Avoid Predictable Staffing Mistakes in an Economic Recovery
This year I celebrate my thirty-fifth year in the information technology industry. Much has changed, but over the course of my career, I have observed some management patterns that would be nice to avoid.
I suspect management and accounting arose about the same time. Management is the game, and accounting—specifically, profit—is how organizations keep score.
Accountants tell us:
Revenue – Cost = Profit
To increase profit, increase revenue or decrease costs.
An economic downturn puts pressure on revenue, encouraging management to focus on cost control to maintain profitability. This isn’t a surprise, and it isn’t evil; it is common sense. It also is the precursor to a troubling pattern that threatens to repeat itself as we move into 2015.
During an economic downturn, workers hunker down. A spouse may have lost a job. Investments take a hit. Family members may need help. If you have significant financial commitments, an economic downturn is not the best time to take career risks. Workers temporarily become less mobile.
This hunkering coincides with management pressure to reduce or contain costs. You may experience stagnant wages, a reduction in perks, delays filling vacant slots, or exhortation to work harder and longer hours. If you are in “hunker mode,” this can seem like management taking advantage of the situation of your reduced career mobility. But if the organization doesn’t survive, it doesn’t matter.
The pattern I worry about occurs at the end of a downturn. The economy is recovering and profitability is up, but organizations are slow to ease cost containment measures implemented during hard times. The problem is that really good IT people are scarce, creating an ongoing supply and demand problem. The wages and working conditions that people with fewer options might tolerate during bad times are easily outbid in a more competitive labor market.
Ironically, organizations realizing they need more resources are often quicker to bring in new staff at higher wages than they are to increase the wages of existing staff to retain them, which encourages turnover and loss of organizational knowledge. Managers who got used to paying bargain rates for high-quality consultants and contractors to augment their staff are surprised at how little talent those rates will buy.
During my career the best skilled and most versatile IT folks have always enjoyed premium compensation and career mobility, though dampened a bit when the economy faltered. The pattern we must avoid is organizations being slow to revise labor cost expectations in response to a recovering job market and, as a consequence, losing talent and missing opportunities.
How will your organization respond to changing labor conditions? How long will it take your management team to adjust their expectations and behavior?