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The Coming Employee Shortage Has Arrived

Small Businesses can compete for workers by being f lexible and desirable places to w ork!

By Phil Watlington

Theres more than the tip of this iceberg showing! Much hasbeen written about the coming employee shortage; well, itshere! Economists predict the U.S. employee shortage couldbecome as high as 10 million jobs unfilled by 2010, as millionsof baby boomers retire and fewer younger workers enter theworkplace to take their places. In fact, finding employees to fillcertain job openingswhether its a person who is the right

fit for the job, or someone who is just acceptablehasreached a near crisis level in todays business environment.Small businesses are feeling the employee shortage squeeze;so are larger businesses.

The bad news is that employee shortages are predicted to getworse before they get better! Studies by the MassachusettsInstitute of Technology, Robert Half International, and TowersPerrin all point to the tightest labor markets in the past 30years. In fact, 80% of businesses surveyed by Robert Halfindicated that today it is more difficult to find qualifiedcandidates for job openings than a year ago.

The worker shortage mystery!

With the thousands of employees who have been laid off bymajor corporations in recent years, the logical conclusionmight be that there are plenty of available unemployedworkers to fill job openings. And, as the overall U.S. economyhas slowed this year, due mainly to the housing slump and oilprices, one might think that there would be more people out ofwork looking for jobs. Well, the exact opposite is true!

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According to the U.S. Bureau of Economic Analysis and LaborStatistics, job markets remain tighter than before theslowdown. Supporting this economic abnormality,unemployment in the U.S. recently (Spring 2007) hit a 5 yearrecord low of 4.4%, which means that basically most of uswho are eligible, willing, and able to work, are working. And,overall adult joblessness hit a five year record low as well,coming in at 3.9%. On a more specific basis, the Bureau ofLabor Statistics reports that the unemployment rate forworkers with a bachelors degree or above is less than 3%.For engineering professionals, the rate is about 1%. The

supply of educated workers is simply not keeping up with theever-increasing demandespecially in accounting, computerscience, electronic/ computer engineering, finance, globalbusiness management, information sciences/ systems,marketing management, medical technicians, retailprofessionals, healthcare workers, and teachers. Therefore,todays employee shortage actually turns out to be a shortageof skilled and educated workers.

Workforce demographics.

Were in the middle of a major aging workforce demographictransition, as well as a transition to a more global economythat requires larger numbers of knowledge workers. Thesupply of skilled and educated people (knowledge workers)is extremely tight and is expected to worsen until educational

and retraining programs catch up with some of the demand. Inaddition, the supply of workers at the lower end of theemployment scale, where wages are typically in the $8 to $12per hour range, has been at critical levels as well for years.

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If you are looking for the root cause of these shortages, as Iwas in writing this article, Richard Florida in his latest booktitled The Flight of the Creative Class: The New GlobalCompetition for Talent,states: the basic rules of biologyindicate that in the next twenty years the U.S. is going toexperience a lack of available workers that hasnt been seenfor the past fifty years. I believe he is telling us that humanreproduction in the U.S. is not sufficient to supply theworkforce neededespecially at a time when the boomersare starting to exit the workplace in record numbers and thegenerations that follow them (often called Generations X and

Y or Millenials), are entering the workplace in smallernumbers. By the way, this same demographic is at work inother parts of the world as wellnamely China and Japan.

The good news is that during the transition smallbusinesses can attract their share of skilled and talentedworkers by being flexible and desirable places for both olderand younger workers to be employed. In fact, smallerbusinesses can often change quicker than large organizationsand be more flexible with programs to attract and retain goodemployees.

Good employees -- the key to a successful small

business.

A third generation owner of a small Kansas City restaurant

chain remarked to me recently: when one of my employeeswho has been with us for a long time quits or retires, I reallycant replace them. No one wants to do this work. I have tofind standard ways of doing everything so that training time isminimized. Turnover is very high. I spend a large portion ofeach day nurturing and training employees. I may be the last

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generation to operate our familys business. A local smallbusiness design engineering firm entrepreneur indicated thatwhen he sees someone he feels fits his business, he hiresthem even if there is not an opening--in anticipation of a laterneed and knowing that the hiring process for good designengineers can be long. A small retailer remarked that it isalmost impossible to keep employees who can maintain alevel of customer service required for the success of herbusiness. The bottom line is that nearly all small businessowners--especially those in retail, food service, technology,and engineering--cite finding suitable employees and turnover

as major challenges in their businesses.Heres what to do!

