Why is Unemployment So High, and How to Emerge a Winner

Why is unemployment higher than it has been for decades and massive layoffs announced daily? Is something going on that is deeper than a recession? In past recessions the general reason for layoffs is twofold. The first reason is to use the recession as an excuse to remove the less-productive employees. Every organization has employees who perform marginally, but are not bad enough to discharge outright in normal times. The second reason is because customer demand for the products or services has declined and there is no need for workers who have nothing to do. The underlying assumption is that at some point customers will return and the workers will be re-employed as before. That’s the reason unemployment insurance (in the United States) is limited to a few weeks. The expectation is that workers will be brought back or rehired elsewhere in a short time.

On the other hand, recruiters and hiring managers still report that it is exceedingly difficult to find workers for certain key jobs which include computer-security experts, computer engineers, pharmacists, health workers, and even senior-level executives. The time it takes to fill open positions seems to have increased, and hiring managers frequently complain that they have to settle for “second best.”

Is there something we don’t understand going on?

Panic, Job Markets, and Emerging Work

I believe there are several factors influencing us. The first is simply panic. Corporate leaders are just reacting and playing the lemming game: They are thinking, “If one company is laying people off then I probably should be as well.” Despite market information or sales data, they view layoffs as an insurance policy against future shareholder complaints and against possible market downturns. They do not factor in employee morale or the effect such actions have on key workers, nor do they realize that by their actions they signal that things must be bad and thereby potentially influence customer behavior.

Most of us do not understand how deeply the job market is changing. We are in the midst of a global redefinition of what a job is and how it should be performed. The Internet and the virtual worlds it has made possible, combined with video technologies and virtual-presence capabilities means that thousands of traditional jobs are going to disappear permanently.

We will need thousands of people newly skilled in occupations that are being invented right now. Jobs such virtual community managers, collaboration experts, globally skilled sales consultants, and web designers with a mix of graphic language and human interface skills are just a sampling. No one knows what all of these jobs are, but we do know that many will be performed virtually. Many will be augmented with mobile devices and will require a blending of old skills with emerging ones.

One emerging example is in hospitals where doctors and nurses will be equipped with mobile, wireless information devices. These devices will read a barcode or RFID chip on a patient and get that person’s full medical history. Doctors can examine a patient virtually using remote sensors connected to this device and subsequently order drugs and start treatments virtually. These devices are already in use and are getting more sophisticated each year. Congress is about to focus on digital medical records, and this is a keystone in every discussion about national health care. These devices will eliminate many current jobs by reducing the need for record departments, accountants (the devices track all procedures and drugs and automatically generate invoices that can be directly sent to insurance companies) and a host of other occupations, but they will create many new jobs.

Every profession is the midst, whether they realize or not, of a similar transformation. Tools, technologies, processes, and traditional assumptions about how people work are changing at a very fast rate. This is the cause of many layoffs. Most employers are followers, not leaders, and rather than take a chance at defining the future, they are using the time offered them by the slow economy to wait and see what the trend becomes.

In many cases the layoffs are triggered by human resource and recruiting functions that very narrowly define jobs and lack imagination about how a traditional occupation might be transformed with training and a new focus. We set up expectations and define jobs based on yesterday’s needs.

Education and Learning Models

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Corporate training and recruiting functions have a lot to offer in these recessionary times. They can be showcasing the emerging jobs and educating management about which jobs are in demand and which are declining in interest. Job postings and a variety of analysts offer this kind of information. For occupations where demand is growing, the learning functions can concentrate on developing those skills. The best firms are building learning portals and guiding employees to explore and learn around areas of emerging need — even if specific jobs are not yet defined.

Successful firms accept that they have a responsibility and a business need to develop the people they need. Unfortunately most of us — or most of our employers, anyway — would rather spend money on search fees, agency fees, administrative overhead, and advertising rather than on finding the right balance between recruiting new people and intensively training those employees who have decent basic skills. After all, it is very hard to find people when the skills you may need are vague or not clearly defined. On the other hand, development programs can be much more general and strive to create an adaptable and flexible employee with the technical skills needed for 21st century success. Waiting for the school system or the government to do your job for you has never been a very good strategy.

