[Excerpt] Times of economic hardship and prosperity both pose unique challenges to companies and their talent management practices. On one hand, while companies are experiencing contraction, employers may neglect motivating and developing their employees. Conversely, during periods of expansion, companies may set themselves on an unsustainable course that may lead to dramatic consequences when leaner times prevail. Indeed, it is easy for companies to fall into talent management traps both in times of growth and recession

Sheranian, Nathan J.

English

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Cornell University ILR School 
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Cornell HR Review 
5-7-2010 
A Fine Balance: Effectively Managing Growth and Contraction 
Nathan J. Sheranian 
Cornell University 
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A Fine Balance: Effectively Managing Growth and Contraction 
Abstract 
[Excerpt] Times of economic hardship and prosperity both pose unique challenges to companies and their 
talent management practices. On one hand, while companies are experiencing contraction, employers 
may neglect motivating and developing their employees. Conversely, during periods of expansion, 
companies may set themselves on an unsustainable course that may lead to dramatic consequences 
when leaner times prevail. Indeed, it is easy for companies to fall into talent management traps both in 
times of growth and recession. 
Keywords 
management, growth, contraction, economic hardship, talent management 
Comments 
Suggested Citation 
Sheranian, N. J. (2010, May 7). A fine balance: Effectively managing growth and contraction. Cornell HR 
Review. Retrieved [insert date] from Cornell University, ILR School site: 
http://digitalcommons.ilr.cornell.edu/chrr/4 
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CORNELL H R REVIEW 
A FINE BALANCE: EFFECTIVELY MANAGING 
GROWTH AND CONTRACTION 
Nathan J. Sheranian 
Times of economic hardship and prosperity both pose unique challenges to companies 
and their talent management practices. On one hand, while companies are experiencing 
contraction, employers may neglect motivating and developing their employees. 
Conversely, during periods of expansion, companies may set themselves on an 
unsustainable course that may lead to dramatic consequences when leaner times prevail. 
Indeed, it is easy for companies to fall into talent management traps both in times of 
growth and recession. 
Traps of Economic Hardship 
When a firm goes through a rough period, it may elect to lay off workers as a way to cut 
costs. Reductions in force are a necessary part of a competitive firm's business strategy. 
However, the remainder of the workforce may be left anxious and uncertain about the 
future—especially when other benefits, incentives, and perks are also cut. Firms may also 
decide to reduce recruiting efforts, and employee training and development programs. 
For firms, these reductions in costs may seem like logical and necessary measures to 
ensure the financial health of the organization. But although these decisions may abate 
current crises, the implications related to the future pipeline of talented employees may 
present a new set of challenges. That is, if a company is able to pull itself out of financial 
trouble, there may not be enough skilled or qualified employees left to lead the company 
on a continued upward trend. Moreover, management may believe that the survivors feel 
"lucky" to have been kept on the payroll of the firm and will work hard to ensure job 
security and the success of the company. 
On the other hand, employees may view these reductions as arbitrary and worrisome, 
which may negatively affect their performance. Therefore, in order to bridge this 
perception gap, employers should never play the "you're-lucky-you're-still-here" card. 
Indeed, employers must never assume that an employed worker will be engaged and 
productive, especially when uncertainty is mounting. 
Cuts in benefits, incentives, and other perks should be done thoughtfully, keeping in mind 
how these changes will impact the workforce. Employers should not ignore what 
motivates the remaining workers to be engaged and productive. Ignoring such issues may 
set organizations on course to an uncertain future. 
Q2010 Cornell HR Review 
Traps of Economic Prosperity 
Rapid growth is exciting. The future looks bright and the organization confidently lays 
plans to achieve lofty goals. To meet these objectives, firms may over-eagerly engage in 
a recruiting blitz and quickly hire too many people, assuming incorrectly that these fat 
times will continue indefinitely. Such hasty staffing decisions may erroneously allocate 
human resources, which will actually act to stifle growth because having too many 
workers in the wrong places may gobble up productive capacity. 
Excessive hiring in times of optimistic growth may create many unintended costly 
consequences such as cultural assimilation, team integration, training, on boarding and so 
forth. These efforts to increase headcount can divert important company resources, which 
could otherwise be used for continued revenue-building activity. Therefore, during times 
of growth, firms should ensure human resources are allocated in a pragmatic and 
utilitarian manner, with careful thought to where headcount additions will make the 
greatest and lasting impact. 
Additionally, with profit margins increasing, firms may be tempted to institute 
unsustainable incentive programs and costly fringe benefits. Such benefits may serve to 
further employee engagement; however, if these fringe benefits are ever retracted (even 
for reasons not relating to contraction), employees may view such changes as a 
foreshadowing of negative things to come, which may lead to lower levels of employee 
engagement and morale. 
Excessively generous bonuses and other forms of lucrative performance-based 
compensation programs may also help the firm meet its short term goals; however, when 
the competitive environment changes, it may be impossible for employees to reach the 
incentive requirements or the firm may no longer be able to afford these incentives, thus 
creating a disaffected and discouraged workforce if such programs are cut without a clear 
and compelling explanation. 
In order to combat this hasty tendency to grow too quickly, firms need to constantly 
beware of over-confidence. Firms must consider when—not if—hard times befall the 
organization, how these talent management practices will be affected, and how 
employees will be impacted. Otherwise, the unprepared firm will be faced with painful 
decisions that could have been avoided through employing a more pragmatic approach to 
talent management. 
A Fine Balance 
In an ideal world most firms would choose to see consistent and managed growth rather 
than periods of rapid growth and steep contraction. However, the competitive landscape 
continues to morph as a result of innovations, economic recession and recovery, and 
increasing government regulations. Consequently, firms need to be better prepared than 
ever to respond to an ever-changing economy. 
2 
O2010 Cornell HR Review 
Organizations should carefully plan for additions and subtractions to the workforce 
because poor decisions in either direction can be costly and derail the organization from 
meeting its future goals. Moreover, incentive programs and fringe benefits should be 
thoughtfully devised to motivate employees to reach a high and consistent level of 
productivity. 
Finally, the best way to deal with both seasons of prosperity and uncertainty is through 
open communication with employees. Employers should inform employees of what 
changes will be made and why. Without a clear explanation, employees may be left 
anxious and nervous about the future, which may decrease levels of engagement and 
productivity. Furthermore, firms should actively solicit ideas from employees regarding 
their needs and ideas for how to respond to a changing environment. 
Often employees have valuable knowledge which may not be shared unless given an 
opportunity to do so. Open communication will provide firms with the knowledge 
necessary to determine what motivates employees, where resources should be allocated, 
and how employees are responding to times of worrisome contraction and exciting 
growth. K 
Nathan J. Sheranian is a student at Cornell University, pursuing an MILR at the School 
of Industrial & Labor Relations. This essay was the winning entry in the Cornell HR 
Review 2010 Essay Competition. 
3 


A Fine Balance: Effectively Managing Growth and Contraction

[Excerpt] Times of economic hardship and prosperity both pose unique challenges to companies and their talent management practices. On one hand, while companies are experiencing contraction, employers may neglect motivating and developing their employees. Conversely, during periods of expansion, companies may set themselves on an unsustainable course that may lead to dramatic consequences when leaner times prevail. Indeed, it is easy for companies to fall into talent management traps both in times of growth and recession.5_7_2010_A_FINE_BALANCE.pdf: 144 downloads, before Oct. 1, 2020

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