When the war for talent ground to a halt

The economy soured and recruitment plans were put on hold

The gloomy economic forecasts began early in 2001 — clouds were on the horizon and stormy weather on the way.

Over the course of the year, a growing number of businesses abandoned, or at least put on hold, long-term strategic plans and moved into reaction mode. To minimize the damage of declining revenues, they looked to reduce costs and for HR that inevitably meant taking a hard look at head count.

Just months before, seemingly every HR department in the country was searching frantically for employees and then suddenly many were looking at layoffs and hiring freezes, again.

Of course the responses were far from universal, but there is little doubt the recruitment and staffing picture changed dramatically in 2001.

“The general mood was just to put a freeze on everything,” said James Parr vice-president with Michael Stern Associates, a Toronto-based executive search firm. That was evident in the drop in business for recruiting and headhunters. Some of the big firms saw their business drop by 35 per cent, he said.

Gerry Walsh, of Gerald Walsh Recruitment Services Inc., a firm that services mostly small- to mid-size firms in Atlantic Canada, said that while recruitment slowed down throughout last summer, things got a lot worse after Sept. 11.

“People used Sept. 11 as a bit of an excuse to downsize people,” he said. Companies were suffering and their business was down slightly and that led to some large downsizing, particularly with the bigger firms, he said. Smaller firms weren’t sure how to respond.

“They didn’t have a lot of fat so they couldn’t downsize,” said Walsh. But if they couldn’t reduce head count they were reluctant to add to it. “We had a lot of search assignments put on hold,” he said.

Not all industries were affected in the same way, said Parr. Some of the more mature businesses, in industries like manufacturing, continued to do their best in terms of succession planning and were looking to find people that would enable them to continue to grow.

“We also saw continuing growth in the non-profit and some of the charity organizations. Our percentage of activity increased in that sector.” Conversely, recruiting for the technology sector virtually disappeared, he said.

But not all high-tech hiring stopped, said Kevin Dee, CEO of Eagle Resources Inc., an Ottawa-based high-tech staffing firm. “We’ve still managed to grow, primarily because of our Canadian business. The U.S. took a big hit,” he said.

Aside from telecommunications and the dotcom industry, every industry continued to need high-tech workers, said Dee. They placed a lot of systems integration people in government and the financial industries, for example.

They definitely noticed changes in the market and were under pressure to reduce their pricing, as there were more candidates available. “Clearly we are in the business to be profitable,” he said.

Just because there are more candidates out there and it might have been easier to find workers, Eagle could not forget about its margins, said Dee. “There is a line in the sand, and we won’t give any better deal than we give our best client.”

He said the organizations that stuck to their long-term strategies will be in the best position as the economy begins to recover. “Markets are beginning to turn around already. We are going to see a real shortage by this time next year,” he predicted.

Parr said it was difficult to think about long term plans in the challenging business climate that many organizations found themselves in.

“I think that when a crisis hits, people take a very short-term view. The last thing they stay awake thinking about is a shortage in executive ranks five years from now.

“It’s not an easy time for HR,” said Parr. Hiring freezes make it tough because existing employees often end up doing extra work. “We have got a lot of people who are quite stressed now because of the workload,” he said.

“A lot of senior HR people are kind of frustrated,” said Parr. They know where the weak spots are in the company and who they should be hiring but they have to wait for the go ahead to take some action and so far it hasn’t come.

Even if the economy is starting to pick up slightly, many senior business leaders in public companies have become distracted by the Enron scandal and are more concerned about ensuring they aren’t making the same mistakes and that they are meeting appropriate disclosure and transparency requirements.

Contrary to the popular response to stop hiring or looking for good talent, a downturn could actually be looked at as an opportunity to go to market and scoop up great talent, said Parr.

And even if you can’t afford to hire new people, it is important to keep in touch with high potential candidates so that when things do improve for your business, you’ll already have begun to develop relationships that reap rewards.

As for when recruitment activity will pick up again, Walsh said it already has. From about mid-December things have been steadily picking up again, he said. Businesses regained their footing and were looking to hire again. “They realized the world wasn’t coming to an end and they had to get on with their lives.”

But Parr said he still has not seen signs of recovery. “We hear about a turnaround beginning in the U.S., but we don’t really see any indication that people are turning on the taps at this point.”

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