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A Right Recruiting Newsletter, 9/2008
As the unemployment rate ticks up, many managers and HR people expect it to become easier to find candidates for technical and professional level jobs. I think that is incorrect. That false perception may affect your ability to build and maintain your team in these interesting times. I don’t think it will be easier to find candidates and, in fact, it may get even harder to find certain types of people and not noticeably easier to find others. There are many cross-currents in any market and, to understand them, you sometimes have to live in the market, like a recruiter does.
On the macro side, you need to parse unemployment figures beyond the headline numbers. The business world in which we live, both you as a manager and me as a recruiter, revolves around the market for skilled professionals. These are almost exclusively people with college degrees and specific skills sets. As of last week, the national unemployment rate for people with a college degree was 2.5%. That is full employment. Don’t forget that a significant part of those who are unemployed either live in regions that don’t touch ours, like the Mid-West, or work in fields that don’t correlate well to the skill sets that you seek, like mortgage brokers. Those general unemployment numbers can easily become meaningless. How is a layoff in NYC of thousands of financial people going to help you find a design engineer or even a cost accountant? The only thing that can erode the local market for professionals is a series of local layoffs at manufacturing or technology companies. We have seen very few layoffs locally. Those that have occurred can probably best be described as tree-pruning. Nothing like 2001-2003 in IT and telecomm.
An analysis of the macro numbers tells us that the market is still tight for the people that populate our business universe. While there are less companies hiring than 2 years ago, there are still enough companies out there trying to upgrade their staffs to make it a competitive market. It helps that the candidate you want to hire may have only had 3 interviews instead of 6, but I don’t think it changes things in your favor dramatically.
Most of our clients are either technology firms or manufacturing firms. You probably know that, despite the common perception that manufacturing is dying, last year the US manufactured more goods than at any time in it’s history and will continue to do so again. Industries that are considered weak are, upon examination, not as weak as they appear. For all the wailing and teeth gnashing about the auto industry, a very high percentage of jobs eliminated by the Big 3 in Michigan have been replaced by foreign auto companies with significant plants and presence in the south. Some regions have a skill supply surplus and some a supply shortage, even in an industry that many consider decimated. When you hear someone say that jobs don’t exist in their industry, they often mean that a job doesn’t exist that lies within 20 miles of their home that will pay them an equal or higher amount than their last job. Those are two different statements.
On the micro side, we have empirical and anecdotal evidence that supports our view that the professional labor market here in our region has not loosened to any great extent, and may tighten soon. I will share with you some things that we have seen and heard over the last few months, with our last data point likely to be the one that gives you the most problems as a manager.
Please keep in mind that, when I speak of technical professional employment, I use technical in a broad sense. I don’t just mean engineers. I include accountants, marketing and some sales people in the definition. These are the type of disciplines in which there are important but nuanced differences in the components of different jobs. For example, an engineer who has designed machinery in front of a CAD terminal for 10 years is starting from scratch as a Maintenance Engineer tomorrow. An accountant with 5 years in tax accounting has a fresh-grad transition to a job in cost accounting. For our purposes, we are speaking of a specific type of professional employee.
One thing we’ve seen and have mentioned before, is that every year for the past 15 years fewer and fewer people go into these fields. There are fewer engineers graduating with bachelors degrees every year, at least ones that don’t have immigrancy restrictions on their employment. The drop-off in accounting is similar. Despite the market, a shrinking pool of candidates with the basic skill sets that you seek will limit your ability to hire talent. Supply and demand rules any market.
The obvious question is, why is the pool shrinking? I think there are a primary and a secondary answer. The primary reason is obvious. Those are difficult fields to study and master. Over the last 5 years, I’ve seen about a dozen of my friend’s children begin college. All but one started in a rigorous program, either engineering, science or accounting. Of them, ALL eventually moved on to other, simpler majors: journalism, pre-law, education, etc. Hey, I know when I was 20 the idea of an easier major and more time to enjoy myself sounded great too. I don’t blame the kids – I blame the schools. The answer is not the make the engineering/accounting/science curriculum easier. The answer is to make the other disciplines tougher. But that’s a topic for another newsletter.
There is a secondary factor to the shrinking pool of talent in our world. I call it the “LA Law” factor. Some of you may remember the LA Law TV show that presented this incredibly glamorous and sexy life shared by all lawyers. It showed none of the debt from college, the grinding hours or anything remotely like reality. It made a media created promise to an impressionable audience that, yes, this is actually what practicing law is like.
