By Jared Shelly
Scenario: TV news anchor: "And now for a financial report, let's go to Salvatore Christie on Wall Street. Sal?"
Christie: "Thanks Diane. The numbers are in, and boy do they look great! Unemployment has dropped to a paltry 5.6 percent this
morning. For the seventh month in a row, the U.S. economy added 300,000 or more jobs, on the strength of the housing, construction and financial markets.
Meanwhile, the Dow Jones Industrial Average broke another record yesterday.
Leaders at American companies seem excited about the future, and many are expanding, innovating and most importantly -- hiring.
Baby boomers who delayed retirement during the recession are finally financially ready to call it a career and enjoy those golden years.
Yes, America is back baby!
This is Salvatore Christie for Money News."
With that, Victor Nu, CEO of JAS Corp., muted his TV, lifted his tumbler of scotch to his mouth and took a generous gulp.
For the airplane parts manufacturing giant, things are not quite as rosy as that news report suggests. Sure, they're receiving more orders and signing more deals, but employees are suddenly quitting in droves. Most are getting new jobs while a few baby boomers are finally retiring after delaying it during the recession. Many of those
fleeing workers have had extensive training and possess deep knowledge of the company's complex building processes.
Take Craig Appel for example. The company's senior vice president of sales was instrumental in helping to land an exclusive deal to supply National Airlines with all its safety equipment and landing gear, but he quit after being aggressively wooed by an executive recruiter for a technology company. Or Stephen Yadan, a 28-year veteran of the manufacturing line that knew every process like the back of his hand, and frequently trained younger workers. After getting more and more frustrated with his increasing workload, he took a job with NLIB Co., a competitor.
Nu glanced back at the TV screen and saw a report about a factory worker who was nearly broke a year ago but with a new job he can now not only afford his mortgage and bills but also take his wife out to dinner each week.
Nu and the top brass at JAS Corp. thought they'd handled the recession properly. They carefully picked which employees were essential and laid off ones that were not. Then they forced those surviving employees to work harder --often doing the jobs of two or three people. While he'd never admit it in public, Nu thought they should've just been happy to have jobs during such a tumultuous period.
Now that the economy has turned around, JAS Corp. employees are testing the job market in unprecedented numbers. And why not? There are plenty of companies hiring and employees can search for jobs on their smartphones and e-mail potential employers while they're at work. Most importantly, many are disgruntled about how they've been treated over the last few years --and after receiving additional training and job experience, now is time to cash in.
With such a mass exodus, lots of valuable knowledge is seemingly walking right out of the JAS Corp. doors. Sure, the company can find replacements, but the job searches and extensive training for new hires is eating up revenues -- making it feel like recessionary times again.
The suddenly difficult environment has forced company leadership to postpone the development of new products, like a landing gear crank it hoped to roll out this year.
The same story is playing out at companies all over the world. The amount of talent walking out the door is mind blowing for companies and poaching from competitors is at an all-time high. Even Silicon Valley is feeling the pinch, as the largest tech companies in the world are engaging in a talent war of unprecedented proportions.
While companies with progressive human resource practices have garnered much more loyalty from workers, companies that treated their people poorly are seeing a deluge of talent, hampering innovation, delaying the release of new products and services and stifling the nation's gross
Analysis: While Americans are understandably wishing for a sharp increase in hiring and a full-scale economic recovery, companies had better watch out for the turnover tsunami that could follow. Economist Joel Narofff said such a hiring spike could finally happen if unemployment numbers dip to six percent and the housing and financial markets begin thriving. Such a scenario could lead to a power to shift -- from the employers to the employees.
Employee engagement has taken a nose dive since the recession, as those who didn't get fired were forced to work much harder. Nearly one in three (32 percent) U.S. workers is seriously considering leaving his or her job, according to a 2011 survey by HR consultancy Mercer. That's up from 23 percent in 2005. Meanwhile, another 21 percent are not looking to leave but view their employers unfavorably.
"People are saying, 'it's got to be better someplace else,' " said Gene Tange, president of consultancy Pearl HPS. "If a company treated people poorly and laid people off like disposable assets, they will experience disproportionate turnover when the economy turns around."
"Once that starts happening," he continued, "quality, revenue and earnings will go down."
Workers, it seems, are no longer loyal to their companies, but are instead loyal to the next rung in their career ladders.
"There is a pent-up desire to get to that next position," said Naroff. "Loyalty is not to the company anymore. Loyalty is to your career. Whoever lets you do your desired job, that's where you're gonna work."
The coming talent gap is starting to worry company leaders. In Lloyd's Risk Index 2011, senior leaders identified it as their second highest priority, while it had been their 22nd highest priority just two years earlier.
"This is absolutely top of mind," said Howard Mills, chief adviser to Deloitte's insurance practice. "It's been a rough couple years. Plus insurers, and other companies in all types of industries, are looking to hire away and poach from competitors. Many companies are giving serious thought to retention strategies."
Companies also find themselves in a catch-22 with regard to baby boomers. If the economy improves enough that boomers stop delaying retirement, then it will lead to an epic knowledge drain. If the boomers stick around (as they have during the recession) talented employees in positions underneath them will continue to be frustrated because they can't advance -- and high-potential employees will leave.
"When they don't see turnover at the top, the next generation of leadership cannot move into those jobs," said Mills. "They're under the 'gray cap.' "
Another demographic shift hurting the talent market is the sheer number of Millennials, people born between 1980 and 2000, entering the workforce. Experts estimate that this group will make up 50 percent of the workforce by 2020, and while they certainly have potential, they will not have much to offer in the way of experience.
Narofff doesn't believe that a turnover tsunami would drive the U.S. back into recession, but he said it will make a dramatic effect on businesses' bottom lines because they will lose their ability to be flexible, meet growing demands and innovate. They will instead be forced to spend time and money on job searches and training.
The insurance industry could be specifically affected by the talent shortage, as talented underwriters and actuaries could become hard to find, said Mills.
To prevent a talent shortage in the future, risk managers and human resources executives will have to get more creative in their retention packages, focusing on things like career advancement, telecommuting and stressing work/life balance, said Mills.
JARED SHELLY is senior editor/Web editor of Risk & Insurance®. He can be reached at email@example.com.
April 13, 2012
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