The New “New Normal”: Why Employers Must Start Competing and Paying for Talent, Right Now
By: Chuck Pappalardo, Managing Director, Trilogy Search Non+Profit
There’s something truly remarkable going on in the U.S. economy, and yet it’s something that seems to be mostly unnoticed, even by many specialized observers. The country’s economy is on fire, expanding at a rate we haven’t seen for well over a decade. There are plenty of reasons — lower energy costs making the manufacturing sector more competitive, pent-up demand after years of low consumer and corporate confidence, aging infrastructure that urgently needs to be replaced — and they’re all important. What’s even more important, however, is that the job market is expanding, too, possibly even faster than the economy as a whole. That means the competition for business-critical talent is about to get a whole lot harder. And employers need to get out in front of this trend, and fast.
It’s almost impossible to overstate how spectacular the job growth statistics are. The nationwide unemployment rate has been under 6% for months — it was just 5.5% in February — and it’s likely to stay at least that low, and maybe a lot lower, for the foreseeable future. (Most labor economists traditionally consider unemployment in the 5% range “full employment.”) There’s no question that what we’re seeing is a real, sustained, long-term recovery, with the explosive job growth that inevitably goes along with it. The reality is, everybody’s hiring, or soon will be. I’m so certain of this that I’m willing to make this prediction with absolute confidence: By the end of this year, just about anybody who wants a job will have one.
Now, this is obviously great news for the workforce — millennials looking for their first serious jobs, longtime employees who want to stay where they are but feel unappreciated and underpaid, and especially talented, restless workers who may be ready to make a change. (I’ll be talking about what all this means for job seekers in another post, coming soon.) But it makes for a far more complicated picture for employers, who are soon going to be competing for talent in a way they haven’t had to for years.
Those of us who have decades of experience bringing employers and employees together have seen this kind of job market before. But if you’re under 40 or so, you’ve never known anything like it. The fact is, we haven’t seen job growth on this scale since the dot-com bubble burst in late 2000, and wages and overall compensation have been stagnant, or worse, for at least that long. For years, employers have been taking advantage of a persistently weak job market — a situation that many observers took, mistakenly in my view, to calling “the new normal.” Everyone from corporate recruiters to human resources (HR) departments to hiring managers thought they could underinvest in their employees and still attract and retain the talent they needed.
Today, there’s a new “new normal,” and employers urgently need to recognize it, and adapt to it.
Here’s one of the most important reasons: A fascinating fact that has gone largely unnoticed for more than a decade is that unemployment hasn’t been evenly distributed. Not even close. Even during the darkest days of the worldwide economic downturn, in 2008–2009, the unemployment rate for college-educated workers never rose much above 4%. Those well-educated, highly skilled personnel mostly kept their jobs through the recession and the long not-quite-recovery that followed, but they paid a high price: minimal or nonexistent pay raises, tiny performance bonuses, and limited career advancement. And for a long time, they were willing to make that tradeoff, in return for job security. No longer. They can see that their companies and their shareholders are realizing huge returns, and they feel strongly that they deserve some of that money. And if they don’t get it, they’re going to leave for more challenging, and better-paid, positions elsewhere.
This isn’t just a phenomenon affecting current employees, either. During the long period of economic difficulty, hundreds of thousands of downsized employees started their own boutique companies — and a lot of them found they liked working for themselves. Now that the economy is turning around, and money is flowing more freely, their businesses are doing better, too, and they’re not likely to want to leave a good thing to return to the corporate world. The same is true of talented young millennials, many of whom don’t feel they have a place in the corporate world. Employers are going to have to work, and work hard, to get these people before other, more aggressive competitors do.
The bottom line: The HR/talent world has been a buyer’s market for so long that it’s going to be very challenging for employers to adjust to the new new normal. Suddenly, glancing at a few résumés or skimming through LinkedIn profiles isn’t going to get them the people and skills they need to survive and thrive. Businesses are going to need to sharpen their talent acquisition skills — in recruiting and compensation, among other key areas — and they’re frequently going to have to look outside their own HR/talent departments to find them. (In an upcoming post, I’ll be discussing concrete steps employers can take.) In the meantime, here’s the most important takeaway: You can’t afford to take your talent for granted anymore.
Upcoming posts: What job seekers and employers can do to successfully navigate the “new new normal.”