As recruiters, we need to become coaches to our managers, as I have mentioned in previous columns. It is very difficult, I know, to convince a hiring manager that the kind of person he is looking for is better developed in-house than found externally. But I think it is to your credit if you can convince them. As a recruiter you need to develop a relationship with them that is good enough and strong enough that they will listen to you. In a slow economy, you can use the time to build the relationship and redefine your role as a talent adviser rather than just a recruiter.

I constantly argue for integrated staffing and development because I believe the two functions are inextricably intertwined. It is very difficult to do one without doing the other. If we are to look at recruiting as a process, we are going to have to incorporate development into our staffing thinking and staffing into our training thinking.

Whether this is done by merging departments or whether it is done simply through good collaboration doesn’t really matter. What is critical is that there is a dialogue between the two functions. If you work in a small company where there are no separate training and recruiting functions, then this becomes even easier to do.

Layoffs are unavoidable, but understanding why they are occurring and having a strategy to deal with them and with the demands that will face you as we recover from the recession will keep you sane, safe, and successful.

Kevin Wheeler is a globally known speaker, author, futurist, and consultant in talent management, human capital acquisition and learning & development. He has founded a number of organizations including the Future of Talent Institute, Global Learning Resources, Inc. and the Australasian Talent Conference, Ltd. He hosts Future of Talent Retreats in the U.S., Europe, and Australia. He writes frequently on LinkedIn, is a columnist for ERE.net, keynotes, and speaks at conferences and events globally, and advises firms on talent strategy. He has authored two books and hundreds of articles and white papers. He has a new book on recruiting that will be out in late summer of 2016. Prior to his current work, he had a 20+year corporate career in several San Francisco area tech and financial service firms. He has also been on the faculty of San Francisco State University and the University of San Francisco. He can be reached at kwheeler@futureoftalent.org.

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8 Comments on “Why is Unemployment So High, and How to Emerge a Winner

  1. Kevin, once again, your thoughtful insights and broad view of the world combine to offer clear guidance. Thank you.

    Growing talent from within and building stronger alignment between recruiting and training and development provides a competitive advantage. In most cases the cost of on-boarding an entry level associate is much less than a mid or upper level individual. In addition, the contextual knowledge existing associates bring to their new assignment can never be purchased nor transferred via some “Vulan mind-link”.

    The emerging jobs needed to address the new ways we work require some serious attention. Both in corporate experimentation and in the educational career prep track. This is a great opportunity for internships and collaborative partnerships with local schools, colleges and universities. Call your local institutions to discuss how best to align your needs with their curriculum.

    While your company may be faced with reductions in the workforce, keep an open mind to low cost-no cost opportunities to develop future workers with some on-the-job experiments and experience. In times like these, internships, and co-op jobs send a message of hope for those about to enter the workforce.

    Joseph P. Murphy
    Shaker Consulting Group
    Developers of the Virtual Job Tryout®

  2. Solving this dilemma involves changing the root cause of the problem. The answer is helping corporations and educational systems understand that the mechanical structure by which our business and enterprise operate suffocates the ability of an individual to contribute at their highest potential. For example: if Nurse A is doing her job and finds a way to do it more efficiently via mobile or blogging with her counterparts across the world, how much red-tape would she need to untangle before aligning her technological insight with her talent of informing the world? She, as a knowledge worker, should be able to say “I have a way of making the lives of our customers better and easier, using these tools.” A discussion will take place, people will brainstorm and quickly come up with a solution, implement and move on to developing, then a product “model” that supports each individuals gifts, skills and talents – like paying and taking time for a guitar lesson while at “work”….. what? Yes. …. that’s where we need to be. Creative talents stimulate analytical talents, motivate and breed thought connectivity.

