Businomics Blog

Many Roads Lead to Success

The ace high-tech recruiter Connie Dorrigan just released a little survey of keys to success, including the best economist for business consulting. Click here to read Many Roads Lead to Success.

Non-tech businesses are at risk from the technology boom

Non-tech businesses are at risk from the technology boom. Do you run a medical clinic, a retail chain, or a manufacturing company? You are at risk of losing important talent—greater risk than may be obvious. However, strategies to retain your geeks can help you survive.

You may say, “It’s not fair. My business is not booming. Why should I have to compete with LinkedIn, Facebook or Apple?”

Okay, it’s not fair. Didn’t your father tell you life isn’t fair? But it’s the reality.

Even non-tech companies risk losing their IT employees.

You may think that your information technology staff lack the cutting edge skills so valued by Silicon Valley start-ups, but don’t be so sure. For example, a hot area right now is creating apps (short for applications) for cell phones. “Gee, my guys don’t know anything about that,” you think. Wait. Are you sure they are not writing cells phone apps in their spare time? Some of the iPhone apps have made their authors millions of dollars.

iPhone apps are written in a version the C programming language, while Android apps are written in Java. Some of your people are programming in these languages right now. If not, they would probably be comfortable coming up to speed on a new programming language.

Once your people know C or Java, they learn about some tools provided for free by Google or Apple to help people write apps. For simple apps, this is all that’s needed. For more complex apps, the programmer may need to write some code for the app to read and write from a database. There’s a good chance that your company’s programmers write that kind of code every day.

There are certainly some extra tricks that the programmer will have to learn to do a great job writing a smart phone app, but these tricks are learnable.

This is just one example. There are many more possibilities, though some of your staff won’t fit into the new world. A person who mastered COBOL 30 years ago and does not want to learn anything new will be a stable, reliable staff member. Your bright, ambitious people, however, have already started wondering what life would be like elsewhere.

The connection between the tech boom and your company applies even if you only have people with fairly basic skills. Consider:

• Joe works at a large medical clinic. He is competent in Java, experienced with complex databases and optimization.  He takes a job at a glamorous high tech company.

• Sally works at a manufacturing company, writing small programs in the C++ language, mostly focused on making database information more useful to managers. After Joe leaves, the medical clinic decides to hire Sally. She isn’t as qualified as Joe, but she can do the job and she’s anxious to leave her current employer.

• Fred works at a retail chain. He has been taught to run queries on the company’s database. He took one programming course at the local junior college. Although he’s not the manufacturing company’s ideal candidate, they hire him to replace Sally. Nobody better qualified was available.

As we economists sometimes say, everything is connected to everything else. The tech boom is trickling down to workers who are only mildly techie.

What’s driving the tech boom, and will it continue?

The most obvious cause of the tech boom is the rise of social media, such as FaceBook and LinkedIn, but they are actually symptoms of a more general cause: near-universal Internet access enables hugely more valuable improvements. Let’s begin with the obvious: young people who describe themselves as not heavily into Facebook are spending about one hour per day on the site (based on my small sample of friends and family under 30).

LinkedIn’s value to business is not so obvious without an example. My sales rep cold-called a woman in Sacramento. I entered the woman’s name into LinkedIn and found that she had a connection to a client of mine in Seattle. I emailed my Seattle guy, and he said that he knew the Sacramento woman pretty well, her boss even better, and he’d be delighted to recommend me to her. That’s the kind of connection we lost when we moved out of small towns.

As we see more and more good software, we demand more and more features. When I converted my paper address book to a database on my PCjr, back in 1985, I was enthralled that I could print labels for Christmas cards. Now I expect Act!, my contact management software, to not only keep names and addresses, but also history of all my contacts, random notes that I’ve chosen to add about the contacts, as well as my calendar. I synchronize my Act! database with my smart phone, so I have phone book and calendar on my cell phone. Now I wonder why my contact database does not synchronize easily with my accounting program.

In short, I want more and more connectivity, more ease of use, more applications that are easily tailored to my needs and wants.

The ability to make better software drives demand for better software. If I see a good feature in one program, then I want that feature in other programs.

The economics of programming further stimulates demand. I want a cool feature, like my calendar should remind to book air travel four weeks before a meeting scheduled more than 150 miles from home. A programmer works on the feature, giving it some flexibility to suit other users with similar but slightly different needs. Once the programming is done, all users can use it without any further resources allocated to the project. Once and done. If I’m the only person who wants a feature, then the feature will be pretty expensive. If, however, my need is typical of thousands of other users, then the cost per user is pretty small.

What does the future hold for tech demand?

Have all the programs been written already? I heard that said by a business professor advising a student not to major in computer science. The professor said that we had payroll programs, accounts receivable programs, etc. We had all business functions covered, so all that programmers would be doing in the future is mundane, boring adjustments to the existing programs. I heard that advice (I was an economics professor overhearing the conversation) back in 1978. Wow! What a spectacularly bad forecast, though one with a certain logic behind it.

I’m still not able to do everything I would like to be able to do on a computer smoothly, effortlessly, and without risk. Certainly there will be further demand for programming skills in the future.

