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This is costly in any environment, but much more so in a slowdown. Talent – and the loss of it - is enormously expensive. That is particularly topical now.

Many businesses are facing a situation where culls are necessary. Many companies make the crucial mistake of not thinking structurally when they are making redundancies. This leads to imbalances of talent within organisations once the economy picks back up.

If you really have to make job cuts, thinking long term about how your business will operate is fundamental. You need to retain not just the best staff, but a good balance of skills.

If cuts are severe, bear in mind that you may need to invest in training for those who are left in order not to lose them too.

The second rule is not to cut too deep. Professional services firms are notorious for wielding axes during economic downturns – when they should be wielding scalpels.

For the sake of their staff, I hope the Big 4 have learnt their lessons from the last downturn.

Job culls in 2002 were a classic case of companies acting before thinking properly. Swathes of people were made redundant - only to be offered their jobs back within six months - having taken up to a year’s pay in severance package.

Even if you make the right amount of cuts, it’s important to retain your top talent during a downturn. Obviously, this is easier said than done - money is in shorter supply.

As companies become more reluctant to spend money, and benefits like bonuses become less spectacular, however, its inevitable that some employees become dissatisfied with their lot.

So it is crucial you focus your budget on retaining and rewarding your top talent.

Particularly in the current climate, competitive salaries, career development, and investment in your employees’ personal and academic progression will ultimately be more cost effective than having to keep replacing staff.

The best way to ensure your HR budget stretches as far as possible is not to rely on counter-offers to retain staff.

The vast majority of people who are bought back through counter offers are back on the jobs market again within six months.

Counter offers are expensive and often short term solutions. Buybacks have their place though; they are necessary when someone leaves a vital role with no cover for instance, but they are the HR equivalent of a bandage on a dirty wound.

A cost effective response to the sort of situations where counter offers become necessary is to extend notice periods for your key staff.

This may sound counter-intuitive in companies that have made a large number of redundancies, but if you have made the right amount of cuts, this will save you money in the end.

Notice periods still need to be kept in keeping with the role – around three to six months for most senior roles, and twelve months or more for C suite – but can protect the business and improve the transition process by leading to a less pressured re-hiring process.

Managing the exit process well can also save you money. Where possible, involving the leaving employee in the process of finding their replacement is advisable.

Progressive firms will work with the outgoing member of staff to ease the hiring process – in terms of referrals, interviewing and the handover of work – which will help ensure you get the right person for the job and smooth the transition.

In the bad times, retention of your best employees is even more important, and focusing what may be limited resources on them is a sound policy.

Take decisions based on what will be best for your business over the long term, but plan properly and have provisions in place to manage the exit process smoothly should the situation arise.

Failing to take the long view, will end up costing you more in both time and money. If you are short-sighted about your human resources, your business could be short lived.

Tom Bailey is principal consultant at GRS Risk Professional Services.

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