While some employers are considering hiring freezes or downsizings, others see steady demand for workers, especially highly skilled or high-level talent. Restructuring total rewards or increasing training may help employers keep their most valued workers when times are tough.
March 10, 2008
The nation's precarious economy seems to be having dissimilar effects on hiring. High-level and highly skilled workers remain in demand while some U.S. employers are beginning to think about hiring freezes and downsizings.
A survey conducted by New York consulting firm Mercer found that 33 percent of U.S. employers may implement hiring freezes or downsize their staffs due to the current economic slump.
In addition, according to Milwaukee-based Baird Equity Research, an international asset management firm, the rate at which the economy is adding jobs has slowed.
Manufacturing and construction employment has declined, according to Baird, which also reports that "forward-looking indicators like the Monster Employment Index and the Help Wanted Advertising Index, which both provide a measure of hiring intentions, indicate broader slowing in the labor market is likely."
Countering that outlook, the American Staffing Association's monthly report for February shows that demand for temporary and contract workers -- which often is an indicator of hiring trends -- has remained steady. The ASA Staffing Index has fluctuated between 98 and 99 since the first week of January. The baseline value was set at 100 in June 2006.
Executive recruitment, too, offers a more positive view. Confidence among recruiters increased in February as companies continued to search for top talent, according to ExecuNet's Recruiter Confidence Index, an indicator for the executive employment market.
According to ExecuNet's survey last month of 114 executive recruiters, 51 percent are confident or very confident the executive employment market will improve during the next six months -- up from 47 percent last month. During this period of time, the executive recruiting industry is expecting a 14 percent increase in assignments.
Jim Flanagan , executive vice president of HR for the King of Prussia, Pa.-based e-commerce outsource provider GSI Commerce, says his company will continue to hire and grow, but at a slightly slower clip.
"We need great talent," he says. "We'll probably trim back a little, make Q3 hires instead of Q1."
GSI assesses its position every quarter, he says. "If things get really bad, we'd consider cutting back hiring." But he sees no hiring freeze on the horizon.
Richard Fanelli, president of Fanelli McClain Design Studios, a commercial interior planning and design firm located in Fairfax, Va., says that his company is not hiring right now, but they're scouting.
"We have to have the workload to support new hires," he says. "But if I were to find the right person, I might hire them and then market harder to justify the hire."
But layoffs are definitely not in sight, says Fanelli. "We're not letting go of anybody. When you go into hire and fire mode you lose the loyalty of good employees because they don't feel secure."
Rather than extreme measures such as downsizing or across-the-board hiring freezes, Steve Gross, Mercer's broad-based performance and rewards consulting leader, recommends allocating incentives differently to focus more on high-performance/high-potential employees than on others who may show promise, but have yet to deliver.
"So you become more discriminating in how you give out rewards," he says.
"There's a lot of uncertainty out there," says Gross. "You want to maintain your high performers, but a pay freeze affects high performers and low performers."
Gross points out that an employer need not freeze all wages. "You can freeze the first 3.5 percent or 4 percent of everyone's salaries," he says, "so the highest performers don't get caught in the wage freeze."
What's more, says, Gross, this is a good time to think about total rewards -- cash, benefits, career development and environment -- and spend more time on succession planning and career pathing.
"Ask yourself: 'If I can't give money, what can I give?'" he says.
That way, he says, a company's high-potential employees will be less likely to feel the economic pinch because they'll have a good sense of the opportunities in store when the economic pendulum swings the other way.
"It's a good time to segment your workforce and get to know what your employees value," Gross says. "They may care more about flex-time than cash."
Jack Harrington, CEO of Boston-based Atlantic Associates, an IT staffing organization, recommends upgrading training during economic downturns -- an approach that may enable employers to retain people they value -- while also helping to reduce an employer's unemployment insurance premiums.
"Look for opportunities to invest in your good people," he advises. "There's always a high negative when you lay off. So, is there another place in the company for [talented employees who might otherwise lose their jobs]?" he asks. "If so you'll save money by transferring them instead of downsizing them."
That may not be an issue for the tech sector, however. Nancy Albertini, chairman of executive search firm Patterson Blackstone in Dallas, says there's no evidence the current economy is having any impact on the tech sector.
Albertini says she's been finding a continuing strong need for executive hires within tech companies and increases in salaries and bonuses.
For some companies, however, the economic slowdown in United States may be driving more jobs to India, according to a report in the Economic Times (India).
The report noted that Capgemini, Europe's largest consulting and computer services firm, has reduced hiring in the United States to "a bare minimum," increased offshoring in its U.S. contracts from 40 percent to 60 percent and is moving internal support services to India.
A Capgemini spokesperson told the Times that "we are anticipating the red flag to go up" in the United States, signaling a significant drop in demand for labor.
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