Who's Left in the Labor Pool

October 1, 1999
The economy is too good. A thoroughly unlikely complaint, and yet, at onelevel, it’s entirely true. We have the lowest rate of unemployment -- about4.2 percent -- in 30 years. And we have a lot of jobs open. Too many jobs, infact, for a lot of employers, who have gaping holes in their workforces. It’spretty simple math: Qualified, in-demand people are already in good jobs;openings are left, well, open.

It may seem an unsolvable puzzle. The National Federation of IndependentBusiness just released a survey in which small businesses rated the shortage ofquality workers as their No. 1 problem. And recruiters say that it’s not justsmall companies being affected. "It’s getting a lot more difficult torecruit," says David Aberman, president of ROSS Corp., a recruiting servicebased in Minneapolis. "It depends some on the skills a company is lookingfor, but every kind of position companies are looking to fill is competitive.There’s such low unemployment nationwide that practically everyone who wants ajob has one."

Of course, this forces employers to consider new strategies -- and the mostsuccessful of these can be hiring people they formerly considered unemployable:welfare recipients, ex-convicts, the uneducated and unskilled.

It’s not an ideal solution. Most of the companies that go this route willsee a slump in productivity at first, admits John A. Challenger, CEO ofChicago-based workplace consultants Challenger, Gray & Christmas. Andturnover can be high. Just ask people in sales industries, the hardest hitsegment, where three-year retention rates are below 25 percent. In addition,that turnover can be expensive: Recent Department of Labor estimates place thecost between $10,000 and $30,000 per incident.

Lowering hiring standards without proper training can be downrightdisastrous, frankly -- resulting in angry customers, alienated employees, stolengoods, and in the worst cases, lawsuits. If it seems like you’re regularlyreading about bad-hiring debacles -- unqualified health-care workers endangeringpatients, drug-dependent drivers making deliveries under the influence, convictswith violent records working around children -- you’re right.

But these problems don’t have to happen. They’re the result of poor HRstrategy as much as poor candidate pools. With the right training andmanagement, it can turn out to everyone’s advantage. "Companies are notgoing to get real strong, qualified candidates right now, so they need to lookat people they didn’t before, people for whom these jobs are a step up,"Challenger says. "We need to create entry points anyway. So this is what wewant. But there’s going to be risk in the change."

The organizations that are able to make it work, however, say it’s worthit. "Understand them, train them and respect them -- and they’re thegolden goose for employers," says Leone Ackerly, head of The Mini MaidServices Company Inc., whose 1,000 employees are largely former welfarerecipients and high-school dropouts. "Employers are missing out if they don’ttry to make it work."

Recruiting and hiring require a little extra effort
First of all, companies need to stop holding out for some mythical crop ofdream workers who are suddenly going to explode on the scene and make everythingall right. If your senior executives have been stalling when it comes to lookingat the underemployed segment, disabuse them of the idea that the situation willchange anytime soon. It won’t.

The focus must switch from finding ideal candidates to finding people whowant to work and can be trained on the job.

This means changing your approach to interviewing and testing. Rather thansearching for skills, you search for trainability. For instance, instead ofadministering only a clerical quiz -- typing, filing, computer skills -- HRshould also test for learning skills. If a person fails a filing test, stop,give a quick demonstration, then retest. If the scores improve, you’veidentified a candidate who might be trainable for an entry-level position.

At International Laser Group in Los Angeles, applicants go through not justan in-person interview but a phone interview also. This helps president GaryMichaels get an idea of how they’ll handle the telephone sales he’s hiringfor. "It just helps get us one step closer to the person’s communicationskills and how well they take advice," he says.

Naturally, a positive attitude and work ethic are also necessary to assess --that’s often the reason many of the underemployed are underemployed. Thatdoesn’t mean the way the applicant is dressed; inappropriate attire is aneasily solvable problem. The focus should be on understanding the applicant’spersonality and attitude -- which in turn requires a more in-depth interview.

Nila Betof, vice president of strategic planning and organizational servicesfor Minneapolis-based Ceridian Performance Partners -- which has helped createwelfare-to-work programs for such companies as Marriott International and Bankof America -- suggests using experiential interviewing. Ask the person, forinstance, to describe a situation in which things went wrong, or challenges werepresented. If the candidate describes handling such a situation proactively, youget an idea of his or her mindset. If the applicant blames the situation onothers, you’ve got a red flag.

Of course, background checks continue to be important for all hires, butparticularly for those who, on their application, admit to being convicted ofpast crimes. HR must run a thorough investigation to determine the type ofcrime, the time passed since the crime and signs of recidivism.

