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A Right Recruiting Newsletter, 12/2008
In our other enclosure, we shared the results from our employer survey on hiring plans for next year. However, there are some underlying trends that have been gathering strength over the last 10 years or so that, I believe, will become stronger in this downturn and inevitable recovery. These developments may have a profound affect on both employers and employees, especially in the professional segment of the market. From what I can tell, these trends affect every industry and all disciplines, from engineering to sales to HR to finance and others. Larger firms have begun to plan strategies to deal with these trends. However, they will affect companies of all sizes and industries in years to come. They may change the way you are compensated as an employee and will change the way you do your job. In this discussion, I may be saying some politically incorrect things. Please remember that these are observations and not value judgments on my part. Don’t shoot the messenger, please!
So far, unlike many other downturns, the bulk of the layoffs so far have been of people with 15 or more year’s experience. I have seen only a few people who’ve been laid off at the 5 or less year level. It would also appear that the more junior level who have been laid off seem to get many more interviews while the more senior people are still struggling. Some of this is natural, of course, since senior people make more money and are more obvious cost savings for companies in a layoff mode. However, from my perspective, I’ve never seen this much of a discrepancy between the two demographic segments. In past recessions, the professional market mirrored the philosophy of the general market in layoffs. The last hired was usually the first laid off, based on seniority. I think this is about to reverse. I’d like to explore why and then consider the ramifications of this trend.
Those who have gotten this newsletter before know that I always start my analysis with the premise that employment is a market and has supply and demand components. From a supply standpoint, there are less people in the more junior end of the bell curve, especially talented and ambitious people. Here are some thoughts as to why.
1) Baby boomers - they didn’t call it the baby boom for nothing. Let’s face it there are more senior people in the workforce because, frankly, there are more senior people in general.
2) Education - the public school system has gotten worse in most communities. The reasons why are not today’s topic. All I can say is that I graduated from Northeast High in Philadelphia in 1970. At that time, it was a top echelon public school where some grads went on to Ivy League schools. Sadly, the last stat I saw said that over 50% of the student body could not read anywhere near their grade level. A weaker secondary school system puts pressure on the university system. It’s my personal impression that the top 10% of most university graduates can compete with anyone in the world from any generation. Many of the rest have no idea what to do with life. And that doesn’t include the students that never finish and drift away entirely.
3) Societal Values - intended or not, for the last 20 years society has sent students an increasingly seductive message away from hard, or geeky, subjects towards such glamorous fields as law, finance or journalism, to name a few. That means that there are fewer people graduating each year with the analytical skills and math knowledge for a professional career that requires rigorous methods like engineering, marketing, quality or real science
Here is what this all means. There are not many junior people who stand out and who clearly want to excel. If a manager has a strong performer at the 2-3 year level on his staff, a manager will want to keep him or her on the payroll as long as possible. If a company has an opening to fill and a manager sees someone at the 2-3 year level who has been laid off, he will still fight other firms for that person. The supply of junior talent is very small. The ones who are good and motivated do indeed stand out in the crowd. Since the people who get this are generally people who are in manufacturing or technical firms, the junior ones in this population are to a certain extent, the cream of the crop. Candidly, something in your background or personality has warranted being put on our distribution list and made us want to stay in touch with you. For a variety of reasons, there are fewer talented people at the junior end of the demographic scale that we’ve had before.
The demand side is more interesting and more complex. I have pointed out in earlier Newsletters that the traditional level of required experience for most jobs is for someone with 2-5 years experience. That’s been true as long as I have been a recruiter. In fact, we used to be able to advertise directly for such people. We ran ads for YSA’s –young, sharp, aggressive. Good candidates at that level have the most employer friendly ratio of experience to cost. They’ve been trained by someone else but are still affordable. That’s one reason why they are sought after. They also have a pretty good upside. They have a good balance between Promotability and patience. In other words, they can be groomed for a higher job but at a pace dictated by the employer.
