The ITS Top Talent Newsletter • August 2001

Don't be Fooled by the Slowdown:
Talent Retention is still a Critical Business Issue

By Dr. B. Lynn Ware, President and Founder,
Integral Talent Systems, Inc

Recent media coverage about layoffs and disappointing corporate earnings has colored the perceptions of companies who, only a few months ago, were turning away business opportunities for lack of qualified workers. Some of these companies assume that given the softening economy, retention is no longer a critical business issue.

Our Fortune 1000 clients tell us that many of the current layoffs are in reaction to the stock market and a function of "natural involuntary attrition":

• The unprecedented boom and labor shortage of the past three years meant that companies were unable to adjust their workforces for business changes, poor performance, or hiring mistakes. Every worker was needed, regardless.
• Now, companies can experience a more natural employment cycle, and we are seeing the results of the delayed attrition in the headlines.

Qualified Employees are Still Hard to Find

The underlying fundamentals of workforce supply and demand have not changed. The U.S. economy grew by 2% during Q1 2001. In February 2001, over 135,000 new jobs were created. Meanwhile, the talent shortage is getting worse: by 2008, it is projected that the shortfall of qualified workers in the U.S. will reach 7 million.

We also know that select occupational groups, such as IT professionals, are still a rare commodity. A recent report issued by the Information Technology Association of America states that:

• IT employment in 2001 is up 4% from last year, and now accounts for 7% of total U.S. employment.
• In 2001 there will be a shortfall of 425,000 IT workers with the needed skills and training to fill job openings.
• Demand for enterprise systems workers has increased by 62%; other high-demand areas include programming, network design and administration, and software engineering.

Stay on the Alert for Signs of Defection

As it is generally assumed that the stock market will recover by 2002, the declining stock values of Fortune 1000 companies make their top talent ripe for recruitment by privately held technology companies, who can now offer a low strike price and possible hope to an employee whose current company is in the tank. Projects being cancelled, lack of funding, skill development opportunities being delayed, and valued colleagues being "pink slipped" are all conditions that become strong attrition triggers for the best talent in your company.

During this temporary slowdown, your company should be as watchful as ever of your top talent. Recruiters know that uncertain times breed uncertain employees -- and they are calling your people to fill any new job openings. In response, many top executives are putting renewed effort into identifying the people they want to keep and doing what they can to keep their top talent committed and productive until the storm passes. In addition, top management teams are using this time period to put the infrastructure in place to gain organizational commitment from employees now before business ticks up again early next year.

What You Can Do

• Make sure your managers are watching for early warning signals, including low productivity, withdrawal, and increasing criticism of company problems.
• When managers notice early warning signals, they should be proactive -- and schedule a private meeting with the employee to uncover possible concerns.
• Communicate! In uncertain times, many companies tend to "clam up" and reduce internal communications. Make sure your mission-critical employees know that they are valuable to you and feel included in company strategy.
• Start an "Employer of Choice" initiative now and gain momentum before the upcoming economic upswing.

There are many actions you can take to reduce unwanted attrition. With proactive planning, you can keep your top employees through this period of slower growth, and have the intellectual capital you will need to stay ahead of the competition as the market rebounds.

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