Profound demographic realities mean that the staffing function is undergoing a long-term change.
By Michael Beygelman
Effective December 5, 2010, nearly two million Americans waved goodbye to their unemployment benefits, which had been set to expire without any possibility for extension. Unemployment continues to hover above 9 percent, and not since the 1980s has the U.S. employment picture looked so bleak for so long. Some ask whether or not unemployment will go back below 5 percent, but the question we should be asking is whether it will ever get much better at all?
To form opinions about the future of U.S. employment will require analysis of macro trends that are shaping our society. Staffing.org recently published the 2010 corporate recruiting report. A number of concepts from that can be applied to making predictions about the future of unemployment.
First, a math lesson: An axiom is a proposition that is neither proved nor demonstrated but considered to be self-evident, while a theorem is something that has been or must be proved to be true by careful reasoning. Executives are starting to understand that paying three people $100,000 per year to do a task manually is ultimately more expensive and less efficient than paying one really good person $150,000 per year, plus spending $500,000 to develop technology that can automate the manual processes. Before the trend toward efficiency, it was easier for companies to hire three people to do a task manually and thus in the new economy those two jobs are simply not coming back. It is important for us to understand that “efficiency is a competitive advantage” is an axiom and not a theorem. It is this truth that needs to serve as a starting point for deducing and inferring potential solutions to our unemployment situation. Companies that want to debate this will be at a competitive disadvantage, and individuals that do not accept this as fact will continue to be unemployed.
Making investments into scalable, repeatable technology supports the trend toward efficiency and thus will garner more corporate investment dollars. Unfortunately the larger share of the unemployed population is not made up of people with relevant technology skills. As companies continue to make technology investments—and hire people to help them implement those technology platforms—they will be hiring only a very small portion of the unemployed, so at the macro level there will be very little positive impact to national unemployment.
The kryptonite of efficiency is complexity, so companies will continue to simplify their businesses in order to become more efficient. Companies will look to add knowledge workers to their ranks in order to help simplify their businesses or supply chains or go-to-market strategies. However, the lion’s share of the currently unemployed people would not be categorized as knowledge workers who can help companies transform systems or processes. While some companies might add headcount to projects that can help simplify their businesses, most will opt to add variable labor contractors and temporary employees or outsource non-core, highly complex functions to companies that can do it better, faster, cheaper.
Increasingly, executives are focusing on shareholder value. This leads them to favor investments in initiatives that can drive sustainable improvement in their companies’ financial performance. When faced with a choice of spending $1 million dollars on fixing a mailroom operation or spending half a million dollars on developing an employee productivity improvement program, they’ll opt to shut down the mailroom operation altogether and outsource it, and then take the savings and invest that into employee productivity initiatives. Very little of this spending will result in some of the unemployed getting jobs—outsourcing firms will absorb the capacity (and their businesses will also grow), while existing employees will become more productive doing the jobs they already have.
Corporate HR departments can sometimes find themselves at the epicenter of the unemployment woes. Budgets will continue to be scrutinized by corporate executives because some HR activities are too complex, too transactional, and non-strategic.
Recruitment departments will have to find new ways to continue to process 2,970 unqualified applicants to fill 30 jobs and how to develop flexibility in their service delivery model. If not, the function will simply be outsourced, and people who are currently unemployed will need to radically change their expectations that the U.S. government can do something systemic that might fix the unemployment situation; it cannot. People who are unemployed must accept the reality that the most likely way for them to reenter the workforce is by developing new skills that can help their future employers drive increased efficiency.
Michael Beygelman is president, RPO solutions, at Adecco North America. He can be reached at email@example.com.