Consider the following:
- Monster.com, the largest online job board, has more than 20 million registered users; on a typical Monday afternoon from noon to 4 p.m., six million people are conducting job searches.
- In a recent survey of employees by WetFeet.com, more than one-third of the employees polled said they are very happy in their current job; these same employees also said they are interested in finding out about other job opportunities and would be willing to move within six months.
- In a survey of MBA students worldwide conducted by PricewaterhouseCoopers, students said what they wanted most out of their first job was a good reference for their future career. In the same survey, only 20% of those polled said they expected to stay with their first employer more than five years.
- General Electric last year announced that from now on, half of their new hires would be people the company had already employed as interns, co-ops or workstudy students.
- In April 2001 employers said they expected to hire 19% more college graduates than the year before; by September 15, they expected to hire 20% fewer graduates.
What all this points to, says Peter Cappelli, director of Wharton's Center for Human Resources, is the emergence of a dramatically different labor market that is changing not just the way people are hired and fired, but also how they view their jobs, their employers and their careers.
Speaking at a Nov. 19 executive education forum on Managing in Tough Times: Perspectives on Leadership and Change, Cappelli told executives in human resources and leadership development that changes in the labor market are taking place under conditions managers have never before faced the need to downsize juxtaposed with the increasingly difficult task of recruiting new employees and retaining those who are already top performers. All this under the cloud of a now official recession and the events of September 11.
For those of us who study management, Cappelli says, it is a unique convergence of challenges.
The Rank and Yank Model
Chief among those challenges is talent management - a recognition that the best people in an organization have a significant impact on that organization's success. To put this issue in perspective, Cappelli asked his audience to focus on the worst employee they have, and then focus on their best employee. How much more valuable to the organization is the best employee vs. the worst employee, he asked.
The typical response, Cappelli says, is five to ten times better. And when you look at jobs where you can easily measure productivity such as the amount of error-free code produced by computer programmers the best programmer has been shown to be 22 times more effective than the average programmer.
Now consider how much the best employee is paid vs. the worst employee. The typical response is about 10-15% more. In other words, the performance differences are orders of magnitude bigger than the pay difference.
Why does this matter? The ability of organizations to hire away your star workers has increased significantly in the last few years, says Cappelli. If somebody can come along and figure out who your best employees are, they could double their pay and still make out like bandits. So being able to find good people and keep them is a new phenomenon.
A brief word about those worst performers: what to do about them? In Jack Welch's latest book, Jack: Straight from the Gut, the former head of GE differentiates between the top 20% of employees, the bottom 10% and the middle 70%. Those in the bottom 10% get pushed out, an approach known in consulting circles as the rank and yank model. This really changes organizations, Cappelli points out. It says that there is something about the worst employees that would be so difficult to correct that it's not worth making the effort & Ranking is an evolutionary system designed to make the company work better. But not without risk, Cappelli adds, citing Ford Motor Co., whose attempts earlier this year to enforce rankings resulted in age discrimination suits, among other complaints, before the system was finally abandoned.
Back to the best employees: How do you keep them? According to the WetFeet.com survey mentioned earlier, even employees who are happy in their jobs are willing to be enticed elsewhere given the proper incentives. These employees, says Cappelli, are called passive applicants people who could be lured to a new company if that company takes the initiative in finding them.
With online recruiting, how easy it is now to do that. The 20 million people plugged into monster.com make up 15% of the U.S. workforce. Peak job searching time is from noon to 4 p.m. on Mondays (after the morning meetings) and job seeking is currently the second most popular activity on the Internet.
But online recruiting is more than just posting, or responding to, a job listing. Cappelli points to Cisco Systems, a no-hold-barred master at both keeping its talent and hiring talent away from others. For example, the company runs contests on its website seeking input from outsiders in solving a particular problem in the area of, say, engineering. That helps the company identify good engineers outside the company and also allows Cisco to start flashing banner ads asking interested engineers to apply for jobs. Once an applicant fills out a job profile, that person is put in touch with an employee at Cisco in the same job category. The employee contacts the applicant. It's called Making a Friend at Cisco, says Cappelli. If the applicant is hired, the friend gets a bonus.
Cisco, it should be added, approaches the task at hand with a sense of humor. An employee of another company who is filling out a job profile for Cisco need not worry if his or her boss suddenly shows up. The employee can quickly click on a button labeled oh, no! my boss is coming and be transported to a page entitled Seven Habits of a Successful Employee. Scroll down and there is a list of gift ideas for boss and colleagues.
It's not just jobs that are peddled on the web, but job information as well. Take Vault.com, a web site that sells information to job seekers about what it is like to work in a particular company. Vault.com's information is based on interviews with company employees. Those interested in a particular firm can buy that information, and they can also visit message boards where current employees post their own opinions of the workplace. Do you think these boards attract your average well-balanced employee? Cappelli asks. Hardly.
The point is, the company no longer controls the information that is out there, says Cappelli. Company recruiters used to be able to direct recruiting by deciding how to pitch the company to job applicants. Now someone else is shaping that pitch.
So what are recruiters to do? One answer is to get more sophisticated about the way they do their job.
We Cheat Death
During the last 20 years, recruitment In most organizations was not a hard task, says Cappelli. The company merely had to hint that it was thinking about hiring, and job applications poured in. That's no longer true. Since about 1998, companies have realized that recruiting deserves not just more attention, but more creative thinking.