Focus on employee development programs such as onand off-site educational opportunities, mentoringsessions, counseling, on-line training, and time off forlearning experiences and trips. Programs that helpemployees gain personal and professional skills are themost effective methods for retaining employees; yes,ahead of money. Surveys indicate that most employeesleave a company due to a lack of personal and careergrowth, and a feeling of not learning or getting ahead.With the cost of hiring employees estimated at 50% -200% of salaries, retaining employees is absolutelycritical to the success and profitability of any business.

And, small business owners have long recognized thevital connection between the retention of experiencedand loyal employees and the retention of customers!

Create an environment of inclusion and recognition,where employees are included in as many aspects ofrunning a business as possible and provide individual

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recognition for their contribution to the success of thebusiness. As with personal and career development,inclusion and recognition for accomplishments have beenproven to be more effective than money when it comes toemployee satisfaction and retention. In fact, employeesare looking for accomplishment, personal recognition,and a positive team environmentnot just money! And,with todays high cost of doing business, firms must focusmore on non-monetary bennieswhich are proving tobe just as important and effective as monetary rewards.This is especially true for small business start-ups that

face initial restrictive financial resources. Provide flexibilitywhen possible--with regard to work

schedules that allow time for child care, elder care,personal care, community service, working from home,and time off for special family events. Nearly allbusinesses that introduce flexible work hours in theirworkplace report a significant reduction in employeeturnover. Telecommuting (working at home part or full-

time) has also proven to be an effective retention tool. Recognize and curb employee burnout. A recent survey

and study by the Mercer Human Resources ConsultingGroup indicated that 47% of a companys highperformers face burnout. With the pressure on to domore with fewer resources, small and large businessesmust keep in constant communication with employees sothat burnout can be detected and effectively dealt with

before the employee becomes discouraged and leaves.Due to size, small businesses have an advantage indetecting and mitigating employee burnout.

To the extent possible, provide employees with benefitssuch as healthcare, educational assistance, stockownership, and tax deferred 401K savings plans.

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Surveys continue to reveal that for many employees theavailability of healthcare benefits is a main reason forworking and staying with an employer. And, with the costof healthcare benefits (medical, dental, vision) soaring,employees often say they cant afford not to work andhave coverage, or they cant change jobs and face pre-existing condition waiting periods.

Offer product discounts to employees and their familymembers. And, allow employees to extend a limitednumber of discounts to their friends and acquaintances.This can be a benefit that helps both the employee and

the business by providing additional sales and, at thesame time, promoting the company. Retain and hire older workers. The Bureau of Labor

Statistics reports that workers between the ages of 55 64 have been with their employer for an average of 9.3years, while workers between the ages of 25 34average 2.9 years. Older educated and experiencedworkers can fill many of the critical shortages that exist

today by working full-time, part-time, or through jobsharing arrangements.

To end where we began: The Coming Employee ShortageHas Arrived!It has brought with it unprecedented challengesto find and retain one of the most critical components requiredin the operation of a businessskilled and talented people!The shortage comes at a time when globalization has

intensified the competition for knowledge workers aroundthe world. It comes at a time of unprecedented demographicchange as the first of the 76 million baby boomers start toretire, and the web generation that follows them continuesto redefine workplace and the manner in which work getsdone. Small business entrepreneurs are especially equipped

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to handle these changes and lead the way. By establishingflexible, desirable, and rewarding places to work, smallbusinesses can continue to successfully compete for talentedemployees. Welcome to the new global economy andemployee shortages!

Phil Watlington teaches finance, managerial accountingand strategic planning through the University of Phoenixand is a senior manager at the General ElectricCompany. He is the author of The World Is At YourDoor.You can reach him at (913) 485-2577 orpwatlington@earthlink.net.