If a company wants to cast a wider recruiting net by specifically targetingwelfare recipients, foreign immigrants or recent parolees, HR should team upwith a local organization that specializes in placing these people. Doing sohelps reach this demographic, because these candidates are less likely to bescouring the want ads, putting together résumés and proactively courtingcompanies. Hires are often through word of mouth instead -- friends, families.Also, such organizations will do much of the pre-screening for you, so you’remore likely to receive candidates who really want to work.

Once an underemployed person is hired, a strong, thorough orientation iscritical. HR needs to let the employee know exactly what to expect and what isexpected. These are people who often have never worked or who haven’t workedin a long time. This orientation should cover not only job requirements, butinter-relational expectations.

Also, sit down and determine any special challenges the new employee mighthave. If it’s transportation, vouchers may be helpful (there are tax creditsthat employers can take advantage of in many cases). If it’s child or eldercare, a resource-and-referral service could be useful. The employee might beeligible for an earned income tax credit, and this should also be examined.Marriott has a special toll-free hotline for its welfare workers to call withany kind of adjustment questions. However, this isn’t absolutely necessary.

What is necessary is to provide a supervisor, co-worker or some sort ofliaison that can help the employee balance an often hectic home life with work."The early days of employing these people are critical," says Betof."This is a population that tends to have a lot of day-to-day life crisesbecause they’re always living very tightly with rent and utility payments. It’sa difficult transition, and they need support."

During the first days, HR also must dispel any misconceptions management hasabout former convicts or welfare recipients -- they shouldn’t be thought of ascharity cases or as risky people to be around. They also shouldn’t beidentified as such in the general workforce. Supervisors should be informed sothey can understand the issues, but there’s no need for co-workers to know aperson’s past history -- it’s too easily stigmatizing.

Finally, check in early and often with both the worker and the supervisor:Quick intervention in trouble areas can make the difference between gaining agood employee and losing a poor one.

Training -- and lots of it -- is a must
When Ackerly hires a new employee at Mini Maid, the learning begins rightaway. She has a strict structure and clear rules. "More than likely aperson on welfare was born on welfare," says Ackerly, who worked with NewtGingrich on welfare reform in her home base of Marietta, Georgia. "So whenyou find someone who wants to break away from that, you have to start almost atthe beginning: You have to come to work every day, you have to be courteous. Anemployer has to create a culture for the individual. You go into it with amindset of total retraining. Be patient, be kind. They’re born in chaos andthey live in chaos."

While training may include such basics as attendance and interaction, theemployer needs to meet the worker halfway. Because a lot of the Mini Maidemployees can’t read well, the company color codes all the cleaning materials,so the employees know the difference between furniture polish and disinfectantwithout having to read the container. Most of the instructions are givenverbally, because the workers digest oral instructions more easily thanstruggling through written ones. Anything that can be done to make thecommunication easier is done.

Planning for negative outcomes is also helpful. At MicroWarehouse Inc. inNorwalk, Connecticut, the training for the telesales people -- many of whichhave limited work experience -- focuses on how to engage customers and how tohandle impolite reactions.

"Our outbound telesalespeople make a lot of calls every day, and a lotof them are cold calls to companies we do no business with, so there’s lots ofrejection," explains Bruce L. Lev, executive vice president of legal andcorporate affairs. "You warn them, you give them techniques on how to dealwith rude people, and you alert them that this will happen. The more you canprepare them that this is a reality, the more luck you’ll have."

At International Laser Group, the company uses what Michaels describes as"Zen training," which is particularly useful to its workforce. Of the100 employees, about 30 are in halfway houses or are recent parolees. Thecompany began such hiring accidentally: An employee on a work-release programturned out to be particularly valuable, and the company, in need of moreworkers, began hiring more former convicts -- though none were involved inviolent crimes. Zen training constitutes a focus on the employee’s particularjob -- telesales -- but also on becoming a more complete person.

Workers begin with the company’s first commandment: Always be honest."Most of these people have led lives of complete dishonesty with themselvesand their families," says Michaels. "You need to get them to acceptresponsibility and not blame others for their problems. It’s not easy -- mostof these people were in gangs. [Try meeting] someone in a gang who’s willingto listen and learn." To address this, the company has a very strongphilosophy of mentoring, and Michaels says he continually reminds employees thatthe company won’t let them fail.

