Any business leader that thinks recession means staff will be so grateful for job security that keeping them happy can be ignored, needs to think again. Cost-cutting may have leapt to the top of the business agenda, but paring back plans to nurture and retain talented people would be a false economy. In fact, according to some, a downturn makes it even more vital to hang on to your star performers, since they are best equipped to help you ride out the tough times and hit the ground running when things pick up.

“People often say when the bad times hit, the first thing to go are staff benefits, but although that might save costs in the short term, it would be a mistake,” says Tom Nixon, co-founder of social media consultancy Nixon McInnes.

“Although people might stay in their jobs in an uncertain market, that does not mean their performance will stay the same. If anything, it is more important in tough times to treat your staff well, make sure they are kept informed of any changes and keep them on side so they are working hard to help the company get through.”

In some organisations there is an assumption that they can get by if a few people leave, as the reduction in staff costs helps trim operating costs, says Alistair Russell, development director of IT leaders’ forum CIO Connect, who has worked with many businesses on staff retention initiatives. “I would class that approach as immature and lacking in insight. It is now well understood that what makes the difference between a high-performing and an average organisation is the quality of its leadership and people. You need teams that really enjoy doing their best for the organisation.”

But ­ reassuringly for CIOs facing budget cuts ­ the key to retaining talented staff is not remuneration. “You just need to pay people enough,” says Russell. “Money is important but it is not a motivator. People will walk if they do not think you are rewarding them fairly, but you need not pay over the odds,” he says.

So, if money does not keep people happy, what does? “Holding on to great people is all about culture and style,” says Russell. “One thing that works is giving them a sense of future. You need to make sure people have interesting and challenging assignments, but also that they can see similarly interesting work coming up in the future, and a suitable career path within the organisation.”

Successful IT leaders increasingly understand this, he says, and within large enterprises there is a growing recognition that you need an overarching talent management strategy and process to do it effectively. “I do not think you can do it informally, particularly in large businesses. Many have paid lip service to managing talent and put vague processes in place, but not enough are using these methods strategically. You need to work very hard on competency frameworks, as well as putting in place explicit processes for performance management and staff development,” he says.

This approach is already evident at the large accountancy and IT consulting firms, as well as many companies in the high-tech sector. They are often best equipped to offer talented IT staff rewarding work and a good career structure.

Barry Hoffman, UK HR director for IT services and solutions provider Computacenter, says: “We maintain an active programme of education and qualification for our technical staff, often aligned to SFIA [the government’s Skills Framework for the Information Age]. We want our staff to have careers, not just jobs. The key is in operating a talent strategy that is inclusive rather than elitist and having clearly identified development paths for different types of staff. We also operate a system of job families and levels through which staff can progress.”

The story is similar at telecoms service provider Colt. Its chief information officer (CIO) Mark Leonard says: “We have a mix of measures to ensure we retain our best people. This includes intrinsic factors such as interesting and varied work, a clear career development programme, the chance to work within a talented team, strong leadership and management practices and a good work-life balance.”

These are complemented with a range of rewards and recognition programmes and a talent management strategy based around a set of “high potential” definitions, which are used to forecast the skills likely to be needed in future. Colt has also aligned its career structure for IT staff with the British Computer Society’s SFIAPlus framework, which “gives people up-to-date, industry standard skills relevant to our business needs,” says Leonard. “Keeping our employees’ skills up-to-date is a key part of their career development.”

But of course, these are all high-tech firms with clear career paths for technically-focused IT staff. The challenge of offering rewarding work and a clear career structure, particularly for technical people, is more difficult for organisations with smaller IT departments or those with limited opportunities to work on exciting projects, particularly as budgets dwindle. “In such cases, rather than agonise over career paths for your deep techies, I think you have to work with people to enrich the job they do,” says business consultant Rohit Talwar.

Talwar does not agree that implementing more processes is the answer. “People make talent management seem about as interesting as cleaning out the dishwasher pipes. In a world where we’re becoming more cost conscious, we have to move away from heavy process and towards self-service solutions. If we want to keep the best talent then we have to get much smarter about how we do it ­ and not just overload the existing management with more procedure and process,” he says.

More lateral approaches to staff retention are needed, says Talwar. “The opportunity to work on exciting, innovative IT projects might be limited over the next couple of years as people retrench. But there are other things you can do. Google, for example, has a range of creative benefits, such as giving staff a certain number of hours off a month to work on anything they want to,” he says.

Allowing staff to participate in charitable or educational projects, or entering events such as the Times Leadership Challenge, where teams from different organisations compete on various worthwhile projects, can re-invigorate staff, he suggests. “I met a woman from one of the winning teams on a plane recently, on her way back from a village in Malawi. The finalists had been sent there to build accommodation for teachers, an orphanage and a road in a game park. She was motivated about her company. I think giving people those kinds of opportunities outside the workplace ­ things that enrich what they do ­ will grow in importance,” says Talwar.

Other creative measures might include Google’s employee appreciation days, for example, where staff are pampered with massages or cakes to make them feel their employer values them. Or even giving employees the chance to run their own business sidelines during working hours, which Talwar says is becoming more common.

“In IT especially, people often have a web project they are building and running in their spare time. And I am seeing increasing tolerance and accommodation of this from employers,” he says.

Helping employees improve their work-life balance, through initiatives such as flexible or remote working, is another way you can hang on to them.

“At NixonMcInnes we have no fixed working hours. Everyone comes and goes according to their own schedule, which means they can fit work around their lives.

A lot of techies do their best work at 3am. Allowing people to have the flexibility to do the best work they can is really important. And they will be less likely to leave for another firm where things are more rigid,” says. Nixon

Another way to keep your best people is to allow them to use the technologies that make them most productive, which ­ particularly in the case of the younger generation ­ includes social networking tools and web applications. And when it comes to creating a fun working culture and a great work-life balance that makes staff want to stay, few are as creative as startups. Bath-based events organiser Carsonified, for example, gives all its employees an Apple iPhone and every Friday off.

Jeff Welstead, global director of human resources at another growing high-tech startup, voice-to-text service SpinVox, says: “Flexible benefits are hugely important to IT staff. We find our technical teams are often motivated by intellectual challenges, training and development, working alongside bright colleagues and being able to work in an environment free from politics and bureaucracy. When everyone feels essential, excited and motivated, there is a buzz that permeates everything we do.”

But how radical can more established organisations be? There is much that could be done, but Talwar is not sure the will is there yet. “Startups can offer everyone a four-day working week, for example, because they have less history and politics. If you want to introduce something radical in a startup, you do not have to argue with everyone. But the bulk of IT leaders who have ideas about what they would like to do are not sure how to fight City Hall on it,” he says.

And while it is clear many of the creative retention measures around improving work-life balance and working culture are emanating from the high-tech industry, many CIOs in more traditional businesses are unwilling to fight the battle on behalf of the whole organisation.

“Anything that sounds new or different instantly makes senior management think it is more expensive,” says Talwar. But the message is clear for those brave enough to shout about it: “A lot of these measures that increase staff satisfaction and retention cost little or nothing.”