What about the supply of programmers? Here the news is bad. Many students shun classes that require math. A report by Dice, a computer job website, quotes Joe Omansky, who is in the venture capital world, “There’s a definite lack of supply of high-level talent.”

What about talent that not so high level? Professor Tim Lindquist at Arizona State says “I can’t tell you the last time I had a student, even some of our poorer students, tell me they had trouble finding a job…. We have weekly requests, very consistent, looking for people.”

How to retain your IT staff

The first step is to recognize that your programmers, like all other employees, want recognition for their work. If the boss isn’t giving out pats on the back for good work, either re-train the boss or fire him.

The second thing that programmers want is to do good work, to earn those pats on the back. They want good tools and support. There are details of the programmer’s world that won’t make sense to non-tech executives (such as source control and daily builds), but if you ask your staff members what you can do to help them be more productive, they’ll help you learn.

Programmers want challenges. They are generally people who love programming, with relatively few people who hate the work but take the job because it pays better than Starbucks. Throw some hard problems at them, and then celebrate their success.

Help them build their skills. The programming world is not so much about credentials as about ability. Good programmers are looking to upgrade their skills. In fact, some choose jobs not so much on the money they’ll be paid as on the learning environment.

Techies want to work with peers who are technically good and highly motivated. It may be easier to retain two great programmers than to retain just one. Facilitate interaction and cooperation. If one of your key people leaves, be especially careful not to lose that person’s friends.

Pay them a competitive wage. Notice that this one comes last. Adding more pay won’t help you retain workers subjected to a bad boss.  People will tolerate being underpaid when they like their job, their co-workers, the challenges and the environment. However, at some point lower pay starts to rankle and irritate. If the boss is having a bad day just after a programmer looked at the salaries other people are getting, there may be a “take this job and shove it” moment.

Keeping tech salaries competitive can be difficult when the company as a whole is struggling. There may be a pay freeze in place, or at least a very “careful” attitude about raises. In a sector of the economy that is not doing well, caution regarding salaries makes sense. However, it won’t help the company to lose its technology talent. You lose some folks because you wouldn’t pay them ten percent more, and you may learn that their replacements needs 20 percent more. It’s vital that human resource personnel stay in touch with tech salaries, which recently have been rising far faster than most other types of jobs.

The tech boom is real, and its threat to non-tech businesses must be addressed. Like so many business problems, it’s not so much about technology as about old-fashioned management. Good management finds a way to keep talented people. More important, they know when they have to make an extra effort to do so.

Manufacturers Are Hiring--When They Can Find Talent

Back in January I wrote:

"The economy will gradually improve over the course of 2011, which is mostly good news, but will present some challenges to business. Notably, your best employees will have opportunities at other companies. You may still be hunkered down, with no bonuses or raises, making you seriously at risk of losing key staff members."

Today's Wall Street Journal headline pronounces "Help Wanted on Factory Floor." I love saying I told you so. Companies are having trouble finding factory workers for several reasons. Some of the folks they downsized in the recession went into retirement. The flow of new people headed into manufacturing has dwindled. The young people who have the math skills to succeed in a modern factory usually head to college.

The bright news is that the young people who do go into manufacturing work are making good wages, usually with no college loans to pay off. The bad news is that many companies won't be able to ramp up fully because of a lack of talent.

Every business should be ready to expand its staff. If you don't have a plan to hire, develop one. You may not have the sales to justify executing the plan right now, but that's OK.  Developing the plan ahead of time is crucial. Some of the things you'll want to do require a little bit of effort months ahead of time. Having your expansion plan will enable you to hit the ground running when the time comes that you need to hire.

Call me if you need help. Although I'm not an HR expert, I've seen plenty of good practices, and I can coach your people on developing their own plans.

You might also want to check out the complete list of 11Business Challenges in 2011.

Human Resources Management in the Economic Recovery

Sometimes I say something that seems obvious to me, and people in the audience start taking notes.  "Aha!" I say to myself, "maybe that wasn't so obvious."

This week I was in Las Vegas presenting a course on how the global and local economy effects foodservice, with historical perspective, for the Women's Foodservice Forum.  I mentioned that the quit rate, the percentage of workers who leave their jobs voluntarily, dropped in the 2001 recession and its aftermath; then rose when good times returned, then plummeted in the 2008-09 recession.  Quits are still running very low.

Here's a practical use for the economic insight.  You have a manager, and you see tell-tale signs that he may not be doing a great job with his subordinates.  But you don't see a high turnover rate among those subordinates, so you ignore the problem.  What do you think will happen when the economy recovers?  Yes, his people will quit as soon as they can find other work.  As Warren Buffett said, "You only find out who is swimming naked when the tide goes out."

Actually, it's not impossible to find out now, when the tide is in.  Look closely for signs of employee discontent.  The signs will be more subtle, but I bet they are there.  Warning: if you wait until the employees start quitting, you've waited too long.  Good employees will again be hard to find, and sooner than you might think.  So make sure that all of your supervisors are encouraging staff members, and showing them the respect they deserve.