Such psychological reinforcement is important. Ackerly, for instance, iscareful to compliment employees on something before she gives any criticism, andshe regularly reminds frustrated employees of the rewards of work. A taste ofsuccess early on is mandatory -- the challenges are large and these newemployees can be easily frustrated.

In that vein, increased work loads and responsibilities should be doneincrementally, with the employee’s cooperation. MRO Advertising, the firm thatcreated the ads for Philadelphia’s welfare-to-work initiative, has hired twoformer welfare recipients in the past year.

One woman, who began as a receptionist, seemed able to take on much more. Thecompany began slowly allowing her to handle billings and other responsibilities-- until she was promoted out of the position altogether. "In this day andage, you’re pretty much thrown into the fire and either sink or swim,"says CEO Frank Keel. "We couldn’t do this with these women. They werecoming into the workforce for the first time in years. So we made a concrete,conscious effort to be hands-on and supportive. The biggest thing from ourperspective was to make sure they understood there were no dumb questions. Thefear of seeming ignorant is a big fear and a cause of failure in the past."

Ackerly’s Mini Maid training is similarly tackled in "littlebites," starting with showing up for work each day on up to becoming a teamleader and a franchisee. With more responsibility comes more rewards. "Ourbusiness is literally run by individuals who are unskilled, uneducated and whoselives are typically out of control," she says. "And the job they do isphenomenal. It’s because of rewards and training."

Be prepared for disappointments -- and pleasant surprises
Although training and good management help, they’re no guarantee. Ackerlyadmits to getting burned out. For one thing, just employing people consideredunemployable takes a lot of work. There are more emergencies for child care,home issues, even having to miss days of work to wait in line for governmentaid. Turnover is the rule rather than the exception. Nationwide retentionstatistics for welfare-to-work employees are shocking: Approximately 46% of thepeople lose their jobs in first three months. By six months, 63 percent haveleft their jobs. Seventy-two percent lose their jobs within 12 months. The mostcommon reasons are absenteeism and conflicts with co-workers or supervisors.

However, the high cost of turnover isn’t as high as HR might expect. JamesEssey, president of TemPositions, a temporary staffing agency in New York City,found that although there may be higher turnover, there are plenty of tax breaksthat make taking a chance on these people feasible. He was driven towelfare-to-work organizations after the economy drove most of his workers intoregular jobs. But through such programs as the Targeted Jobs Tax Credit and theWelfare-to-Work Tax Credit, employers can get up to 40 percent of the wages paidto individuals back in the form of tax credits for two years -- at which pointthe employees are at little risk for turnover. Other good news: Studies showthat companies with good support systems and training fare much better.

Still, you may take some hits. Ackerly says too often company effort isn’tenough. Some employees have psychological problems, others fall into pressurefrom spouses or friends who are threatened by their success. Many have drug oralcohol problems. Not too long ago, Ackerly had to fire an employee sheparticularly liked because the woman stopped for a beer on the way to clean ahouse, and drank it in a company car. It’s not uncommon.

"We have a lady now who just can’t get her life together," saysAckerly. "She does a good job when she’s here and she’s sober. Shepromises you, and the weekend comes and she just capitulates toward her formerlifestyle. You can’t take it personally. You’re going to have successes andfailures."

Michaels has similar issues with his work-release employees: He loses about20 percent -- to depression, drugs or lack of work ability. Some leave andreturn. Some don’t. Both Michaels and Ackerly fight for the ones they can.

Ackerly recently demanded to speak with the local district attorney for anemployee of hers she felt was being abused by the system. She remains anadvocate for many. Michaels testified at a parole hearing for an employee who’dbeen thrown back in jail on a technicality. "It drove me nuts. This was aguy who was a success of the system," he says. Michaels got testimonialsfrom other people at the company, and testified with the employee’s father.The board released the man. Such rewards, says Michaels, more than justifies theextra effort -- and the payoff is big. One employee who’d been in jail forfive years is now a senior account representative, and was able to regaincustody of her children. "They’re so grateful someone gives them anopportunity to go from a place of desolation to a real life," saysMichaels.

In the end, it goes back to the economy: More people in more jobs ishealthier for pretty much everyone. It’s a challenge, but one that can payhealthy dividends. "It’s a great thing because not only are companieslooking at a segment of the population they’ve ignored in the past, but alsotechnology burst upon us so quickly we haven’t caught up yet -- and this isfueling that catch-up process," says Challenger. "The more educatedand trained our workforce, the more competitive we are with the rest of theworld." In the end, there’s really no such thing as an economy that’stoo good.

Workforce, October 1999, Vol. 78, No. 10, pp. 34-40-- Subscribenow!