Jobless Recovery: Human Capital Utilization

Monday December 13 2010

For some time now, indications are that the current economic recovery, which is slowly taking place, will be a “jobless” recovery. By that it is meant that jobs lost in the downturn will not reappear or will reappear in significantly less numbers than prior to the recession. If this is the case, the recession of 2009 will be the third such jobless recovery since 1990. The first and second jobless recoveries occurred in 1991 and 2001 respectively. Prior to 1991 recession-recovery cycles resulted in as many jobs being created as were lost and in some case, excess jobs were produced.  According to The Economist online, the current recovery is following the same path that the prior jobless recoveries of 1991 and 2001 took: a permanent loss of jobs.

To be perfectly clear, it is not the role of private business to create jobs. Jobs are created in the business sector only when a valid business need requires to be fulfilled. Government does have the ability to construct an environment, which stimulates job growth, through public policy, taxation, incentives, and even direct creation of public works. The reason that private business should be concerned with a jobless recovery is twofold: 1. those jobless workers are part of most businesses consumer market, including housing and auto,  2. those jobless workers are part of most businesses future labor workforce.

Following the “dot com” bust, the numbers of students entering IT programs at colleges and universities fell significantly, taking seven years before an uptick was experienced  An article in the Communications of the Association for Information Systems titled “Determinants of Graduating Mis Student Starting Salary in Boom and Bust Job Markets” reported that following the “dot com” bust, starting salaries for IT openings fell by 15% and positions fell by 18%.  As a result, many organizations struggled and continue to struggle with recruiting and retaining IS talent for several years.

Cisco Systems Inc. learned an expensive lesson from the “dot com” bust. If you want to survive, you need the right talent in place before the upturn occurs. According to a Wall Street Journal article on March 10, 2010 by Ben Worthen, Cisco was able to retain almost 70% of its top executive staff who were veterans of the “dot com” bust. Along with other strategic moves and A and M actions, Cisco has been able to emerge from the current recession stronger than it entered it.  Having the right veteran leadership in place before the recovery stared, allowed Cisco to apply the lessons it learned.

In summary, much of the talent that organizations will need to survive and grow over the next 3-5 years is either unemployed or underemployed. While businesses do not have luxury of hiring unneeded workers, it is import to remember that just as organizations develop products and services to ensure they are fully marketable when the need arises, organizations must also develop the talent to design, engineer, craft, market, and service those products and services. An underemployed software or network engineer, developer, or systems analyst may never fully develop their talents and skills making it difficult or impossible for an organization to release a new product or service and thus compete in the marketplace. Taking a lesson from Cisco, it is essential that organizations have the talent they need, when and where they need if they are going to sustain and expand their competitive position in their marketplace.