Great article. My question for you centers around this quote:
"Almost two-thirds report they are using the opportunity provided by the downturn and the surplus of qualified applicants to get rid of low-performing employees and replace them with new hires."
If employers are cutting the low-performing but hiring from the pool of everyone's else's cut underperforming employees', is this a contradiction that there is a surplus of qualified applicants?
According to the DOL report, the unemployment rate for college educated, age 25 or older is in the 3.7 percent range. This is an increase of only 2.6 percent over the 10 year average which at 2.1 percent, is considered full employment.
It seems they are missing out on the 96.7 percent of employed candidates which is by far a richer pool of top talent. Any thoughts?
Management Recruiters of St. Charles
It's a good point -- I didn't do the study, but I don't think they asked where they were hiring from -- it didn't say whether they were hiring from laid-off people, from those who took buy-outs (if you take a buy-out and aren't searching for a new job, you don't count in those unemployed figures), or looking for people who are currently employed. But you're right that a lot of firms just hire other cast-offs.
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Great article! I totally agree that employers need to be thinking about long-term commitment as something of value to the organization. If an employer is unable to create any sense of loyalty with its employees, trust will be lost, and it could create a very uncommitted group of workers when the company falls on hard times, whether economic or otherwise.
Workers are replaceable but should not be treated like appliances in a disposable economy. Companies whose employees are only looking out for themselves will likely find it challenging to be successful.
Vice President of Human Resources
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I read your article on this subject with great interest. I have spent a great deal of time thinking about some of the concepts you outlined, and trying to come up with a "fair" methodology with which to deal with the economic downturn and sudden availability of higher grade talent than we currently have on staff. As the HR manager for a mid-sized company still growing, even during these difficult times, I am confronted with these issues on a daily basis.
I do believe that employers are taking advantage of the exceptional variety of highly skilled labor currently available at bargain basement prices, and I do worry that when this economy turns around, there will be a mass exodus of trained talent returning to their base industry, or at least actively seeking higher paying employment than the "desperation" jobs they settled for in order to put food on the table during the worst of this recession.
However, having come from the wholesale mortgage lending industry, I well remember the years of very high profitability, in which we, as employers, were forced to offer ever escalating salary/benefit/incentive packages, even to obtain mediocre talent.
Trained wholesale lending professionals such as underwriters, document drawers, funders, shippers, compliance officers, etc., were not degreed individuals (although some of them may actually have possessed college degrees, they were not required for these positions); their worth was based upon their experience.
Potential employees who had worked in several environments, i.e. wholesale, retail, A paper, Alt A, subprime, etc., had the widest depth of knowledge and therefore commanded the highest salaries. It was not unusual for several employees at one branch to make in excess of six figures with only a high school education and a few years in the industry, if they were smart, fast and efficient.
We routinely lost trained employees to competitors who would offer higher bonuses, better working conditions, more benefits, etc., creating a revolving door in which we were constantly recruiting, training, maintaining and attempting to provide some type of stability at the branch level.
With the advent of the recession, those of us fortunate enough to be employed in the HR field have what could possibly be a once-in-a-lifetime opportunity to upgrade our talent pool. Will we be better off in the end, when the recession fades from memory and things go back to "normal?" Who really knows?
I do know, however, that after years and years of working in an industry where I was constantly forced to weigh what areas to cut back in order to offer excessive pay package to employees who would most likely move on in less than six months, it's a welcome relief to see applicants excited about the possibility of becoming employed and willing to work hard to stay employed.
I, myself, have left the mortgage industry and, although I'm making one-third of what I made before, I am thankful everyday to have a job, and I renew my commitment to my employer every single day. Now if the entire company did the same thing, I can't help but think we would have a win/win situation, at least in the short term.
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I often work as an advisor to HR on projects that need "A class" talent. Indeed, where I function as the project manager, all resources report to me and on larger project I have the authority to terminate any non-performers. Yes, that includes those who "enjoy" full time status with the client.
To think that this "movement to replace" is anything other than a move to reduce employee costs is truly self-delusional. No one in HR has yet complained about all of the false resumes and the now new, verifiable but false background and references, but it is only a matter of time until someone in higher management raises the question. It's worth mentioning that the vast majority -- maybe all -- of these acts are in connection with the H-1B mess.
We have never commissioned a study, but from speaking directly with directors and VPs of HR, the one thing that I come away with is: a "Need To Reduce Personnel Costs", before they themselves are pushed out for failure to perform. Worse, I have had more than one tell me that the bar has been lowered considerably to allow the "cheap resources" to appear qualified.
To expect loyalty under such conditions is a good indication of needing psychiatric help!
Glenn L Foote
Senior Project Officer
Broken Oak Services Ltd.
