The majority of European companies are facing difficulties in attracting and motivating the critical-skill talent needed to help them rebound and prosper in the wake of the economic crisis, according to the results of new research from global professional services company Towers Watson. The negative impact that cost-cutting measures have had on existing employees is also an issue for employers. As a result, companies are beginning to re-evaluate how they attract, motivate and engage employees.

The Towers Watson Global Talent Management and Rewards Survey, prepared in conjunction with WorldatWork, an international association of human resource professionals, confirms that attracting critical-skill employees is an issue companies are facing worldwide, as they prepare for growth during the recovery. Nearly two thirds (65%) of companies globally reported problems attracting critical-skill employees, while in Europe over half (58%) said they were facing these problems to a great or moderate extent. Six in 10 (61%) of European organisations also reported similar difficulties attracting top-performing employees.

The research found that the economic crisis forced companies across the globe to undertake cost-cutting activities with hiring freezes (75%), salary freezes (63%) and layoffs/redundancies (57%) the top three measures amongst European companies. Respondents to the survey also said that these cost-cutting measures have been hard on employees. Nearly two thirds of European organisations (61%) said their employees’ workload had increased as a result. Some 47% reported they had an adverse impact on employees’ ability to manage workplace stress and nearly half (44%) also said the measures had led to a negative effect on employees’ ability to have a healthy work-life balance. Half (51%) believed that there had been an adverse impact on overall employee engagement.

Carole Hathaway, senior consultant at Towers Watson, said: “Employers need to address the adverse issues amongst employees caused by cost-cutting. It is critical that companies re-motivate and re-engage their employees as there is a clear link between increased employee engagement and improved business performance. Business leaders therefore need to show their employees how they intend to build trust and demonstrate interest in their employees’ well-being – whilst also doing so in as cost-effective ways as possible.”

The survey shows that many companies are re-evaluating their reward and talent management programmes as a result of the impact of cost-cutting on engagement amongst their employees. More than half of the European companies surveyed (58%) are addressing this by ensuring the readiness of talent for critical roles, a further 56% are creating more movement, rotation and development opportunities for talent and 53% are also increasing the investment in building the internal pipeline of talent.

Carole Hathaway said: “The business climate has clearly affected companies’ ability to attract and re-motivate top-performing employees. At least in part because these key people simply are in no rush to seek employment elsewhere given the uncertainty over economic recovery and the future of their current pay and benefits package. But these are the very people most likely to leave should a better offer come along. Many employers have also underestimated the impact of pensions, job security and flexible working arrangements on employees’ decisions whether or not to leave their organisation.”