In other words, we have a small supply of candidates who are, ironically, the same ones who are normally in high demand. That explains why we almost have 2 separate professional markets, people with 1-5 years of experience and everyone else. If you have 20 years experience and you are making $95,000 and have been laid off, not only are their fewer jobs at that level available, there is more competition for those jobs. If you have 1 year of experience and are making $55,000, there is less likelihood that you will be laid off and, if you are laid off, more opportunities are available for you.
I think most senior people understand this. They may not like it but they understand it. However, things get murky when the senior person decides that, even though they have been making $95,000, they will work for less. After all, there must be a salary figure that will make them a better value for an employer than someone with 15 years less experience. I get calls like that all the time. It’s not rare for someone who has been out of work for a few months to talk about “taking a step back” in salary or responsibility. I call that “overhiring” for a job. Unfortunately, for most jobs overhiring rarely works and most good companies want no part of that dynamic. Here is why. After exploring why, I want to address what changes will need to occur over the next 5 or 10 years in the way companies are organized. But first, why doesn’t overhiring work? Here’s why –
1) Short term solution - most people’s salary is a reasonably accurate reflection of their worth to an employer. In other words, if you are making $95,000 in a normal economy you are probably worth $95,000 in a normal economy. Recessions are not normal economies but recessions are also not permanent. They are abnormal. So, hiring someone who is taking a step back will often lead to having to refill the job months or a year later when, in a recovering economy, jobs re-appear at the person’s true salary level. That is bad business.
2) Job content disconnect - many junior jobs are geared towards junior people for an organizational reason. Imagine a company that has a department composed of mid-level and senior people, all managing large projects. They may want to add someone with less experience because they want someone who will do the minor parts of major projects and be happy at that level of responsibility. A senior person taking a step back may quickly become bored in that role and lobby for deeper duties than the job requires. That is not what the company needs and will create friction.
3) Managerial insecurity - it may not be fair but it can be tough managing someone your father’s age. To some extent, it may be just a personal level of discomfort. A 35 year old recently promoted manager may not be secure enough to tell a 55 year old staff member that they need to come in on the weekend to finish a project, for example. Sometimes, it may be actual insecurity. That same manager may see the senior person as a potential threat and find reasons to avoid considering them for a role. Please remember, that I am not defending that attitude. I am acknowledging its existence. Sometimes, the senior candidate doesn’t help themselves though, which leads us to the last reason ...
4) The philosopher - sometimes managerial insecurity is actually generated by the senior person and not the manager. I’ve written about this before. The 55 year old ex-manager being hired to work for a 35 year old newly promoted manager can see themselves as “mentoring” their boss. This shows itself in many ways, all annoying and demeaning to the boss. I call them “war stories”. In every meeting, the senior person has a philosophical anecdote about how things used to be done 10 years ago or what he/she did when faced with a similar problem as a manager before. War stories usually have no relevance to the issue at hand but are often perceived as a subtle tactic to remind everyone involved of the teller’s prior important role. While the intentions may or may not be pure, the reception is often negative.
However, war stories are at least public. Another tactic is for the ex-manager to create a bond with his boss’s boss. After all, they are often of the same generation and have some life experiences in common. This can lead to a long conversation over beers about all the faults of the younger boss. But of course, only in a well meaning way.
Companies don’t like philosophers. If you are sincere in a desire to step back, remember to do the job for which you were hired. If you have ambitions to move up, do the job really well. Avoid the temptation to do your boss’s job for them. That tactic is usually more obvious than you think it is.
OK, here is our scenario so far. We will have a continuing disconnect in the employment market that will become visible this downturn. There will be an underlying, growing need for professional level talent. The group of more junior people who usually are the source of talent for growing companies is shrinking. At the same time, more senior people are being laid off and having a harder time finding work. Some of the reasons are related to financial issues, some organizational issues and some personal issues of behavior, on the part of both the manager and employee. There is an easy solution to one and more difficult solutions to the others.
The easy one is financial. If junior people remain a highly sought commodity, their salaries will increase. At some point they will increase to a level that makes the senior person competitive, maybe with a small cut. There should be a premium for experience in some jobs. Each company can determine what that premium is. Remember, if the employment market is indeed a market, it will eventually balance. I think you will see this trend become visible in 2009. On the macro level, this will take care of itself.