Incidentally, the Women's Foodservice Forum got rave reviews from all the attendees I met (even those who did not attend my sessions).  If you are in the business, whether at a junior level or a senior level, plan on attending next year's forum.  And men are welcome!  I had looked forward to being the smartest man in the room, but there were a few guys in both my sessions.

Unemployment, Wages and Quits: Slack Labor Market

The headlines will go to the rising unemployment, but there's other interesting labor market news.

Not a surprise, but the number of workers voluntarily quitting is down.  Folks are sticking with the devil they know (or at least the boss they know).

The slack labor market is reflected in modest wage gains:

Business Planning Implications:  If you need talent, this is a good time to pick it up.  Don't dawdle.  Labor markets will tighten up next year.

Don't forget that we'll soon be entering the era of very slow gains in the labor force.  The current slackness should not lead to poor employee retention behavior.

Salaries for College Graduates: Economics Near the Top

The Wall Street Journal published a list of starting salaries for college graduates by major (subscription required).

At the top of the list is engineering ($49,707), followed by computer programming ($46,775), mathematics ($46,405) and economics ($43,419).

What's critical here is that we're talking first job, not lifetime earnings.  Now it's probably true that over a lifetime, engineers make more than philosophy majors (the major at the bottom of the list) on average.  But there are plenty of philosophy majors who have done very well for themselves--just not in theie first jobs.

My experience in economics is that the highest paid starting jobs went to those with the best quantitative skills.  But the best second or third jobs or positions went to those with the best communication skills and understanding of "big picture" issues.  Some of those folks with majors farther down the list may look stronger ten years out.

However, one factor that could be at work is how challenging the course work is.  There are harder courses and easier courses.  No one with a chemical engineering degree is ever accused of taking only easy courses.  The job market may be rewarding not specific skills, but proof that the student went into the very hardest courses and came out alive.  That's a valuable trait even if the subject matter is not terribly important.

Employee Retention of New Hires: Best Practices

Even with the economy turning down, employee retention is important.  The cost of hiring, training, and supervising new employees is substantial.  If a person leaves before the company recoups all of these costs, then turnover is a significant cost.  It's only going to get worse in the coming decade, when baby boomer retirements match new entrants to the labor force.

The Aberdeen Group has just released a new survey of best practices (free, but registration required) for retention of new hires.  Their key points:

The report was based on a very broad survey, covering different industries and different size companies, including large corporations and small businesses.  Every senior executive should address employee retention, and browsing this report is a good way to get started.

Shrinking Middle Class? Drew Carey Says No

I wouldn't normally look to a comedian for economic commentary, but Drew Carey combines an interview with economist Michael Cox with some eye-opening interviews with . . . maybe they were fat cats or maybe the middle class. 

Watch the video (from Reason.tv) and see for yourself. (Hat tip to Russ Roberts.)

Hiring Retirees to Cope with Tight Labor Markets

The Wall Street Journal has a good article (subscription required) about companies re-hiring their retirees to cope with tight labor markets.  These companies often use the retirees for part-time or temporary positions.  The article featured Schneider the "transportation and logistics" company (which I would have called a trucking company), but the Immigration and Naturalization Service recently announced plans to bring back retirees to help clear the agency's backlog (reported by the AP).

I've posted before on the importance of bringing older workers into the workforce, (such as here).  I think it will take some experimentation to get work the bugs out of a retire hiring program.  Your retirees are likely to want more flexibility than when they were regular employees.  A big part of why they will return to work is to feel that they are doing something useful, so make sure to express your appreciation.  It will probably help if you facilitate social networking among your retirees.  Some retirees find that they are cut off from their old social connections; work can help them.

We're still a few years away from the real labor crunch, but it's coming.  The businesses that thrive in the next decade will be those that are experimenting now.

Professionals Working from Home

The Wall Street Journal recently ran a column by Sue Shellenbarger (subscription required) about professionals working from home.

This subject should be on the strategic planning radar screen of all companies with employees.  Here's why:  in the decade from 2010 to 2020, there will be no net growth of the working age population.  That's because the baby boomers will be leaving their working years, and their children (the "echo boom") will have already entered their working years.

If your long-run business plan has growth of the number of employees next decade, you will have to steal those employees from some other employer.  How do you do that?

I'm not sure how best to do that.  I'm pretty sure that you don't know, either.  But I know the way to learn is to experiment.  Try some folks working from home.  Try hiring some retirees who get more flexible hours.  Try tapping into non-traditional labor sources, such as immigrant  communities.  Try using some high school grads where you previously used college grads.  Try different things, because there may not be one best strategy.  Even if one strategy proves best, you'll have to work out some bugs.  You may find that if you hire work-at-homes, you need different hiring criteria, different monitoring systems, different compensation systems.  The time to work out the bugs is now.

I've talked about this in my speeches to corporate executives, and I don't seem to get much traction.  I fear that many business leaders are thinking, "Yes, that's a problem, but I retire in three years, so it's not MY problem."  Actually, if a person is thinking that, he doesn't deserve the label "business leader."  But if a business is to survive, someone at the top needs to sponsor some experiments to figure out how to deal with the labor dearth of the next decade.