We are entering a business cycle I have never seen in my 50+ years in the business arena. Multiple factors are creating a “perfect storm”. I am concerned if the business world doesn’t address this issue now, in the next few years we will slide into a recession because of supply shortages.
The intersecting issues I see are:
1. Every business I am aware of cannot find all the qualified employees they need to accomplish their production demands. This has multiple causes.
A. Their veterans, the baby-boomers, are leaving the workforce. These are people that have grown up in a world promoting “hard work gets you ahead” and “working as much overtime as possible is good because it brings more money to support the family”.
B. The replacement generation, the millennials, have grown up in a different culture. We can debate if it is good or bad, but the facts are they do not see employment as their major focus in life, and they are not driven to work overtime to make more money.
C. This combination reduces output per employee.
D. Add to that the lack of qualified employees and everyone is scrambling.
2. During the recession almost a decade ago, the education system dropped classes due to budget restraints that pre-qualified young people for the journeymen trades. In this same time frame, the requirements of those jobs elevated their need for computer systems knowledge and technical understanding. During this cycle educators and parents, driven by fear of no jobs for their kids as they graduate from high school, believed the “manufacturing is dead” misconception and pushed their students into the direction that you must get a four-year degree to get a good job. Not every student is wired that way. With that failed concept we now see four-year degreed students with $40,000+ of student debt working in retail and fast-food.
3. The economy is hot and demands products for consumers. In this consumer driven economy, demand is everywhere from big ticket items to the latest technology to the ever-growing health and fitness industry, etc.
In the past, the ups and downs of the law of supply and demand were handled by increasing or decreasing the workforce. Unemployment went up or down, but the consumer appetite was satisfied either way.
We now have moved into territory that is outside of the normal supply and demand curve. In this “up” market we need to add employees. The problem as stated before is the inability to find qualified employees. I see companies requiring people to work 50 or more hours per week because they do not have enough staff. The workforce is getting tired and find it easy to move to another company that is not so demanding of their time. As turnover increases, companies back-off on the overtime demands, but on-time deliveries to their customers then suffer. The downward spiral begins.
Another thing I have recently seen with companies I am consulting for is potential customers willing to “help them bring their systems to a higher level” if they are interested in taking on “cutting edge” projects that current supply base either can’t or won’t participate in with them. Their customers’ customers are demanding more and more improvements, but the supply chain simply does not have the capacity and the production hours to attempt the new work.
This “perfect storm” left unchecked will create supply shortages which will in turn drive OEM production facilities to cut back employee hours due to supply shortages. When the cut back cycle starts, the economy suffers and recession is soon on the horizon. Not a demand driven recession, but one started in the supply chain by lack of capacity of qualified people to satisfy the economy demands.
How do we head off this pending disaster? Companies need to realize that the employment crisis is not going to be solved with “help wanted” signs stuck in their front yards or in their windows. We are now seeing elaborate improvements on the help wanted advertising; billboards with catchy phrases, city buses, signs on ever truck you see, etc. The problem isn’t how you advertise your need. The problem is all qualified people are working.
We are left with two choices, start a bidding war for the qualified people that are already working or build your own workforce of tomorrow. The bidding war cannot solve the problem and it will create a wavy of internal wages to match the new employee scale. We will just be “robbing Peter to pay Paul” as the saying goes. Overall the shortage is still here. Focusing on building your workforce is the only real solution.
The question then is where do the candidates come from? We need to understand where the right type of candidates are currently. This differs by job, but the farther back you can connect in the candidate pipeline supply chain, the more likely you can find the “raw material” you need to build your team of the future. One company I worked for has a dynamic internship program, another has created a co-op partnership with a local high school that fits both the educational need and the future employment needs, still another has a program that brings an entry level employee through a process that leads them to journeyman status in their maintenance area.
The companies that will thrive in this employment market will see their role in employees lives as an educator. To help them become all they can be. This focus on people will increase morale, reduce turnover and turn them into an employer of choice. Your employees will become your best recruiters. Their stories of working for you will bring more candidates than you can find on your own. I have watch it happen. Focus on growing your team’s abilities and they will be the best recruiters you have ever known.
Christian Life Coach 