freezes (75 per cent)
  • salary freezes (63 per cent)
  • layoffs/redundancies (57 per cent)

Respondents acknowledged that these cost-cutting measures have been tough on employees.

  • 61 per cent of European respondents said that employees’ workload had increased as a result
  • 47 per cent felt they had adversely impacted on employees’ ability to manage workplace stress
  • 44 per cent said the measures had a negative effect on employees’ healthy work-life balance
  • 51 per cent believed that there had been an adverse impact on overall employee engagement

Carole Hathaway, senior consultant at Towers Watson, said:

"Employers need to address the adverse issues amongst employees caused by cost-cutting. It is critical that companies re-motivate and re-engage their employees as there is a clear link between increased employee engagement and improved business performance. Business leaders therefore need to show their employees how they intend to build trust and demonstrate interest in their employees’ well-being - whilst also doing so in as cost-effective ways as possible."

Many companies are re-evaluating reward and talent management programmes because of the impact of cost-cutting on employee:

  • 58 per cent of businesses surveyed are ensuring readiness of skilled people for critical roles
  • 56 per cent are creating more movement, rotation and development opportunities for skilled people
  • 53 per cent are investing more in building internal pipelines of talent

Carole Hathaway added:

"The business climate has clearly affected companies’ ability to attract and re-motivate top-performing employees. At least in part because these key people simply are in no rush to seek employment elsewhere given the uncertainty over economic recovery and the future of their current pay and benefits package. But these are the very people most likely to leave should a better offer come along. Many employers have also underestimated the impact of pensions, job security and flexible working arrangements on employees’ decisions whether or not to leave their organization."

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