The Coming Storm Part 1
April 10, 2006
The Coming Workforce Storm
By: Gregory P. Smith
We can see a storm on the horizon.
The U.S. economy added 2.2 million jobs in 2004, the highest rate of job growth since 1999. Economists expect the nation to add a similar number of jobs in 2005. However, the improving economy will influence the workforce in several different ways.
Job Skill Shortage. We do not have enough quality people equipped with the right skills to fill all the jobs available, and it's going to get worse--a lot worse very soon. Many of these shortages are found in the skilled trades such as heavy equipment mechanics, construction, truck drivers, healthcare, and certain jobs in the IT sector to name a few.
Shortage of Workers. The aging workforce is an issue businesses need to address. The simple truth is this country is not having enough babies. The growth rate of the workforce has been steadily declining since the 1970s. Both the U.S. Census Bureau and a report from Accenture Consulting indicate the workforce will begin to experience a negative growth rate beginning in the year 2015.
Consider the 45- to 65-year-old workers, who census figures show is the fastest growing demographic. Estimates indicate by year 2020 one out of every two people in the U.S. will be older than 50. These older workers are willing to stay in the workforce longer or even reenter it after retirement.
Yet most businesses continue to cater to rapidly diminishing younger workers. A survey conducted by the Society of Human Resource Managers shows 65 percent of companies surveyed exerted no effort to recruit older workers for open positions. Eighty-one percent did not have benefit plans designed with older workers in mind.
Unwanted Employee Turnover. As the economy grows, employee turnover will rise significantly. Research my company has conducted shows a large portion of the workforce is getting ready to "abandon ship" as the economy improves. Employees are looking for better benefits, career advancement, and greater job satisfaction.
A survey conducted by SHRM, Society for Human Resource Management, showed "83% of employees said it was "extremely likely" or "somewhat likely" they would actively seek new employment once the job market and economy improves."
The Cost of Turnover Costs More Than Most Realize
The cost of attracting, recruiting, hiring, training, and getting new people up to speed is tremendously more costly as well as more wasteful than many realize. This equates to allowing your house to burn down when you could have purchased an inexpensive smoke detector. Prevention is always less expensive and wiser use of your resources.
Labor costs are the most expensive aspect of running a business. Even though all businesses measure profit and loss, they rarely consider how much turnover is actually costing them. Just consider--the annual turnover costs of a typical healthcare system range from $14 million to $27 million per year according to Unifi Network, a subsidiary of Price Waterhouse Coopers LLP.
Studies show it costs $4,000 - $7,000 to replace an hourly low-wage employee and up to $45,000 to replace a mid-level salaried employee. One Silicon Valley company estimates the cost of replacing the average employee is over $125,000. The Saratoga Institute and Hewitt Associates estimate the productivity cost of replacing employees can cost 1 to 2.5 times the salary of the job opening.
Second, productivity is directly tied to retention. Companies with high turnover are at risk for low productivity. Studies from the Gallup organization show employees who have an above-average attitude toward their work will generate 38 percent higher customer satisfaction scores, 22 percent higher productivity, and 27 percent higher profits for their companies.
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Greg Smith is a nationally recognized speaker, author, and business performance consultant. He has written numerous books and featured on television programs such as Bloomberg News, PBS television, and in publications including Business Week, Kiplingers, President and CEO, and the Christian Science Monitor. He is the President and "Captain of the Ship" of a management-consulting firm, Chart Your Course International, located in Atlanta, Georgia. Phone him at 770-860-9464. More articles available: http://www.chartcourse.com
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