Consider the following facts: This past year, half of the college graduates made commitments to employers at the beginning of their senior year; MBA recruiting now starts in the first year of the two-year program; Accenture has begun co-op and internship programs in the sophomore year of college; the number of internships and co-op programs in high schools jumped dramatically between 1997 and 2000; UPS is making pitches about job opportunities in junior high schools.
The reason GE and other companies now focus heavily on their internship and co-op programs, says Cappelli, is that they have already worked with these employees and more importantly, these employees have worked with them. Someone who is already familiar with the company is less likely to leave shortly after signing on. The result is less turnover.
But the real challenge for recruiters these days is understanding the importance of marketing, especially on the web. Statistics show that one in five people who apply for a job at a particular company do so because of that company's product market ads. IBM is especially good at this, says Cappelli. They generate ads that don't mention the products at all but talk about innovation, creativity, being future-oriented. People see the ads, think they are neat, go to the web site and apply for the job.
What we are moving toward is a model of thinking about hiring as an employee value proposition, says Cappelli. Look at it this way. Suppose, he asks, you had to sell your job in a competitive market, knowing that there are a number of other firms out there trying to hire the same people you want. What could you say to persuade these people to come work for you? What, for example, could you say about what it is like to work for your company?
Some companies have already incorporated this question in their recruitment ads. McKinsey, for example, basically tells employees that they will have to work very hard and that what they will get back is experience working with the cutting edge of the U.S. economy, says Cappelli. Amgen has a motto in their employee value proposition that says we cheat death. In other words, employees who work here will be creating drugs that keep people alive who would otherwise be dead. The Booz Allen website has a video description of a day in the life of an entry level consultant. And some companies announce that new hires will never have to work with a team member who isn't carrying his or her weight.
Trying to determine how to sell a company to future employees is a real wakeup call to recruiters, Cappelli says. It requires them to think like marketers.
What all this means, says Cappelli, is that it's fairly easy for companies out here to find your good employees. It's also easy for job applicants to find out information about a particular company that the company itself doesn't provide. There is a sense that the labor markets have opened up. When that happens, and when people no longer expect careers inside the same organization forever, it begins to change the way they behave. Both talent management and online recruiting add to these new behaviors. The next generation of workers is the first group to experience this.
The Emerging Workforce: What's In It for Me?
The question then becomes, just who is this next generation of workers? According to the study cited earlier of MBA students in industrialized countries (including the U.S.), the most important attribute of a new job for these workers is that it will provide a good reference for their future career. The second most coveted attribute is agreement with the company's values, including career/personal life balance, followed by likeable, inspiring colleagues (third) and competitive salary (fourth).
Is this new generation really different from other generations, Cappelli asks. The answer is yes, and no. The sharpest change in attitude among American workers occurs in people born before World War II vs. people born after World War II. People born after the war have a dramatically lower sense of commitment, of community, of involvement, and a much greater sense of the importance of individualism and keeping their options open. It's the baby boom generation moving forward. But if you look at people born in the 1970s and 1980s who are now entering the work force, they are not that different from the baby boomers. It's the baby boomers who are truly different from the generation that came before them.
The real issue for the emerging group of new workers is their view of the market. They have seen their parents going through downsizing, restructuring, all sorts of cutbacks, so they don't have a particularly pretty picture of corporate loyalty, Cappelli says. They don't expect it. Their attitude is, I had better take care of myself.
This new generation also seems to be more willing to take risks. It is no longer such a black mark to go with a company that failed, whereas 20 years ago it was something you buried on your resume. Now people say, oh, a failed start-up. That's interesting. Maybe he or she learned something, says Cappelli.
And finally, these young people are focusing on building careers across jobs, which means they really want good performance management, Cappelli notes. They want someone to tell them what is expected of them, how it will be measured, and what they will get for a job done well, not necessarily in terms of salary but perhaps in terms of experience or some sort of credential. They want all this because they are trying to build a career. They don't anticipate being at a particular company forever and they want to make the most out of their time there before they move on.
What does this mean for the companies who are hiring these workers, Cappelli asks. It means that companies are paying much more attention to first-level management. For the last two decades, companies could get away with poorly-trained first-level supervisors, Cappelli says. People were promoted on the basis of seniority, not on how well they could manage. And unless a company was sued, it didn't see the costs of this. Because there weren't a lot of jobs out there, employees tended to stay where they were.
When the labor market tightened up at the end of the 1990s, suddenly first-level management becomes crucial, Cappelli says. More attention is paid to doing better performance reviews, conducting them in ways that are more objective. It's the kind of feedback employees should have been offered all along from their supervisors.
Cappelli offered several other observations to his audience:
- In a survey of U.S. companies done two years ago, 63% of the companies said they were laying off employees in one part of the organization even as they were hiring in another part. Before the economy began its downturn, more than half of the companies in the U.S. were having layoffs, Cappelli says. It doesn't mean they were shrinking. It means they were getting out of certain businesses and into others.
- The average college student takes six years to complete his or her college education. At Division One colleges and universities in particular, only 60% of the students graduate within five years.
The shortage of technical workers in such fields as engineering, software and IT is based on an imbalance between supply and demand that is related to the length of time it takes to get degrees in these areas. In 1991, for example, with a recession and a downturn in the IT area, many companies decided to back off this function as a competency and to outsource it instead. Jobs began to dry up and college students no longer enrolled in IT programs. By 1995-96, IT workers were therefore in short supply - just when the market began to take off. Now, Cappelli says, IT programs are booming once again. In four years, he asks, will we begin to see an oversupply of these workers? The answer depends in part on the health of the technology sector.