To gain an edge in a looming recession, focus on employee development, McKinsey says
Companies with a dual focus on developing human capital and managing workers well have the edge in performance and rank among the most profitable firms in their industry, new research from the McKinsey Global Institute showed. Those employers also are earnings resilient and successfully attract and retain talent, McKinsey said.
Top employers have several practices in common, the research found: They create opportunities for employees to keep learning and reinventing themselves, such as by providing more than 70 hours a year of training per employee, and by making promotions and internal transfers readily available. They also deliver a better day-to-day work experience. In addition, they promote a culture of “intrapreneurship,” where employees can collaborate and share expertise and ideas across functions. They also set the standard for inclusivity by, for example, having the lowest gender pay gaps.
Strong performance management starts with clarifying expectations and incentives and using a dynamic approach to achieving them, the report said. Companies also should have mechanisms for recognition, such as financial rewards and gestures that can make employees feel appreciated, it added. The transition can be a “difficult undertaking that requires sustained engagement and a willingness to change familiar patterns,” the researchers cautioned. “But companies that do shift in this direction have a lot to gain,” they said.
Beyond formal training programs, the top performing companies also emphasize on-the-job coaching, according to McKinsey. “Ongoing coaching and continuous feedback are key to helping employees resolve challenges and adapt the way they work as needed,” the report observed.
Employers get the best results from managers who stay engaged and give feedback in the moment, always with an eye toward goals and by encouraging employees to achieve more than they thought possible, the report explained. But many managers, especially those who have been newly promoted, lack the training to do this, experts consistently point out.
Because of this, employers should invest in coaching for managers as well, particularly if they are relying on managers to shepherd employees and company initiatives through a potential recession, various sources have said.
To equip its managers with the proper leadership skills, one company started a training program focused entirely on inclusive management. If managers are to become a positive force for change, they need practical tools and guidance that deals with real-life issues, a company spokesperson previously told HR Dive.
A culture of learning and development is also a critical retention tool, according to an MIT Technology Review report from September. For companies that have started “labor hoarding” in response to an unprecedented talent market and looming recession, a culture of learning and development may be one way to keep workers on board, other reports have suggested.
Employees are looking for the next great work opportunity, even if their employers don’t know it, Udemy’s 2023 Workplace Learning Trends report, released in late 2022, indicated. They’re brushing up on customer management and nonverbal and business management skills, among others, according to the report.
But creating the means for trusted employees who already know the business’s practices to grow and add new skills can directly address this, the McKinsey report suggested: The companies with the performance edge also had moderate rates of attrition, it found.