The other issues are murkier because they involve changes in both the way companies view employment and changes in individual behavior. First, maybe you are wondering why this is even important to a company. People are being laid off and hiring is weak. Why should a company worry when they have a choice of candidates? Let’s go over the long-term issues once again. They are easy to forget.
This country is still facing, and will continue to face a tremendous shortage of educated and skilled workers, especially for technology related firms. We don’t have enough talented people in the US and will soon have to find ways to replace the largest group of retirees in the history of the world. Demographically, these people are irreplaceable. Companies will be desperate to find staff for their professional jobs at the same time they are losing their baby boomers. No recession will stop that trend.
It is imperative for companies to address how they structure their organization, compensation and employment to keep baby boomers in the work force without creating an employment ceiling for the next generation. It won’t help to keep someone in place an extra 10 years if that just blocks off advancement for the rest of the staff. Our goal is to make use of all available talent at all levels in a way that makes everyone happy and feel productive. No problem, right? Here are some suggestions for your organization to explore.
1) Job content - when determining a job spec, make sure you are looking at the macro as well as micro picture. Don’t always use the default 2-5 year experience spec as your base. Be creative. Of course, you don’t want to hire a senior person for a boring job or pay more money than you need to pay. But, is there something you can do within your team, or in conjunction with another team, that will warrant increased job duties that may allow you to hire a more senior, easier to identify person?
Last year I had a client with this very problem. They created a new job classification as a Project Manager that allowed them to hire senior engineers who had more interest in matrix than department management. This eventually allowed them to merge two departments and, in fact, created cost savings, even though the salaries they created were higher than normal for them.
2) Managerial training - let’s minimize managerial insecurity by making sure our managers are not insecure. How do we do this? Training, active HR participation, feedback, etc. Often, we assume that once we promote someone to a manager role, they don’t need any more career guidance. In fact, that’s when they need it most.
3) Compensation - one of the immutable laws of compensation is that managers make more than their staff. Why?
4) Contracting/Consulting - if you see an attractive senior person that you can’t squeeze into your org chart, can they work as a consultant/contractor for you and be productive? That removes any issues related to career advancement and still allows work to be done that can be tailored for a senior person. My guess is that within the next few years we will see a less employer-based health care system, which should make this a more attractive alternative for a senior employee.
For this to work though, the dynamic of the employer-contractor relationship must change. Too many consultants see themselves as gypsies with no stake in the game and too many employers see the consultant as basically a second-class citizen. Behavioral changes may be necessary for both sides.
5) HR redefinition - in too many companies HR is considered an annoyance and not a partner, despite rhetoric to the contrary. The refrain I often hear is that HR always tells me why I can’t do something instead of how I can do what I want to do. HR can be a schizophrenic discipline. On the one hand, they are heavily involved in micro issues like benefit plan selection and management, legal issues on terminations, etc. On the other hand, HR is also heavily involved in strategic issues, specifically in deciding how a company is going to hire and promote its staff. Should HR start dividing itself more clearly into a planning side and an operational side? Should they both be under the same department?
In other words, should the same person who plans the company Christmas party also plan educational programs for the managers and do organizational analysis? HR just means too many different things in too many different companies. Can it move from a service-driven department to an actual contributor to company policy? I have thoughts on that by need to save them for another time.
6) No more philosophers - the senior contributor with the younger boss needs to recognize their place in the organization and accept it. While it’s great to have 30 years at doing something, that doesn’t mean you’ve done it as well as someone with 10 years experience. Don’t overvalue years of experience and undervalue other traits. I recently spoke to an accountant who had 25 years of experience. He had interviewed at a company where, he said, “I have more experience in accounting that the person to whom I would report was alive.” He was also stunned when he didn’t get hired for the job. His value system needs to change.
If you’ve gotten this far, I appreciate it and hope that we’ve given you a good perspective on both the more immediate market and long-term trends. If we do not communicate till January, I hope everyone has a good holiday season and a better than expected 2009.
Jeff
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