"The only good thing about the recession is that we don't have to worry as much about all that HR mumbo-jumbo you keep banging on about," he said with a big smirk and throwing his eyes to heaven for effect; watched intently by the others at the table.

"Strangely enough," he continued, and I saw him nudge the person seated next to him as he did, "our employee turnover has fallen through the floor over the past two years – and we've invested little or nothing in our people since the bad times hit. So much for all that employee development stuff you kept pushing on us before we got sense...I think we were sold a bit of a pup...whad'ya think lads?"

He eyeballed me as he finished that last sentence, waiting for a reaction. Poking the bear, if you like; always pushing buttons of one kind or another.
Still, he is the client, after all, so he gets more leeway than some.

Truth is, I know him well enough by now to understand that he was not being totally serious. He was likely trying to get a bit of mileage out of me. Dangling the bait to see would he get a bite.

That said, I also know him well enough to know that he wasn't entirely joking either.

The guy in question owns a chain of bars, pretty successful and a good operator, but like everyone else in the service industry, feeling the pain of the last few years as discretionary spend has dwindled.
And although he wasn't entirely serious - and, truth be known, he never did a whole lot of employee development in the first place - I have heard a number of similar-type comments from business owners and managers of late; there seems to be a mistaken belief that there are few downsides to cutting back on investing in employees.

Obviously, if you read my articles on a regular basis, you will not be surprised to learn that I don't agree with the idea that there are little or no consequences to cutting back on employee development when times are tough. That said, at the same time, I also completely understand the dilemma facing owners and managers when the numbers need to stack up.

The cuts have to fall somewhere after all.
In reality, employee development is an area that is relatively easy to target for cutbacks. Like the phrase that's very popular at present: it's part of the 'low hanging fruit'.

Anyway, back to our friend.

Despite the fact that he didn't spend a whole lot on employee development anyway – at least not compared to some companies - he had slashed and burned what he did spend to the point where now the budget for employee development is essentially zero. Nada. Zilch.
But, rather than try to convince this guy of my way of thinking - we have had plenty of healthy debates on the matter over the years - I decided to take another track.

We had planned to take a quick tour of the bar we were in, and as we later walked around, I started to point out aspects of the premises which looked a bit 'tired' so to speak – you know the kind of thing, scuffed paintwork, cracked tiles, locks missing on the toilet doors and the like – nothing major, mostly cosmetic stuff.
Thankfully, he knows me long enough to know that I wasn't being a jerk for nothing, but he did glare at me once or twice as we walked around. He knew there was a purpose to what I was doing. Just wasn't sure what.
He made no bones about the issue – the money simply wasn't there – so all but the very essential maintenance tasks had been put on hold; most areas, he explained, would be 'spruced up' eventually, but at a slower pace than previously. Quite simply investment in the product was off the agenda.

Something that, as I said, I totally understand.

Still, I tried to point out a simple difference for him between the consequences of cutting back on the investment in the product and doing something similar on the people side.
Unless he lets his product deteriorate to such an extent that it turns customers off – which he would never do - then putting off a repainting job, for example, by a couple of months won't make a massive difference in the end. On the other hand, putting off developing his employees – even if only for six months or a year – will make a difference, although that difference may be harder to quantify.

At its simplest level, let's look at one example of what I mean.

As I said, he explained that he had more or less stopped all external training in order to save money. Now, apart from the fact that the savings wouldn't have been all that massive given what he did spend, no doubt that move kept his accountant happy.

It took a number from the minus column; no matter how small that number might have been.
But, there are likely to be hidden costs associated with that decision.

For example, one area that was totally hit was customer care training - one of the few things that did happen quite frequently in the past, but now hadn't been done for eighteen months or so. For sure, there are likely to be downsides to that decision in terms of falling service standards. Unfortunately, it's not possible to quantify what they are because, although they use comment cards in that particular bar, they actually don't do anything with them and as such customer satisfaction isn't actually measured.

Still, and I told him this, my bet is that were he to do so, he would be seeing a decline in customer satisfaction ratings since he last did customer care training. Certainly his bar manager looked a bit sheepish when were discussing that issue, so I assume I'm not a million miles of the mark on that one.

Far more worrying, perhaps, are the 'cultural' impacts arising when employee development grinds to a halt in any business. These are even harder to measure, but they happen all the same.
People aren't stupid, they can tell that they have fewer development opportunities than before and their reading of the situation will be that 'development' is optional, or only for the good times. That will be their attitude.
And, when it comes to managers and supervisors, this will likely impact on how they deal with their own people, so the trickle-down effect is likely to be that 'development' gets totally sidelined over time.
What's more, building a culture where employees feel really valued and appreciated – one which helps to attract and retain the best people and which engages them to the fullest extent – takes a long time.
It cannot happen overnight.
And when that effort is diluted for a few months or, worse still, years then the organization as a whole takes a major step backwards.

So, how to balance the need to cut spending with the desire to maintain as much employee development as possible?

Well, it always goes back to whether employee development is seen as an investment or a cost. When the mindset is right, the money - or as much as can be devoted to it - is found for employee development. The second issue is whether the business has a track record in really measuring the impact of employee development. When this area is measured over time, then the results can be quantified and this in turn helps to inform decisions as to whether the investment is worthwhile, even in tough times. In companies where that has been the norm, I find that not only are they trying hard not to cut back on employee development, but in some cases they are even increasing expenditure in this area, particularly with regard to up-selling or yield management skills, because they know they will get a return.

Without the measures to make the case, employee development will always remain an easy target.

Sure, on face value, in this particular bar business, employee turnover was down even though development had essentially stopped - but that has likely more to do with the fact that there are few options, so employees have to hang tight right now. Were they to measure employee satisfaction - which they don't - then I would wager that there would be plenty of issues bubbling under the surface.

Enda Larkin has over 25 years experience in the hotel industry having held a number

of senior management positions in Ireland, UK and the US. In 1994 he founded HTC Consulting, a Geneva based firm, which specialises in working with enterprises in hospitality and tourism. Since that time, he has led numerous consulting projects for public and private sector clients throughout Europe and the Middle East. He is author of Ready to Lead? (Pearson/Prentice Hall 2007), How to Run a Great Hotel (How to Books 2009), 'Quick Win' Leadership (Oak Tree Press 2010) and Journeys – Short Stories and Tall Tales for Managers which is due to be published in March 2012. He may be contacted via www.htc- consult.com or at [email protected]. Read his Blog at www.htc-consult.com/new/blog

Enda Larkin
HTC Consulting
+41 (0) 22 700 8675
HTC Consulting