So Where Do We Go From Here?
By Jim Schaffer
August 2008
OK, so we’re facing one of the toughest markets most of us have ever seen. What we once thought was a recession-proof industry has been impacted now for more than a year in all three of its major sectors, new home construction, remodeling, and retail DIY. Every day we are confronted with new headlines that underscore what we know already…that times are tough.
But have we considered the realities of the situation we’re in? Have we taken a look beyond the headlines to see what’s really happening in our business economy and more specifically, in our industry? We’ve taken some pretty hard hits – retail sales declines, fuel cost increases, and commodity price changes to name but a few – and yet most of us are still in business! Sure, the bottom line has been impacted, but in most cases, the fact is that well-run businesses are surviving this downturn. And, despite forecasts of continuing economic malaise, we’re even hearing that certain sectors of the industry are beginning to turn toward the positive once again!
From all that we have seen and heard, the businesses that are best weathering the storm have several common points of focus. First, they recognize that they must maintain a satisfactory gross profit margin in the face of rapidly rising raw material and transportation costs, and they take action accordingly. Second, they know that the only way to grow their businesses in a declining market is to maintain an exceptional level of customer service while aggressively pursuing market share. And third, they recognize that the human resource asset is still the most valuable and volatile one they possess and they take the prerequisite steps to build and protect it.
While the first two points are certainly critical, let’s direct our attention today to the human resource equation, our area of expertise at Schaffer Associates. Simply stated, in the context of what we are seeing currently in the employment marketplace, we believe that it’s time to begin to think and plan strategically once again. For the past year and a half, companies have been downsizing, rightsizing, and outsourcing. The driving force has singularly been survival, with only a minimal concern for the future capabilities of our organizations. But as noted above, most of us have proven that we can survive in the face of a major economic downturn. It stands to reason, then, that as we emerge from these doldrums and begin to build back the sales volumes we have lost, we’re going to need competent, qualified people to make it happen.
For those of us who think this will be easy to accomplish as we’ve done it once or twice before, we need to seriously evaluate the dynamics of today’s employment market before finalizing our plans. Yes, there has been a significant increase in the unemployment rate, with a large number of employees displaced from jobs in the construction and manufacturing sectors. However, before developing a false sense of security, we must recognize that the realities of today’s weak economy are much different than those of prior recessions. For example, the unemployment rate reported for July was 5.7%, quite a jump upward from the 4.6% average of the prior two years. In comparison, however, unemployment is nowhere near as widespread as it was in 1992 following a similar housing downturn when it totaled 7.5% for the year, or as it was in 1982 when we recorded an overall 9.7% unemployment rate. This dramatic disparity is the result of a number of factors, but the bottom line is readily apparent. When employers begin to rebuild their organizations for the future, there will be proportionately fewer unemployed workers to fill the open jobs.
Further compounding this fact, we must remember that we are on the verge of a significant transition in the workplace as “baby-boomers” retire and “gen-Xers” take their place. This phenomenon has been well documented in the media over the past several years, and most of us recognize that the first baby-boomers have already moved into early retirement at ages 62 and younger. However, the major impact of this transition will begin to be felt in the timeframe of 2010 to 2015, just when many have predicted a strong return to real economic growth. We might normally consider this to be a routine “changing of the guard,” but as employers, we must recognize that there is a significant variable that will come into play this time around. Due to smaller family size, dual income households, the legalization of abortion, etc., this next generation will be 15% smaller than the one it must replace in the employment ranks. That means that there will be over 10 million fewer people in the marketplace, and with increased competition for qualified workers, there will be an overwhelming shortage of talent!
So where do we go from here? In light of the demographic variables cited, our prediction at Schaffer Associates is that the demand for talent will come upon us like a wave and will grow to epic proportions as we emerge from this downturn over the next months and years. To ensure future success, all of us must look closely at our organizations, even more than ever before. We must have a plan. We must consider what our growth and succession strategies must be, and then commit to implementing these strategies . . . identifying, promoting, and recruiting the right individuals onto the appropriate career tracks for the future. And, we must recognize that the competition for talent is going to be great. In addition, we must focus on developing employment practices that will improve employee retention, because retaining great people on the job will be as critical to future success as identifying and recruiting them.
It’s been said that when the tide runs out for an extended period of time, one should prepare for the likelihood of a tsunami. Are you ready?
