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Everything in the universe runs in cycles. From mites to men to mountains to stars all proceed from birth through growth to decline and inevitably death. In mites the cycle may run only hours or days. For stars the cycle is measured in millions or billions of years. Still, for everything, the cycle is inevitable.
This natural phenomenon applies as well to economics and inside that, the labor market. Just after WW II the American economy was relatively small compared to today. And until the 1970s economic cycles were not so severe. Today, the growth and decline appears to be expanding with the apexes and nadirs occurring more frequently. Consider that since 1978 we have had stagflation, followed by recession in 1988, dotcom bust in 2000 and credit crunch in 2008. Each of these had a significant to profound effect on the labor market.
A Look at Unemployment History
If you take the time to review the post WW II labor market in the United States you see a continuous rolling unemployment curve with peaks and valleys about ten years apart.
Source: Bureau of Labor Statistics
What Effect?
What happens if you misread the direction of the curve? To see the impact of missing a cycle consider this case. In the 1970s and 1980s the company was a greatly admired powerhouse in the two way communications and semiconductor industries. At that time the company was number one in communications and number two in semiconductors. Under the leadership of the founder’s son the company exploited six sigma for its fullest benefit. However, when he retired in the 1990s through internal miscommunication between sales and human resources the company suffered mightily.
During that decade they misplayed the cycle of bookings versus hirings. As bookings rose, hiring froze. As hiring took off, bookings fell off. This happened three times within the decade. It cost the company over one billion dollars in hiring and layoff costs. If you have followed this great organization you know it has never recovered at least partly due to the way it managed its human capital. With all the coming and going there was no continuity and product innovation fell off. CEOs have had short tenure and business lines have been sold off. Today the company is on life support trying desperately, perhaps futilely to recover. It is Motorola.
The Point
At the start of 2008 the shortage of skilled personnel in North America was a major problem. Every HR journal carried stories on how to find and keep talent. Yet, by the end of the year America was on the threshold of another major downsizing. It was 1989 déjà vu.
By the time this edition of TM reaches you where will your organization be on the cycle? Will you still be floundering in the nadir or turning upward again? Will you heave a sigh of relief as the company bottoms out and layoffs cease? Will you frantically begin to build strength to handle new hire growth? Either way, what have you learned about managing human capital? If you have not learned from this latest cycle you may become another Motorola.
The Lesson
No matter which way the cycle is running the winners stay ahead of the curve. They do this through a combination of planning and risk assessment. This takes place not only in sales and production but in human resource management as well. The secret is two fold.
First, human capital is managed forward. No one waits to see which way the market is going. Planning applies business intelligence tools. Data mining, competitive intelligence and human capital analytics are brought to bear in an effort to foresee market changes before they happen. Rather than benchmarking what others have done or are doing the smart people are scanning the field for signs of future turns.
Second, statistical analysis in the form of process optimization tunes up hiring, developing and engagement processes. Analytic tools are available to everyone. There is no great mystery in them. You can find people who are skilled in statistical analysis. The trick is not in the stats. It is the combination of a predictive management model enabled by human capital analytics.
As the Market Turns
I don’t claim to know which way the market will move tomorrow. As I am writing this in July there are signs that we might be bottoming out. If I were in an HR executive’s chair today I wouldn’t be asking what someone else is doing. I would be working predictively with marketing and finance gathering market signals and making plans for tomorrow, today.
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