MARCH
2001
Bad
Economy: Good News for Employers?
IS
THERE A SILVER LINING inside the clouds of certain
economic slowdown and possible recession hanging over the
U.S. and other countries? Is a less overheated economy secretly
good news for employers desperately seeking employees? As
layoffs increase the pool of unemployed workers, will companies
have an easier time of hiring – now and in the future?
Is it therefore time to slow down from overnight job offers
and scale back those astronomical hiring bonuses?
The best
advice: Don’t assume anything yet.
In the
U.S., for example, some economists forecast that unemployment
may rise by as much as one percent during 2001, from last
year’s historic low of four percent. However, unemployment
will vary from industry to industry, from region to region
and from one occupational discipline to another. Moreover,
in many cases it will be short-lived.
And while
it is true that layoffs more than tripled in January from
last year’s monthly average of about 45,000, the U.S.
Labor Department also reports that new job creation during
the same month exceeded a quarter-million jobs – a net
gain of over 100,000 jobs.
The main
reason that there will be any increase in unemployment figures
at all is that many laid-off workers will lack the skills
to fill the new positions and/or will live in the wrong place
to take advantage of them. Thus some jobs will go begging,
for lack of people to fill them.
Of course,
employers tend to get nervous when economic trends aren’t
clear. For example, home sales are strong, while retail sales
are weak. The Fed lowers interest rates, but consumer confidence
drops. When the Dow goes up, NASDAQ goes down – and
vice versa. One survey says that the average worker wants
to stay put in 2001, while another says that record numbers
will change jobs. Congress may or may not enact the Bush tax
cut, which may or may not (a) stimulate the economy, (b) stimulate
the economy in time to do much good, (c) stimulate the economy
at the expense of debt reduction, or (d) all or none of the
above.
Given
those and other variables, many find it tough to make hiring
decisions with great gobs of enthusiasm – even when
vital position openings need to be filled. As president Tom
Silveri of the outplacement firm Drake Beam Morin told The
Wall Street Journal, employers today “have one foot
on the pedal and one foot on the brake.”
Getting
the Corporation’s Foot off the Brake
Here’s
the bottom line: There are not legions of highly qualified,
increasingly inexpensive job candidates out there who are
out of work and anxious to join your organization.
Virtually
all Sanford Rose Associates offices continue to report high
demand and fierce competition for highly qualified candidates.
Their observations are echoed by a new report from Hunt-Scanlon
Advisors, which predicts that last year’s 20-percent
growth in executive-search assignments will occur again this
year.
Demand
remains strong in such diverse functions as marketing, engineering,
knowledge management and general management. It can be argued
that, in times of corporate belt-tightening, it is more important
than ever to attract the very best talent for those critical
positions that can make or break a company’s performance.
Since leaders and visionaries are always in short supply,
don’t look for them in the unemployment line; they are
jealously guarded by their current employers and will need
to be wooed away by skilled search consultants bearing exceptional
offers from clients they represent. In a few super-hot industries,
hiring bonuses equal to first-year salary have become the
currency of the realm.
One trend
that economics can’t change is the relentless march
of Baby Boomers past the Age 50 milestone. By the year 2005,
your pool of workers to replace them will have shrunk eleven
percent from the supply in 1995. Unless new job creation grinds
to a halt, there will be more open positions chasing fewer
job candidates – and that’s happening right now.
Smart
employers will re-think their attitudes toward older, part-time
and/or virtual employees and will actively recruit alumni,
instead of banning them for life. Companies also will need
to address employee retention issues in much more creative
ways; what is the sense of the average manager changing employers
every 2.3 years? And when companies look outside for people,
they must come to terms with the fact that it’s still
a seller’s market for candidates – meaning that
prompt offers with competitive compensation packages are still
required.
The
Blessing and Curse of Instant Knowledge
During
the last recession of 1989-1992, layoffs were a lagging economic
indicator – with employers continuing to lay off workers
up to a year after the economy had reversed its course. Today,
the increased ability of all but the most dull-witted organizations
to process and interpret scads of data has led to almost instantaneous
employment decisions.
Thus,
if the Australian subsidiary has a poor February, this is
known at corporate headquarters by the second or third of
March and analyzed by sophisticated computer programs (was
it the economy, unexpected weather, expected seasonality,
interest rates, currency translation, sales gains by competitors
or what?). Headquarters then has the option to take immediate
corrective action – including reducing head count in
Australia.
Layoffs
hence have become a leading indicator in just one short decade.
The term “layoff” still means what it says in
factory circles; you can lay off a worker and then bring him
or her back when orders improve. Managers and professionals,
however, are rarely idled. They are terminated. Out of work,
they find other work. They aren’t waiting to be recalled.
So here’s
the rub: Fast on its feet, our hypothetical company terminates
53 salaried employees at the Australian subsidiary. Two months
later, the Australian business takes a dramatic turn for the
better. It’s time to get back to full strength, or at
least fighting weight (maybe 30 new hires instead of 53).
It will take longer to find the replacements (not to mention
train them) than it did to fire their predecessors.
No
One Size Fits All
The morbid
public fascination with job loss in the early months of 2001
is partly a reflection of its suddenness and partly a reflection
of the well-known corporate names involved – including
AOL Time Warner, Daimler-Chrysler, J. C. Penney and Xerox.
Yet there is a different story for each, not all of which
are related to the economy. For example, the elimination of
redundant jobs caused by the merger of AOL and Time Warner
would have occurred regardless of the economy.
In general,
the best maxim is “the more drastic the illness, the
more drastic the remedy.” Fortunately, the average company
today is not in financial peril; consequently, most do not
need to engage in widespread layoffs or cancel hiring decisions
– especially for critical position openings. Unless
sales have shriveled or the strategic plan has proved to be
a bust, it’s unlikely that normal employment patterns
need to be changed; they are difficult and time-consuming
to put back together.
Aggressive
hiring of the best and brightest during periods of economic
uncertainty may even pay two special dividends. One is the
opportunity to build market share at a time when weaker-willed
competitors are losing theirs. The other is the security of
knowing you are way ahead of the curve when the economy rebounds
and demand for people heats up.
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