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August 21, 2001
Small Firms Losing the Talent War
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Increasingly, job-seeking managers and executives are rebuffing smaller firms in favor of larger employers, which they apparently perceive as being a safer harbor in the weakened economy, according to the outplacement firm Challenger, Gray & Christmas.
Without an infusion of skilled, experienced managers and executives, small businesses may have a difficult time getting back on track when the economy begins to recover, Challenger reports.
Only 54 percent of job seeking managers and executives went to smaller firms in the second quarter of 2001. That was 12 percent lower than the pre-slowdown second quarter of 2000 when 62 percent of job seekers took positions at small firms.

The numbers come from the latest Challenger Job Market Index, a quarterly survey of 3,000 discharged managers and executives.

The second-quarter figure was the lowest since the 53 percent recorded in the third quarter of 1990, the first year Challenger began tracking this data.

The second quarter contrasts to previous periods of economic weakness when a much higher percentage of jobless managers and executives went to small businesses. In 1992, with the economy in or near recession, 71 percent of discharged managers and executives found refuge at small firms.

"The migration of downsized managers and executives to small businesses in the early 1990s may have played a significant role in the expansion of these firms which, in turn, fueled heavy job growth into the late 1990s," noted John A. Challenger, chief executive officer of Challenger.

He suggests the apparent decline in this trend may be a result of small business' heightened link with the global economy.

"At the time of the last recession, small businesses, while not entirely shielded from the economy, offered slightly more job security than large companies which were basically slashing thick layers of middle management in an effort to become more streamlined and efficient," he said. "Today, many small firms are just as active as large corporations when it comes to importing and exporting, so when the foreign markets suffer, as they are now, small businesses are as adversely affected as their larger counterparts."

"Since small businesses today are just as vulnerable to economic conditions, if not more so, more managers and executives are choosing to confine their job searches to larger firms where they are more likely to start at a higher salary, have better benefits and receive a more favorable severance package if the job does not work out."

Further evidence that managers and executives are favoring large over small firms is the fact that fewer are starting their own businesses.

During the 1991-1992 recession, an average of 15 percent of jobless managers and executives started their own firms. Over the last four quarters, since the economy began to falter, the average percentage of managers and executives starting businesses has been a scant 6 percent.
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