Yet, conventional wisdom has many believing that our supply of workers is abundant. Events such as corporate downsizings, rising unemployment and a faltering economy lend support to the belief. However, critical-position data from the Bureau of Labor and Statistics is quietly telling a different story.
My organization, Talent Strategy Advisors, conducted a 12-month study of U.S. workforce data to determine the supply of workers, as measured by the unemployment rate, who are immediately available for critical positions. Determining the supply is important because as the economy rebounds, companies whose growth depends on hiring additional critical-position workers will need a labor supply to source. If low unemployment levels exist for a critical position, then organizations may not have a reliable supply of workers to fuel growth.
To facilitate reporting, this study grouped similar critical positions into occupations for its analysis. For example, the sales occupation consists of such critical positions as salesperson and sales engineer.
Each critical-position occupation’s unemployment rate was evaluated relative to full employment, which is a situation where every qualified worker who wants a job is employed. Because labor markets always have a pool of workers who are between jobs, full employment is not equal to zero unemployment. Instead, full employment is often associated with a rate of 4 percent or less.
The findings reveal that of five critical-position occupations selected for the study, two have a supply of unemployed workers that is too little, two have a supply that is about right and only one has an excess supply of workers. In summary:
• Health care and sales critical positions have unemployment rates of 2.4 percent and 4.4 percent, respectively, signaling low supply levels.
• Production and information technology critical positions have unemployment rates of 8.3 percent and 6 percent, signaling a supply that is about right.
• Construction critical positions have an unemployment rate of 18.9 percent, signaling an excess supply of workers.
Each critical-position occupation was further assessed across eight core sectors: construction, financial services, health care, manufacturing and transportation, mining, oil and coal production, retail, and utilities and telecom. Key critical-position occupation findings from the sector analysis include:
• Construction critical positions have a supply of workers that is too low in two sectors: health care and oil and coal products.
• Health care critical positions have a supply of workers that is too low in the three sectors analyzed: manufacturing and transportation, retail and health care.
• Production critical positions have a supply of workers that is too low in three sectors: utilities and telecom, financial services and health care.
• Information technology critical positions have a supply of workers that is too low in six sectors: mining, construction, manufacturing and transportation, utilities and telecom, health care, and oil and coal products.
• Sales critical positions have a supply of workers that is too low in five sectors: mining, construction, retail, health care, and oil and coal products.
So while the macro-economy continues to displace workers, several critical-position occupations have a low supply of unemployed workers, a situation counterintuitive to the national unemployment picture.
• Here are four scenarios that employers can expect to encounter for critical positions in a rebounding economy:
• Higher turnover: Business leaders can expect rising turnover in critical positions that are pivotal to growth.
• Longer search periods: Business leaders can expect longer search periods for critical positions that are pivotal to growth.
• Lower workforce capabilities: Business leaders can expect a gradual reduction in critical-position capabilities if managers respond to the prospects of longer search periods by relaxing employment standards to fill open critical positions.
• Higher compensation: Business leaders can expect higher compensation costs if managers respond to the prospects of longer search periods by increasing the offer’s compensation package. This appears likely in sectors where the critical position requires a higher degree of technical skills and the sector has above-average profit potential.
The net result is that unless business leaders address low supply levels of critical-position workers, sub-optimal business growth is likely during the economic rebound.
Executives who want to resolve workforce supply issues should begin by identifying the organization’s critical positions. This can be accomplished with little investment and in three quick steps.
Step 1: Generate critical-position criteria
The first step is to generate specific criteria for two characteristics that must be present if a position is indeed critical. Is the job core to the organization’s mission? Does the job have a significant impact on the business? The criteria consist of specific, measurable and time-based statements that act as reference points for determining whether a critical position satisfies a characteristic. The criteria are created because the terms “mission-critical” or “business-affecting” are too general and are likely to engender more arguments than actual determinations of which positions are indeed critical.
Two to three statements for each characteristic are generally sufficient. For example, one organization determined that “business impact” meant that a vacancy in a critical position would “result in the organization missing its fiscal-year revenue target by $5 million or more.” The specific, measurable and time-based components of this statement make it easier to engage others in a productive conversation regarding whether or not a position is critical.
Step 2: Identify critical positions
Once the critical-position criteria are determined, the next step is evaluating jobs against each set of criteria. Using the criteria as a reference point, each critical position is evaluated to determine whether it satisfies them. Most business executives agree that when a critical position has multiple criteria, a position needs to satisfy only one to be considered critical. For example, one company determined that a position is business-affecting if a vacancy causes the organization to miss only one of the following:
• Revenue projections
• Profit projections
• Customer satisfaction scores
So, while this company determined that business impact has three different meanings, a position only needs to satisfy one to be critical. The end result, after evaluating an organization’s positions, is that, at most, 20 to 40 are really critical positions.
Step 3: Determine key critical positions
The final step of critical positions is a transition activity that bridges this effort with the framework for developing workforce solutions. This final step determines which of the 20 to 40 critical positions are key to the organization’s current business scenario and objectives. This step is an acknowledgement that while the organization has critical positions that are pivotal to its success, some are more important than others at any given time. The following process will help you determine the importance or prioritization of critical positions:
1. Document current business scenario: The business scenario describes the immediate objectives of the organization. The reality is that while business strategy changes infrequently, business objectives can, and often do, change due to external forces. For example, 12 months ago, most organizations were focused on reducing costs. Now, with an economic rebound approaching, organizations are focusing on increasing revenues. The critical positions associated with those two scenarios are very different. It’s best to begin with documenting the current business scenario.
2. Determine talent requirements: Each business scenario has an associated set of talent requirements or key capabilities fundamental to the achievement of its objectives. In the example of an organization focusing on increasing revenues, the talent requirements might be “new-customer acquisition capabilities,” “new-customer revenue production capabilities” or “new-product revenue production capabilities.” In general, this step produces three to five strategic-talent requirements.
3. Evaluate critical positions: Each critical position is evaluated to determine whether its profile contains the talent requirements for generating the objectives of the current business scenario. For example, most organizations are anticipating an economic rebound and are crafting a business scenario of aggressive revenue growth. To fulfill this scenario, organizations will manage to business objectives such as “new revenue growth” or “new account openings.” In this example, each critical position would be evaluated to determine whether its profile has the talent requirements or capabilities to achieve the business objectives.
Critical positions such as sales executive or plant manager are key to our example objectives. The positions of internal auditor or IT application architect, while critical, have little impact on revenue or new-account openings.
The result of this activity is usually the identification of five to seven critical positions that satisfy more of the business objectives than others. These critical positions should then be evaluated to determine whether the critical- position workforce strategy is still relevant or whether it requires updating because of the changing business scenario.
While many think we have an overabundance of workers because of rising unemployment, it’s clear that the supply for some critical positions may actually be low. This has the potential to create competitive disadvantages, particularly as the economy begins a rebound and organizations restart hiring in response to organizational growth objectives and workforce turnover. Resolving your own organization’s supply concerns begins with determining its key critical positions. Only then can you have confidence that your workforce interventions—whether that means your hires, your training programs or even force reductions—have the intended results.