  3. Good words Joe as always- no question that improving development is vital to better economic performance.

    However, Kevin’s question is a political one, and that’s a bit of a problem because people don’t like talking politics on this site. Back (way back) what we call politics were referred to as “Political Economy”, and the notion of talking about one without the other would have been impossible.

    Read Mish’s Global Economics Analyis blog or The Oil Drum, and after a few hours, you will have an answer to your questions Kevin.

    In one paragraph, here you go: We have global overcapacity in everything but healthcare and the energy complex. We have built our economy around cheap oil, which is going away for good because while there may be plenty to burn, there is only one atmosphere to burn it in. In our efforts to avoid the results of these facts, we have bankrupted the country on every level, and that has caused a global deflationary spiral to begin. Firms are laying off because the raw numbers are awful- look at shipping rates, rail rates, auto and housing production, energy use, confidence, and debt-to-equity and you will see that this is not a typical recession.

    But it’s not all gloom and doom- while we are bankrupt at the moment, we have vast untapped sources of wealth and answering the health and energy issues will create a far better, more sustainable world. It will be a rough ride for awhile and it will never be the same as it was, but there is plenty to look forward to on the other side.

    The really hard part will be the politics- so why not start talking about what business needs to do to foster the kind of politics needed to answer the challenge ?

  4. The president, this afternoon:

    “our most fundamental economic challenges — the crushing cost of health care, the inadequate state of so many of our schools, our dangerous dependence on foreign oil.”

  5. Obviously the politicians see no problem in the lack of opportunity for human beings, the essence by which our country was created. interesting. In an effort to create conversation – at what point will we quit blaming everything else and begin to create change for ourselves regardless of the politics or economic conditions? What will it take?

  6. Job weakness: Beyond layoffs
    Chris Isidore, CNNMoney.com senior writer
    Friday February 6, 2009, 8:47 am EST

    January was one of the worst months for layoffs ever, with nearly a quarter-million job-cut announcements grabbing headlines.

    But the real problem in the U.S. labor market today isn’t layoffs. It’s a hiring freeze that is gripping most work places – and has not gotten nearly as much attention as the job cuts.

    “The hiring rate has caved. That’s why the job market is as bad as it is,” said Mark Zandi, chief economist with Moody’s Economy.com. “Given this low hiring rate, unemployment would still rise even if layoffs were falling.”

    The government’s key employment report, released Friday morning, doesn’t detail hiring and job openings. It instead gives overall change in the number of workers on U.S. payrolls.

    It was another terrible report, with employers shaving 598,000 jobs off of U.S. payrolls, the biggest drop in 34 years. The unemployment rate climbed to 7.6%, which was a 16-year high. Both results were worse than economists’ forecasts.

    But since 2000, the Labor Department has also tracked hiring, job openings and layoffs. And the most recent readings on those statistics show that the level of hiring and job openings has actually tumbled more than layoffs have soared.

    Through November, the number of layoffs was up 17% from year-earlier levels. But the amount of workers who were hired during November was down 26%, and the number of job openings tumbled 30%.

    While layoffs are likely up from the November levels, the hit to hiring has also gotten much more severe, according to experts. And that means that once people do lose their job, it’s going to be even tougher to find a new one.

    The Conference Board’s tracking of online job listings shows a decline of more than 1 million listings in the last two months alone. That’s a 23% decline in postings since November. The weakness in job postings is widespread, with only two states, North Dakota and Wyoming, having fewer unemployed people than advertised job openings.

    During the last recession in 2001, there was not nearly as sharp a drop in hiring and job openings. In fact, the hiring and job opening rates, which compare new hires and openings to the overall number of workers, are both at their lowest level on record.

    And economists say that even if the number of layoffs peaks soon, the pace of hiring and job openings may remain soft for months to come.

    “The issue of hiring is often overlooked,” said Gad Levanon, senior economist for The Conference Board. “But it’s the key to the labor market. In the last recession, layoffs reached their peak in late 2001. But hiring didn’t reach its lowest level until 2003, and that’s when the job losses finally ended.”

