August, 1995

Workforce Dislocations:
Can You Find (and Keep) the Employees That You Need?

For a brief moment in history, employers and employees maintained a social contract with one another. Then all the rules changed.

The contract, which began in the late 1800s and ended a century later, said in effect, "If you agree to give us a fair day's work for a fair day's pay, we'll agree to hire you without experience, train you, promote you as appropriate, take care of you when you're sick and help you save money for your old age. Do your job well, and you'll never have to look for another one."

During this era, jobs were something to have and to hold, and people defined their existence in terms of their job; if you wanted to get to know someone, you asked them what they did. "I'm a foreman at GM," they would answer or a purchasing manager at General Electric, or a sales rep for IBM. One was proud of one's company and proud of one's job.

The Industrial Revolution created the concept of productivity, and productivity in turn created the need for a stable, long-term workforce. Less than a hundred years later, a redefined notion of productivity killed the same concept. Companies began to restructure, downsize, rightsize and re-engineer themselves; all in the name of global competitiveness.

The result in many companies has been a smaller work force whose ranks are composed of the over-worked, over-stressed and under-motivated. Meanwhile, record numbers of Americans are going into business for themselves in order to escape the corporate rat-race, or sometimes because Corporate America has left them no alternative. Others are becoming contract workers, either self-employed or employed by temporary staffing firms.

And many members of the so-called Generation X (those Americans now in their twenties and early thirties)) bring a skeptical new attitude toward the idea of long-term employment in large measure influenced by the sudden and unexpected unemployment that so many of their parents experienced. In the minds of many, it is better to live for the moment (perhaps financing their beach volleyball habit by waiting tables) than commit themselves to a "meaningful" job that may be here today and gone tomorrow.

Solving Today's Employment Dilemma

In view of all these workforce dislocations, many companies are wondering: Just how flexible can we be in terms of workplace staffing, while attracting and keeping the key employees we need today, not to mention those we'll need ten years from now?

Historically, many companies have tried to respond to marketplace conditions by staffing up during times of plenty and staffing down when times turned lean. The problem with this approach is that it often left employers out of sync with the economic cycle. Just about the time they would reach full employment, the pendulum would swing in the opposite direction ó and vice versa.

Companies also regarded their work forces as relatively homogeneous, to be equally rewarded in good times and penalized in bad. Pay increases and decreases tended to be across-the-board, as did periodic employment additions and reductions. And, as the rate of inflation slowed to the lower single digits, even merit pay systems suffered from the compression between an exceptional increase and a sub-standard one. Those 3-4 percent raises began to look pretty much like a cost-of-living increase.

Rationalizing Your Workforce

A better approach to organization management is what Sanford Rose Associates calls workforce rationalization, which is based on the concept that not all jobs are created equally. Some add considerable value to an organization's bottom line, while others do not. If companies can identify the core functions within their business and, in turn, the critical positions within those functions, rational hiring and compensation systems can be designed.

Core functions, of course, will vary from company to company. Purchasing, for example, is extremely important in retailing, high-volume manufacturing and other types of businesses where fractional changes in the cost of goods sold make the difference between profit and loss. In a service business, by contrast, purchasing decisions may be relatively routine.

Corporate leaders should ask themselves which functions in their company are most important to the success of the enterprise in terms of economic contribution and/or competitive advantage. These should be separated from functions that neither make nor save the company money and that contribute little to its marketplace presence. For each core function, repeat the analysis in terms of individual positions ó at least at the supervisory level and higher.

Centers of Excellence

The resulting lists of core functions, and the critical positions within them, should be regarded as centers of excellence that should be designed to attract and keep the best people that money and other inducements can buy. (By definition, critical positions in core functions are crucial to the company's success or failure. It is therefore appropriate in such positions to place a significant portion of total compensation at risk, with the potential of sizable reward or sizable penalty.) When a critical position opening exists, it is the kind of position for which an executive recruiter would most logically be used.

Remaining functions and positions that are peripheral to the company's success can then be analyzed as follows:

1. Do we need the function/position at all?
2. If yes, how much do we need and at what price?
3. Can we achieve greater flexibility and productivity by augmenting a small "permanent" staff in a given functional area with contract or temporary employees?
4. Do we have any expertise at all in running a particular function, or should we turn its operation over to an independent party (commonly known as "outsourcing")?

A good rule of thumb is to disrupt only that which needs disrupting. Under the concept of workforce rationalization, greater productivity may be gained by eliminating 100 percent of Department A and 0 percent of Department B, as opposed to trimming each by 50 percent.

When You Look for Outside Candidates

Sooner or later, virtually any company has to look outside the organization to fill a critical position opening. When working with an executive recruiter, the company representative should brief the recruiter thoroughly on any recent or pending changes in the organization's structure.

Consciously or unconsciously, astute candidates run a risk-benefit analysis on changing jobs. To paraphrase Ernest Hemingway: if the bells are tolling at the potential new employer, the candidate may leave an on-site interview concerned that they will toll for him (or her) as well. The well-armed recruiter, however, can head off needless fears by explaining any workforce rationalization underway, how it will make the company more agile and aggressive, and ways in which the open position will contribute to the company of tomorrow.

Recent articles about a major U.S. corporation in the news have referred to the "bunker mentality" that permeates all levels of the organization (i.e., don't stick your head up for fear of being shot). With the pool of future management talent already beginning to shrink, as members of Generation X succeed the baby-boomers, few companies today can afford the perception or reality of a bunker mentality.

Skilled recruiters know that "you can only make a first impression once." The company in firm control of its organizational destiny will best be able to attract the increasingly scarce supply of highly qualified, motivated individuals it needs today and in the years ahead.

If you work in a large, multi-unit organization, others – including the corporate Human Resources and MIS Departments – might appreciate copies of this issue. These can be ordered from your Sanford Rose Associates search consultant.

©1999 SRA International, Inc. All rights reserved, including electronic reproduction or alteration. This SRA Update is published for the clients of Sanford Rose Associates.