Let’s go a little farther back to Lou Grant, another TV show focused on journalists, an extension of “All the President’s Men”. It was, of course, another skewed portrayal, this time of journalism - everyone was a dedicated saint doing good work for society. They all drove nice cars with cool offices doing important work making things better and uncovering evil. No one at that paper seemed to have to work till 11 PM covering a boring school board meeting while making an income that required them to eat egg noodles for dinner.
Look, let’s face it, not only is the technical training hard work, these jobs are just not considered sexy choices. An engineer who designs a useful new device that people actually want and need is a nerd, but a lawyer or a journalist is out there daily fighting for “the people”. If, for the last 10-20 years, we have told every high-school kid that engineers and accountants are nerds and geeks, why are we surprised that so few of them are willing to work in those fields? Every signal we have sent to those about to go into college is that they should pursue other, more glamorous fields. Couple that with the rigorous curriculum and you have a general scarcity of people with less than 10 years experience as technical professionals.
Here is the situation as I see it - you manage a group of professionals that is needed by your employer. For the foreseeable future, it will get tougher and tougher to staff your area, for reason listed above. Other anecdotal evidence is surfacing that will increase the degree of difficulty in recruiting for your team in the future.
In a newsletter a few years ago, when oil prices were beginning to rise, I warned of the impending effect that would have on engineering and manufacturing related employment. It reminded me of the late 70’s, the last time engineering was a glamorous profession. All the solutions, whether alternative fuel or increased drilling, require increased investment in technology. I predicted that a rise in energy prices would tighten the technical labor market. Two anecdotes from the summer confirm that view.
We recently placed a candidate at a client. He is a fresh-grad BSME who had some co-op related experience in design. Good co-ops but nothing earthshaking. He is from our region and wanted to stay local. My client interviewed him and wanted to extend him an offer. In speaking with him about that, he let me know that he had an offer on the table but did not want to tell me about it because he wasn’t going to take it and didn’t want to spook my client. It was an extraordinary offer and he knew he couldn’t match it locally. Here are the numbers: a BSME with 2 non-related co-ops had an offer for $67,000 from a company in Houston that supplies equipment to the energy industry. How does that fit in your companies wage scale for a fresh grad? He didn’t want to move so he accepted less money to stay locally. However, for every person like him, there is another who would move, lessening the candidate pool for your jobs in the future. Unless you are of a certain age, you probably consider pharma the “industry-of-choice” with deep pockets. That is not correct. No industry pays as much or hires as many engineers as the energy sector. That has a trickle down affect nationally, as this story and the next demonstrate.
I have a contact I’ve known for over 20 years who teaches at Drexel. I have known him both as a candidate and hiring manager, and we stay in touch regularly. He recently surveyed the graduating seniors in one of his classes about their job offers. He expected most to be going into electronics, hardware or software design. Surprisingly, out of 20+ students, almost all were going to be working in power related capacities. A handful were being hired to manage documentation on nuclear power plants being refurbished, most of the others were going to work for A&E firms like Fluor working as electrical engineers on large capital projects for refineries. Very few were staying in the region. Once again, less people for your staff, both now and in the future.
This last data point is the one that may the most problematic for you because it will come from within your company. As part of our business, I track the amount of my ad response from different media as well as the amount of resumes we pull from websites in a database maximizing project. I can honestly say I have seen no increase in ad response or resume posting in those disciplines that we’ve defined as technical professions.
As a comparison point, however, I compared two positions for which we recently advertised. Both paid about the same, one was for an Engineering Manager and the other a VP of HR. The Engineering Manager job drew about 25 responses, of which 5 had relevance. That’s about normal. The VP of HR job drew over 300 resumes and every person from that group complained about how poor the market was for their skills. Of course, in our conversations it became clear that they also made an incorrect logic leap and believed that all markets were weak; engineering, accounting etc., just like HR. As we’ve seen above, that is not the case for reasons that are understandable. Unfortunately though, perceptions can become reality and, when you are trying to hire someone for your group, be ready to be told that you can’t pay a lot because “there are lots of people looking”. Be ready to have to fight through a group of unqualified people who have the word engineer or accountant on the resume because, “there are lots of people out of work”. This could be a challenging quarter or two for you as a manager due to false perceptions and incorrect conclusions about the employment market as it affects your world.
And let’s not talk about how these false assumptions might affect your next review. Ouch.
Thanks for reading this far and please, don’t forget Right Recruiting for all your employment needs.
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