Workforce Decisions During Downturn Will Affect Firms' Futures

September 17, 2009 ( - The credit crisis and subsequent global recession caused many companies to slash workforce headcount and drastically reduce their expenditure on people, and a new paper from PricewaterhouseCoopers (PwC) explores how these decisions will affect companies' ability to compete in the future.

PwC suggests that as global economies begin to stabilize, companies need to evaluate whether their people strategies – which includes the ways people are recruited, rewarded, retained, incentivized, trained, and retired – are appropriate for the future. The paper reveals that in the future, employees will align themselves with organizations that fit their priorities and ideals more in the future.

“Preparing for the future world of work means engaging with different groups of employees, making changes to remain sustainable and competitive, and accepting the role of people measurement has never been more critical,” said John Verderese, managing director, Advisory PwC, in a press release.

In the paper, “Managing tomorrow’s people: how the downturn will change the future of work,” PwC warns that reducing graduate intake numbers for a couple of years will seriously affect the talent pipeline and limit the number of options for leadership succession planning in the long term. In addition, cutting training and development budgets could have a potential negative impact on customer service or product quality, and could mean the company lacks the right skills to compete when the upturn comes, incurring the higher cost and delays of hiring new talent.

The paper says that as the economy rebounds, companies could lose key talent if staff feel there has been a significant reduction in key benefits compared to other organizations. In addition, by decreasing travel to save costs, thereby limiting face to face contact, companies risk the breakdown of many years’ investment in building social capital across the operation. PwC suggests that if travel must be contained, companies need to look at alternatives such as using technology to maintain networks.

Companies need to remember the long term, not just focus on the short term, when making cost-cutting decisions, according to PwC. For example, the paper says, reducing numbers of external contractors and bringing a number of areas back in house might seem like a good short-term strategy to save costs, but may not be the best model for the supply chain over the long term.

In addition, decreasing spending on technology enhancements could leave companies without a competitive and relevant technology platform to support the business when growth returns. The paper notes that millennial employees have different needs and expectations from previous generations, and the tech-savvy generation expects employers to embrace technology and the flexibility it brings to their working lives.

PwC also suggests that companies need to embrace the new currency of social networking sites and see them as tools for developing contacts and new clients, and promoting services.

PricewaterhouseCoopers (PwC) anticipates three possible worlds or business models which will co-exist in the future, and suggests that how companies manage their workforces now will affect how they compete in these business models.

According to the paper, the workplaces of the future include:

  • The Orange World: In the Orange World businesses are fragmented, 'companies' are usually small, lean and nimble, relying on an extensive network of suppliers. They have multiple clients and contracts and access a globally diverse workforce of 'team workers' on a supply and demand basis. Communication networks are enabled by continual technological advancement and innovation. Loose collaborative "cloud" networks come and go project by project. Employees in the Orange World are technology savvy and networked to communities of other employees with similar skills.
  • The Green World: Companies have a powerful social conscience intrinsic to the brand and 'green' sense of responsibility. The focus is on sustainable and ethical business practice and a strong drive to minimize and mitigate risky business practices. The responsibility ethos is enforced by governments and regulators and is more prevalent in certain industries such as energy, automotive and financial services. Green World employees engage with the company brand because it reflects their own values. They are recognized for good corporate behavior, not just business results.
  • The Blue World: Blue World companies embody big company capitalism and individual preferences override belief in collective social responsibility. Blue World companies have invested in size, technology, the talent pipeline, strong leadership, and sophisticated metrics. They have highly engaged and committed workforces who are well trained, skilled, and operate globally. Work may be pressurized and fast paced, but staff enjoy a wide range of benefits which help them run busy lifestyles and "lock" them into the organization. For those who perform well, the rewards can be very high.

The most recent paper and previous papers in PwC's "Managing tomorrow's people" series can be obtained from .