Employees aren’t assets, they’re selling a service

In the not-too-distant future, recruitment and retention will reflect supplier negotiation

In spite of continuing concerns about the economy, the war for talent is resuming.

Many industry sectors, other than information technology occupations, are beginning to forecast labour shortages in 2003. In some sectors recruitment challenges have remained intense. For example, in health care, recruitment continues to be increasingly difficult year after year.

Although layoffs grab the news headlines, increasing shortages in some occupations are also receiving media attention. Recently released census data that puts figures on the aging of the workforce is fuelling more discussion of the long-term shortages in professional and skilled trades occupations. (See “Workforce going grey,” by clicking on the link at the bottom of this page.)

For more than a century, the importance of recruitment and retention programs has varied with changes in job market and economic conditions. In times of recession, unemployment was high and recruitment and retention was an administrative matter given a low priority. When the economy boomed there were severe labour shortages and recruitment and retention took on a strategic focus with high priority. But in the last decade, and for years to come, these rules didn’t, and won’t, apply.

Virtually every developed country is experiencing an aging population, which means that experienced employees are leaving the workforce faster than young people are entering the labour pool. These conditions will continue for the next 15 to 30 years.

The situation is rapidly becoming critical for occupations that require high levels of education and work experience. In health care, severe job shortages are being experienced in a number of occupations.

The ability to deliver quality, timely health-care services is increasingly constrained by the shortage of professionals.

A similar pattern exists in other developed countries. With an international shortage, the competition for people with skills in short supply is creating global job markets for an increasing number of occupations. Through the Internet, Canadians are rapidly gaining access to job opportunities worldwide.

Organizations dependent on highly educated and skilled employees will experience sustained cutthroat competition for talent for the working life of current employees. The ongoing shortages will become so severe that some job markets will remain tight even during recessions.

The bottom line is that the traditional pattern of recession/high unemployment versus boom/severe shortages will disappear. Organization growth will depend on the ongoing success in attracting, retaining, developing and utilizing every employee.

The effectiveness of an organization’s HR strategy and programs will determine the success of the business. In a global marketplace, Canadian employers need to be able to compete against employment conditions outside traditional boundaries.

Employers must also change the mindset towards the employer/employee relationship. The job marketplace is becoming a buyers’ market with negotiating power shifting towards employees as their job opportunities increase.

With breakdown in the linkage between economic and job market conditions, there needs to be a shift in the approach to HR management practices.

In particular, there are fundamental shifts in three related paradigms related to recruitment and retention.

The first HR management paradigm shift is that using layoffs to reduce costs will become obsolete as a managerial tool. As skilled people become increasingly hard to recruit and retain, using layoffs as a short-term cost control measure will become associated with committing organizational suicide.

The second HR paradigm shift is that the traditional expectation of long-term job security is evolving into a concept of term or contingent employment. Employees will remain committed to an employer only as long as the employment conditions and rewards are comparable to other opportunities available in the marketplace. Employees, especially those who are highly skilled and mobile, are changing from “assets” of an organization into vendors of skills, expertise, knowledge and time.

The third paradigm shift is the transition of human resource management practices to reflect supplier management practices. Skilled employees are becoming the most critical suppliers of essential services for an organization.

Recruitment and retention will increasingly resemble contract negotiation and supplier care practices in a sellers’ market.

What does it mean to view employees as suppliers?

Organizations must abandon the popular idea that employees are an organization’s most important asset. Employers need to think about employment as a long-term leasing contract with a two-week cancellation clause.

A better concept for an employer would be that: “The competitiveness of our employment relations is our most important asset!”

This means selling the attractiveness of the terms and conditions an employer offers to an employee. It is the total value of the employment relationship that determines whether employees will continue to sell their time, talents and energy to an organization. A competitive employment “contract” is effective in first attracting someone to join an organization and in retaining that employee as a motivated and energetic member of the workforce.

For HR, the challenge is to make sure that the organization’s employment contracts, with either occupation groups or individuals, are competitive in the appropriate job markets. These may be in the form of collective agreements, policies covering compensation, benefits, and conditions of employment, or formal contracts. In assessing the state of current employment contracts, a place to start is to ask the following three questions related to business critical individuals or occupation groups.

If we had to recruit today would we need to search locally, regionally, provincially, nationally, or internationally to be successful?

Would we be able to attract new employees in this broad job marketplace if we offered them the same employment contract that our current employees receive?

What makes it attractive for current employees to stay with our organization?

The answers will help set the course for future initiatives.

Brian Orr is the vice-president of human resources, learning and communications at the London Health Sciences Centre in Ontario. He may be contacted at [email protected]

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