As Published in Business 2 Business, February 2010

Economic Rebound, Turnover Returns

By Ira S Wolfe, Success Performance Solutions

The American spirit — entrepreneurial, hard-working, innovative — was battered in 2009. Serious challenges remain. But without question, business is getting back to what has been called a “new normal” for many organizations. A more apt description may be a “new turmoil.”

With lingering high unemployment, there is an unwarranted expectation that employers will have a choice when it comes to selecting qualified workers. That will hardly be the case. There is already a bit of a frenzy around hiring. Many naïve and unsuspecting managers may envision a return to the way things were.  The reality will be that the “new normal” will behave significantly different. For companies whose growth depends on talent, that means an unprecedented “new turmoil” in recruiting, selection, and retention.  Don’t be lulled into complacency and over-cautiousness when you hear that unemployment will remain high, possibly through 2014.

In fact, Dr. John Sullivan, one of the world's leading thought leaders on strategic talent management and human resource practice, is “forecasting that 2010 will be a year with at least as much turmoil as 2009 … in 2010, the pace of literally everything will continue to increase, leading to 12 months of insane competition, endless labor churn, and boundless opportunity.

Unlike the economic recoveries in the past, we won’t see wholesale re-hiring of tens of thousands of people by a single company. In fact, only 5.8 million of the 25 million businesses in the United States have employees, and just 650,000 of those have at least 20 employees. Instead of seeing one company re-hire 10,000 laid-off employees as we did in the past, watch for 10,000 small businesses to hire one employee. New start-ups and small business will be the lifeblood of our future economy.

Small business hiring has already started. According to a recent CareerBuilder survey, twenty percent of employers plan to increase their number of full-time, permanent employees in 2010, while eleven percent of employers plan to add part-time employees.

I can confirm this trend. The bread-and-butter of my business is pre-employment and leadership assessment and business owners don’t call me when they’re not hiring and promoting. That certainly was the case twelve months extending well into the spring of 2009. But during the summer and fall, fortunes reversed themselves – capped by my best December in fifteen years of business. Based upon my experiences during the last half of 2009, I suspect these hiring estimates are low for small business.

While an uptick in hiring is good news for the economy, the same can’t be said for hiring and HR managers. Labor shortages will return with a vengeance. For many jobs, they never went away during the recession which only means more intense competition for skilled workers. Even as early as the second quarter of 2009, 47 percent of hiring managers cited under-qualified candidates as their most common hiring challenge – 44 percent of resumes employers receive are from unqualified candidates (2009 Edge Report). Many new jobs will require different skills than the ones we had in the past. With unemployment hovering around 10%, a lot of talented people are on the street these days. But there are plenty of job seekers who can't blame their misfortunes entirely on the bad economy. They are simply under-skilled and un-prepared. That will keep unemployment high but talent scarce.

The tricky part for many employers will be figuring out which ones were victims of a bad economy and which ones are trying to connect to the Internet with a typewriter. The recession lulled many employers into believing The Perfect Labor Storm was more fiction than fact. But for the past two years, we merely moved into the eye of the storm. The struggle to find qualified candidates will return with a vengeance in 2010 and get more intense throughout the decade.

Tired of being pawns in a game of mismanagement, many unemployed Americans won't return to traditional corporate jobs. Instead they will become independent contractors, free-agents, and free-lancers piecing together work to create the equivalent of full-time jobs. This type of career, once the emblazoned insignia of Gen X, now fits the lifestyle quirks of Baby Boomers and Gen Y too. This will only add to the pressure of employers who want to recruit highly skilled full time workers. Commitment and loyalty to one job — one company will be almost as challenging to find as the skills to do the work. In addition, Baby Boomers who no longer can or want to retire will reinvent themselves in second careers.

This turn of events will force managers to re-write not only their recruitment strategies but retention as well. In a recent survey twenty-eight percent of workers are dissatisfied or very dissatisfied with the career advancement opportunities provided by their current employers. This factor alone has near catastrophic implications for recruitment and retention. Employee turnover will jump dramatically, especially among specialized and highly skilled employees. Gen X, whose careers have been stalled by the gray ceiling, will jump ship rather than work in the shadows of the unable-or- unwilling -to-retire Baby Boomers.  Many employers will also push the doing-more-with-less theme too far. Employees, burned and stressed out, will quickly jump ship knowing that the job they are filling isn’t the only game in town anymore. Turnover will skyrocket for hourly employees in many sectors, most notably healthcare, technology, management, and sales.

According to CareerBuilder’s latest survey conducted in November 2009 nearly one-in-five workers (19 percent) reporting they plan to leave their current job in 2010 to find a new one. Nine percent said they plan to leave in 2011. 

Expect employee poaching to reach record levels as the economy recovers. While speaking to a group of small business owners in mid-January, one of the participants, the president of an engineering firm shared how his firm’s growth was being stalled by a lack of talent. In 2007 he determined that he would need to acquire a few competitors for their human capital. But the recession forced him to postpone his plans. Now positioned to grow again, it looks like he won’t have to buy his competitor out after all. The competitor’s employees have been applying to his job openings and he’s able to hand pick the best, leaving average performers behind. By mid-2011, I expect to see the recruitment of skilled workers to reach an intensity reminiscent of the dot-com years and 2005-2006.

Several other key factors will contribute to the return of turn and churn.

Twenty-six percent of workers are dissatisfied or very dissatisfied with training and learning opportunities provided by their current employers. Training and learning are generally the first things to get cut during a recession. Unfortunately they are also in the top three strategies for recruiting and retaining Gen X and Gen Y.

Employers who look toward the job outlook in their industry for direction will be deceived too. Twenty percent of workers said they plan to switch careers/fields in the next two years. To learn new skills, 12 percent of workers said they would head back to school to make themselves more marketable in the new year.

Signs over the past few months point to the healing of the U.S. economy, but an uptick in hiring may only open up recruiting wounds and turnover woes of the past.

So what’s ahead for 2010? When it comes to employee recruitment and retention, there is no business too big or small to fail. Brace yourself! Only the strong, the adaptive, the innovative will survive.

Download a pdf version of "What Jobs Won't Return."

About the author

As president of Success Performance Solutions, Ira S Wolfe helps organizations find and hire the right employees and identify high-potential leaders. He speaks nationwide on hiring, workforce trends, managing the generations in a presentation titled Geeks, Geezers, and Googlization. He is also the author of Perfect Labor Storm 2.0: Trends That Will Change the Way You Do Business.