    Andrew Reina, practice director for job placement firm Ajilon Finance Solutions, said hiring freezes are now the rule at most companies.

    “A lot of our clients are looking at hiring freezes, certainly in the short term, and most likely through the first half of this year,” he said.

    Economist Robert Brusca of FAO Economics added that hiring freezes are an easier way for many companies to reduce work forces than layoffs, since even in bad times people will leave companies on their own.

    And he said the hiring freezes won’t end until companies have some confidence that the economy and demand for their products are ready to turn around.

    “It’s pretty clear that fear is running the show right now,” he said.

  7. I’ve been saying for years that the problems associated with employment would virtually disappear if all the participants in our economy had a better understanding of the concept of value.

    As simply as I might say it, value is making someone’s life better and easier. Companies should be about doing this. So should employees. In the current state of things, neither really is.

    Employees pursue employment as if they are attempting to get something. “I’m looking for a job.” “I need to find a job.” “Where can I get a job?” These are the kinds of statements and questions associated with employment from an employee’s perspective. Most employees don’t really know how their job contributes to the value received by the company or its customers.

    The autoworker is suffering as a result of this misunderstanding of value. These workers have, for years, been paid to do a job, not to serve the company or its customers. Their pay is tied to some codified historical wage scales, not to anything actually associated with value delivered.

    Companies aren’t that much different. They are trying to find customers. Salesmen attempt to “get an order.” “We need more customers!” This, too, is too common a comment made by those who hire.

    When I ask companies to tell me what they do, I am bombarded with statements about their product. What I am asking, and what they should be telling me, is “How does your offering make your customer’s life better and easier.” “Why your product?” “Why me?” “Why now?” The answer gives me an expected outcome, the way that my life will be better and easier if I become a customer.

    How would this enhanced understanding of value correct virtually all employment problems?

    Both employer and employee would become more concerned with providing value than with getting something. No longer would an individual desiring to be aligned with an enterprise present himself to get something at all. She would come, rather, to offer an outcome, a value, the way that her participation with the enterprise would make it, and its customers’ lives, better and easier.

    When a prospective employee approaches a potential employer, the offer would be presented as the assurance of an outcome. The applicant, knowing his strengths and aspirations, and confident that the value of the company is aligned with his desire to be a part of it, would intentionally communicate “how” having him as a part of the team would impact the company and its customers. He would communicate exactly what he would you see himself doing to contribute to the cause. She could answer, “Why me?” “Why now?” She could describe the impact that would ‘automatically’ come to the company, or to its customers if she were part of our team.

    This would change the hiring decision. No longer would the hiring organization be making a decision to hire based on an opening in the corporate org chart. (Those are being eliminated in the tough economy as we speak.) Instead, the decision would be one tied inextricably to the impact promised. The question wouldn’t be, “Do we need another person?” It would be, “Do we need the impact this person will produce?”

    If applicants would better know themselves, and confidently communicated their ability to deliver valued outcomes, jobs would open up, even jobs that seemed not to exist.

    This is the Organic Business Model discussed in The Squaredime Letters.

  8. “Unfortunately most of us…would rather spend money on search fees, agency fees, administrative overhead, and advertising rather than on finding the right balance between recruiting new people and intensively training those employees who have decent basic skills. ”

    Kevin, I agree with you that the mindset of recruiting needs a reboot. While recruiters are overwhelmed with an onslaught of applicants, they DO need to find the right balance between ignoring most resumes and finding the skills and competencies that may be hidden in the resumes they receive. I published an article yesterday about the “black hole” of resume submissions(http://plasticskyscraper.wordpress.com/2009/03/10/apply-now-the-black-hole/), and my contention is that over-automation of the recruiting process benefits no one — except saving recruiters the time and effort of actually reading resumes. HR says they must focus on finding skilled (or trainable) people, but instead rely on keywords to determine an applicant’s potenntial fit in an organization. With the difficulty in finding qualified applicants it will be necessary to identify basic abilities & competencies and groom candidates to become the employees that are needed to fill the gap.

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