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On the Hot Seat

Towers Perrin executive helps firms through turbulent times

Gore says keeping key talent will be important for restructuring companies

(Erik Jacobs for the Boston Globe)
January 11, 2009
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Bob Gore is a man with an insider's view of the global recession. As managing partner of the human resources firm Towers Perrin in Boston, Gore, 60, with his team of consultants, is shepherding companies through the turbulent economy. For some clients, that means downsizing and layoffs. For others, it means making a quick pivot to prepare for a rebound in 2009. Gore spoke recently with Globe reporter Casey Ross about his unique vantage point on the turmoil of a recessionary economy.

How are organizations reacting to the stress of this downturn differently than previous recessions?

In the past, organizations tended to be somewhat monolithic in their approaches. They would say, "OK, we know we're going to have to have a layoff, and so we'll cut X-thousands of jobs." And that may still be necessary today as you need to rebalance and restructure. But our strong sense is that it's going to be the result of a much more thoughtful process. Organizations have spent a lot of time, money, and effort over the past five to 10 years identifying talent, recruiting that talent to the organization, and developing it. They don't want to lose that, so keeping your star performers is going to be absolutely essential.

How do you retain that talent with limited resources?

Towers Perrin does a ton of research on what makes organizations tick, what makes employees engaged or not engaged, how engagement relates to operating and financial performance. To make it simple, engagement is absolutely essential. So the idea is to say, what affects engagement? One of the things that affects it the most is what the employees think senior leadership thinks about them. If the employees think that senior leadership cares about them, thinks about them, has their interests at heart, it's amazing how that will impact employees. And that's not to say that there aren't some hard messages that leadership will have to convey. That's just the nature of the world. But what we've found is that when you've got leadership that's visible, that's candid, that is realistic, and tries to do the best thing by the workforce, it has a tremendous impact on engagement.

How do you advise companies trying to manage through the situation of having to downsize and lay off employees?

The first thing you need is a communications strategy, because you want to hang everything around that. If you don't have a strategy, each situation gets defined by itself, and you find some inconsistencies. What we advise our companies to do is to be realistic. We've got an educated workforce and they're fully aware of what's going on in the economy. Don't spin things for the sake of spinning them. At the same time, you don't want to be overly pessimistic. I think presenting a realistic picture to the employees is a great thing for employers to do, because otherwise you've got the workforce defining that for themselves, and usually they're going to tend to the negative. We're all human, and in the absence of information, you just think the worst.

What about the issue of executive compensation. Is the gap in pay between rank-and-file workers and executives going to narrow amid the downturn?

The process and the metrics for determining executive pay, I think, will be enhanced significantly. It can be a lightning rod for many organizations. And there are a lot of lessons learned that we've seen. One of the worst things is to pay for failure. It does nothing but make matters worse. You want to really think about what you're doing as an organization and not make decisions too quickly. Organizations that have a thoughtful process that they can point to are going to be in a much better position than those that don't. Not everybody is going to agree on the decisions a board makes, but in the absence of a sound process I think you're exposing yourself to criticism you don't need.

How do companies manage the fear and uncertainty their employees have about eroding 401(k) plans and retirement savings?

There is no silver bullet to that question, because it's a big challenge at a very interesting time, with a lot of the baby boomers coming to their retirement years - some much better prepared than others. One of the things to do is look back at other downturns. If you go back to 1987, when the Dow went down by an unthinkable number on one given day, there was a lot of panic. And what happened was that people who had come into a strong market were the first ones to get out, which is the opposite of what you need to do. Organizations that have a sound thoughtful program, and have communicated with their employees and given them the tools to make decisions, are going to be a lot better prepared than organizations that haven't. The demise of the defined-benefit pension plan may come to be revisited. As we look at what that did provide for many organizations, that core stability it offered, it would certainly be something I would want to look at as far as capital accumulation for employees.

At a time period when you may be inclined to eliminate pay raises, how do companies perform the calculus of trying to retain employees but also keep their balance sheets healthy?

If you cut back too much, you cut into the flesh of the organization, and then you damage shareholder value and employment prospects, and everyone loses on something like that. Today, we've got tools that are very helpful in giving employers a picture as to which programs are valued by employees and which ones aren't. There may be a benefit program that has a high cost and little or no value. The answer there is straightforward: Let's replace it and spend those dollars where they make sense. And we can do that on a much more statistically sound basis than ever before.

Have you seen in this downturn some examples of how not to communicate with employees about difficult decisions such as layoffs?

Saying and doing nothing, and letting conjecture fill the void, is probably the thing to be most avoided. Right behind that is being overly positive or negative, in a way that is at odds with reality. It's critical to recognize we're all human and to treat people with as much decency and respect as possible.

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