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In response to your article in the HRE Online "Commitment Takes Another Hit", there are few observations I'd like to share.
There is an old adage that reads, "Respect must be earned." This same approach rings true with loyalty. As is with respect, loyalty can be lost if not continuously earned. Employees have a continued obligation to work hard and smart for the companies they serve. The fact that, just because you worked hard for me before, doesn't mean I'll continue your employment.
The relevant question to keep a job should come from the employee's perspective not the company's, "Is my performance BETTER than that of anyone else the company may go searching for?" Or put another way, "Do I continue to be of value to the organization?"
Another component of this phenomenon comes from the fact that when times get tough, the REAL performers come to light, while the low performers are uncovered. A senior executive I know told it to me this way, "When the tide is in, everyone swimming looks similar. All you see is their heads. But when the tide goes out, you can really see who's swimming naked!"
The impact of the availability of better performers in the market is magnified due to the fact that poor performers can no longer achieve the necessary results with just their past behaviors. Companies NEED better people when times get tough to survive.
Organizations are well served to seek better talent in hard times. I believe talented people will recognize the efforts of their organizations in making the upgrade (either by hiring them or improving the team) and loyalty will be earned in the long run.
Daniel E. Gold
Vice President of Human Resources
Richmond Heights, Ohio
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There is more to replacing lower performing employees with new hires than just the fact that there is currently a surplus of qualified candidates.
As our company has had to reduce in size to remain in business, the demands on employees have increased. As a result, poorer performers really stand out. They might be capable of performing one or two simple tasks, but can't easily and competently perform tasks outside their typical job.
Companies need employees who are more flexible and can be moved around to wherever needed because companies are staffing to the minimum levels required. Staffing is way too tight to be able to afford employees who can't do more than just one thing.
So, employees who previously were kept even though they weren't "superstars" can no longer be kept. Employers can't justify keeping these employees. Employees need to evaluate their skills and see what they can do to grow to be a more valuable asset to the employer.
The days of sitting back and coasting to retirement because of long service to an employer are over.
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My take on this is that this tactic rewards better performers, who, both initially, and on an ongoing basis, are more loyal to the employer and thus expend greater effort in the course of their employment and in the performance of their services.
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Executives may think that this is a good way to increase their talent pool in the short run, but the effect on employee morale and trust will be adversely affected in both short and long term. I can predict that these very talents they are hiring to replace the "low performers", will treat the company in the same token; as soon as they find the better opportunity somewhere, they won't hesitate to leave the company who treated the employees as such expendable objects.
Historically, we saw the employee loyalty plummet when the companies started using lay-offs as a means of cutting expenses. This practice of replacing employees during hard economic times will add another milestone to declining employee loyalty.
Besides, what are these executives thinking? Don't they consider the COBRA costs of all these involuntary terminations?
Director of Human Resources
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I recently read Mr. Peter Cappelli's article on Commitment Takes Another Hit and I agree with Mr. Cappelli to a certain extent. However, employee loyalty is a product of the Baby Boomer Generation and Wall Street have created.
I coined the phrase approximately decade ago of "work merc" or "work mercenary" due to seeing how employee are repeatedly under-compensated for the amount of hours and job requirements that are manipulated by the executives, accountants and corporate attorneys under job titles and labor law awareness.
I work in the insurance industry and we are compensated for a 37.5 to 40 hour work week and yet routinely our hours of job requirements and responsibilities require us to work 60-70 hours per week and this includes holidays and weekends.
Our industry like many others attempt to masquerade this under customer service and responsibility while the middle and upper leaders do not lead by example. More importantly, raises, promotions, and compensation/ benefits are scaled back more and more while over-inflated bonuses, raises, and perks are given to these managers.
The fact is that the average employee and in my case above-average employee cannot keep up with the cost of living based on what companies are willing/ not willing to do to take this into consideration.
I liked Peter's article when he talks about upgrading talent which should include reducing costs and expenditures to improve the bottom line or pad the executives' compensation packages. The reality is that our industry over-pays these executives and does not utilize technology to gain more control of expenses and improve profitability.
Our CEO receives an annual bonus of 35+M each year and yet we have now entered the new phase of Employee Ranking and Calibration in efforts to lower individual performance ratings and bonuses if applicable. In addition, shouldn't we apply this philosophy to ALL employees if that is ultimately what the company initiative is?
A friend of mine coined this phrase and he as well as I hold an MBA, "Be the Best Mediocre Employee You Can Be." He went on to add that with average raises being approximately 3 percent to 3.5 percent if you are lucky, why kill yourself to work additional hours and take on more responsibility for an extra 1 percent to 2 percent raise. In my opinion he makes a valid point and it brings me back to why I consider myself a work merc.
