When financial markets weaken, smart investors with a long-term perspective make highly strategic buys. They know that when the inevitable upturn occurs the carefully targeted investments that they made during lean times will pay off handsomely. Indeed, those investments will be seen in retrospect as a great bargain and the investors as having had great foresight. Human resources leaders and executives with P&L responsibility would be well-advised to adopt a similar strategy with talent acquisition.

Although it may seem counterintuitive, there is no better time than now, when business conditions are difficult, to make highly strategic investments in talent. In fact, leading companies are still very much in the market for great talent. They know that difficult economic times offer a unique opportunity to steal a march on the competition by securing superior people for the long term while less farsighted companies hunker down.

Leaders who want to seize this opportunity for their organization must be able to do three essential things:

Make the business case for a strategic hire
Understand the current state of the talent market
Distinguish merely good talent from truly great talent

In addition, they must be sure to nurture and retain top internal talent. There is nothing gained if great external talent comes through the front door while great internal talent slips out the back.

Making the Case

Executives are understandably reluctant to ask a board or a leadership team to invest in a key executive at a time when cost-cutting is a priority and many other people may have been laid off. They also worry about bad publicity and negative reactions from unions and other stakeholders, who may reflexively see in a proposed new hire an overpaid executive instead of a carefully timed investment. Nevertheless, there is no reason to be timid where a real opportunity exists, and a clear and persuasive business case and the subsequent business benefits can go a long way toward satisfying skeptics.

The particulars of the business case will of course differ from company to company. Depending on the industry, the state of the business, and areas of strategic need, different organizations face differing opportunities, each with benefits that are specific to those conditions. Those specifics form the heart of the business case for hiring a key executive.

However, there are some constants that frame the larger case for a strategic hire during a downturn. Even though a company may have had to lay off thousands of employees to reduce costs, satisfy analysts and investors, and adjust to new market conditions, the business must still move forward – no matter the industry. Once the bleeding has been stopped, the goal should be a return to robust health as soon as possible. Smart decision-makers will understand that achieving that goal requires a leader who can do more with less and generate real growth despite reduced resources. In the short run, it may not be easy to explain to a board that is under significant pressure to cut costs, or to mollify a union that is suffering from lay-offs, but it will be far more difficult later to explain under-performance and missed opportunities.

Understanding the Talent Market

The talent market is in a great deal of flux, but the bottom line is that there are far more excellent people available than usual. Many are available due to the changing market conditions and layoffs, as after the bursting of the dot-com bubble, when many talented people suddenly found themselves without a position. Prior to the dot-com boom, many companies refused to consider “job seekers” for senior positions. Following the bust, however, these companies realized that talented people had become available due to circumstances beyond their control.

But “available” does not simply mean someone who is unemployed. Today, the talent pool includes not only the kind of ambitious executives who are always willing to consider a new opportunity, but also many people who previously would not have thought of moving to another company. The reasons for their change of mind vary. For example, we find that many executives, feeling hemmed in when their company remains in purely cost-cutting mode or is plagued with financial difficulty, no longer find their positions satisfying or sufficiently challenging. Others, at companies that have been involved in highly publicized misconduct or mismanagement, feel unjustly tainted by association and wish to move to a company with a better reputation. Still others, following the mergers and acquisitions that often accompany downturns, find themselves unhappy in their roles in the merged organization.

As a result, there are now many supremely talented people who as recently as six months ago wouldn’t have dreamed of considering an external offer. Companies that understand these dynamics have the opportunity to gain access to top talent that other companies simply overlook. The key is to know which industries and companies are in transition, to have some means of tracking the requisite talent, and to assume nothing about an executive’s desire to move.

Distinguishing Good from Great

The adage that “good is the enemy of great” certainly applies to today’s talent market.

The same forces that have made great talent available have also increased the supply of merely good talent. It is therefore critical to be able to know the difference when making a strategic hire.

Making the distinction between good and great requires at least four activities that, while perhaps obvious, are nevertheless critical:

Determine the experiences and the competencies required for the position. Those experiences and competencies should be clearly and specifically defined against company-specific challenges such as organic growth, growth through acquisition, or any of the other possible strategic and operational issues with which the new hire will be confronted. In addition, it is important to determine the requisite level of each competency. For example, if the ability to spearhead new market entry is critical, does it require competency in domestic markets only or will it include global markets? If financial acumen is a required competency, what degree of such acumen is necessary for success? Such clear-sighted determinations define greatness within the context of the position and help avoid time-wasting exercises with under- or over-qualified candidates.

Benchmark candidates. By externally benchmarking the required competencies against the competencies of best-in-class executives both within the company’s industry and elsewhere, it is possible to understand precisely what great looks like and then evaluate prospective candidates against that picture.

Consider carefully the issue of cultural fit. As Claudio Fernandez Araoz points out in Great People Decisions (Wiley, 2007), people get hired on experience and fired on personality. Dazzled by the experience or competencies of a prospect, companies sometimes fail to adequately assess whether a candidate will fit with the organization’s culture or, if the company is looking for a change agent, has the ability to bring the culture along without alienating colleagues.

Undertake fact-based referencing. Merely asking a candidate’s referees for unfocused opinions is of little help in distinguishing good from great in the context of a particular need. Reference checking should be a rigorous, fact-based and competency-focused process in which referees are asked specifically what candidates did, how they did it, under what circumstances, and with what results.

By adhering to these principles, companies can lift the notion of “greatness” out of the hit-or-miss realm of the merely subjective into the far more precise and productive realm of the objective. There is simply no reason to settle for good when great is so widely available.

Retaining Current Talent

Companies that mistakenly assume that executives at other companies cannot or will not move often make a similar mistake about their own people, including the most talented. During downturns, when there appears to be a buyer’s market for talent, it is especially easy to take internal talent for granted. After all, there seem to be fewer opportunities generally and the grass elsewhere doesn’t look greener.

But such assumptions can lead to the loss of key members of an organization. It is far safer to assume that the organization’s guard is likely to be down during difficult times and that therefore careful attention must be paid to all aspects of talent management.

That includes continuing to scan the horizon in recruitment, providing challenging development opportunities to high potential executives, and working hard to retain top internal talent through appropriate rewards and promotions.

Now is Always the Time

Even though people are almost universally referred to today as a company’s most precious assets, many organizations sometimes fail to manage those assets strategically and proactively. During economic downturns, it is especially easy to fall into the trap of simply unreflectively enforcing or assuming a hiring freeze and into believing that internal talent has no place else to go. At any time, it is easy to assume that particular, highly talented executives would never leave their current employers, although that is no longer true in a world where executives, more than ever, manage their careers and understand that there is a vigorous market for top talent.

Leading companies are always managing their people assets. And now, during an economic downturn, is part of always. For companies that understand that and make carefully targeted, strategic hires, while retaining top internal talent, the rewards will be great. For them, the inevitable upturn will begin sooner, it will last longer, and it will leave their organizations better prepared for whatever lies ahead.