Profile: Economic downturn leads to a new focus

The problem is that consultancy services are not easy to sell in an economic downturn. Hugh Shanks, a partner at Towers Perrin, says: "Discretionary spending goes away in tougher times. Consultancies have to be much more articulate about the benefits of their help. We have to convince companies that there is a huge pay-off by investing in consultancy support and that we can help them restructure their HR functions to take out the costs, help employees perform more effectively as well as attract the right people."

Shanks says Towers Perrin has weathered the storm by concentrating on recession-resilient sectors, such as oil, pharmaceuticals, the public sector and certain sections of financial sevices.

The firm, which was started in 1934 with 26 employees in the US, also has a long track record, a blue-chip client list and diverse products, including payroll databases and topical surveys.

It operates in 23 countries and employs more than 8,500 in 79 offices and its services range from employee benefit advice to administrative approaches to reward and performance management. The firm serves 284 of the Financial Times European top 500 companies and 219 of the FT's UK leading 500. Its client roster also includes 379 of the Fortune 500 global list and 799 of the Fortune 1,000 largest US companies.

The economic climate may pose different problems, but many of the human resource issues remain the same - how to get the best out of people and develop suitable compensation packages. In the dot-com boom, firms were worried about losing important staff to start-ups. Now, organisations want to retain their stars without going bankrupt.

Shanks says companies turn to human resource consultancies like Towers Perrin for several reasons. Shortage of resources is often at the top of the list, especially in these cost-conscious times. It can be cheaper to outsource some of the human resource functions than retain a large in-house base.

There can also be a need for an independent and objective perspective on a situation, and companies do not always have the depth of expertise needed to deal with complex issues such as employee benefits and compensation levels.

It is no surprise that companies are having a difficult time grappling with pay and performance. Shifting demographics, a plummeting stock market and a European investor base that takes a greater interest in remuneration have pushed employee benefits to the top of the agenda.

Benefits account for a large chunk of a company's salary bill, which is why HR and finance directors are examining options to improve the effectiveness and efficiency of the delivery of these salary add-ons.

According to a recent Towers Perrin survey of 134 HR departments in the UK, benefits typically comprise between 30% and 50% of the wage bill.

Shanks says: "We are also working with a number of large European organisations who are recognising the scale of the problem and reviewing their employee benefit structures. It is too big an issue to be buried one or two levels down the HR ladder. We can offer the financial and HR skills and the appropriate measures to address the issues."

The firm's services in this area range from cost and risk management to design and implementation of a plan, employee financial advice, investor education and compliance and administration.

Towers Perrin is also increasingly being called upon for its support and advice on compensation matters, which goes hand-in-hand with benefits in attracting and retaining talented people. The firm is well known for its global pay databases across different individual positions and industries.

In Europe, each country's database includes elements and methodologies that are common across the Continent, as well as its own unique practices.

According to Shanks, this not only enables companies to compare and contrast with their rivals but determine whether they properly reward their people.

Towers Perrin breaks down the compensation field into two levels - one for executives and one for the rest of the workforce. For the former, the firm devises reward strategies, compensation levels plus helping to implement annual and longer-term incentive plans. For the latter, it conducts salary administration structures, bonus plans and performance management systems.

Shanks says: "What you are looking at is how much should people be paid and what targets they should achieve. While financial targets still dominate, companies are using a more balanced scorecard to review performance and looking at a wider range of objectives. If companies want to have a performance culture, it is not just about raising the bonus. They need to create the right environment and be clear about the capabilities they need and whether they have the right structures, people and human resource processes in place to build those capabilities."

While compensation and employee benefits are hotly debated topics, Towers Perrin also helps companies improve their internal communications and create a brand the workforce can buy into.

Management can often send different messages to the marketplace and its staff, particularly when it comes to lay-offs. Employees will find it difficult to believe that their bank is a great place to work when it has just axed 5,000 people.

Shanks says: "The chief executive should have the same message when speaking to different audiences. For example, if there is a programme of redundancies, the chief executive must convince staff that if it happens to them they will be able to find other jobs because of the training and development they received while at the firm.

"Employees and the employer must speak with one voice when projecting the company's image. Take Abbey National's tagline, 'because life's complicated enough'. Staff were trained to break down the complexities of the group's different financial products in easy-to-understand pieces for their customers."

Towers Perrin helped a UK building society develop a skills toolkit for its sales team when it switched from selling its home-grown financial products to those of other providers. The sales staff needed to be well versed with its new product line so it could communicate with customers.

Shanks says: "There needs to be consistency and coherence between the internal and external messages so that employees can properly reflect and deliver the firm's value proposition. We can help develop the skills and processes that enable them to do that."