First, please note that I am fortunate and blessed to have a good career and position in a healthy company. Second, as a Gen-X member we are closely related to the WWII generation except for company loyalty due to our beliefs on education, work ethic, morals, values, character, and integrity.
These traits would tend to lead a person to believe that we are loyal for our career to our employer but this is not the case. We have seen plenty of hardship in the current and past economic struggles our country has faced over the last four decades and look for opportunities to advance our careers and provide for our families.
However, job-hopping or changing companies is how you can advance your career and ultimately generate a higher salary. I have done this twice over the last decade and increased my salary over 10k each time which if you do quick math over a 10-year period, that is over 100k including bonuses and that is a great driver.
Lastly, in my opinion, we live in a use and abuse work environment and if companies want to retain employees, then they need to take a look at making their employees happy versus looking at a percentage on an employee survey or turnover amount.
In short, if your employees are happy and you instill the right working environment, your employee will drive customer service, company performance, and profitability. Employee loyalty is most likely a thing of the past until companies change the current Boomer management and leadership corporate operation strategies, tactics, and culture.
Ultimately, time will tell and as we move towards this generation's careers coming to a close, I look forward to making a difference and changing this pattern so that work life balance, loyalty, dignity and respect, and fairness are facts versus pop or click phrases.
Rob Johnson, MBA
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Unfortunately, I am not surprised to read about companies that are using the economic downturn to 'upgrade' talent. I believe there are some company leaders who truly believe, and act on the belief, that 'our employees are our greatest asset.'
However, many don't even purport to believe it; some say it because it's expected, but don't really believe it; and most believe they believe it until tough decisions have to be made. Difficult times like these often reveal the true beliefs and motivations of our leaders, but employees are usually not fooled by the words anyway.
Employers who are concerned that their employees are not "engaged" should look at the constant subtle messages that are sent through the daily interactions in their relationship with employees. This is a more reliable indicator to employees of the perceived value of employees within the organization than all the nice words.
Company leaders that are 'upgrading' their talent now, are unlikely to retain those talented individuals for the long term -- and they will undoubtedly be scratching their heads and wondering why.
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You have written an interesting piece. Here are a couple of thoughts regarding the premise of loyalty and worker replacement.
1. Leaders did better jobs evaluating, coaching, training and leading -- Would they have had so much "sub-standard" talent that needed replacement? This does not mean one needs to resort to "forced ranking." It just means that many supervisors, managers, directors and vice presidents and higher have forgotten that permissiveness is neglect of duty.
They defer and procrastinate, avoiding the hard, messy work of connecting with and serving the people from whom he/she is expected to generate performance. If they had, perhaps they wouldn't have found themselves quite as deeply in the mud that they would have had to resort to such tactics.
2. Leaders realized that there are very few Reggie Jackson (I'm the straw that stirs the drink) type "A" players that exist or could function in a modern corporate environment.
3. Leaders realized that the old saw that "we hire the best people" is highly suspect. Even in the athletic world, good coaching and leadership takes lots of "ordinary" people to extraordinary levels of output. What this means is that everyone more or less hires along a bell curve, especially in large organizations.
It is the leaders' job at every level to generate commitment from the people within the organization, moving the bell curve to a higher level of performance. In fact, statistics show repeatedly that people leave because of leadership problems rather than money.
If one thinks about it, the new "loyalty" could easily form around organizations have created cultures where people want to stay in spite of other inducements.
Wouldn't that be nice?
James D. Johnson
Level Three Performance Solutions
I think you're right -- this move toward "the war for talent" based on the idea that you can hire stars is in large measure due to a decline in interest in developing talent. Maybe managers feel they don't have the time or the resources ... , but it is based on an odd assumption that "talent" is somehow born.
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Congrats on a great story and, in particular, your very astute observations regarding the ability of companies to accurately hire workers who are an upgrade in talent.
For many there has always been a bias towards hiring outsiders (knights on white horses to save the day), but when it comes down to it, most companies will make the same mistake again. I've consulted with and worked in some 20 Fortune 500 companies and in general they are awful when it comes to hiring. I would suspect their validity rating is around .1.
Very few run coordinated behaviorally based interviews, conduct testing, simulations, etc., for most jobs and most don't know where their talent levers are in their organization. Most companies suffer from the Lake Wobegon effect -- where all hiring decisions are above average ... plus they made the mistake in the first place, how have their standards/ processes improved since?
As such they are exchanging relatively perfect information on an internal candidate for vastly imperfect information of an external candidate. I can get better odds going to a casino and playing roulette.
Keep the great work up ... our profession desperately needs it.
Many thanks, Shawn. Great point about the lack of any efforts to assess the success at outside hiring -- it's another of those assumptions that seem to drive how business operates.