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October 09, 2000
The Talent Wars Continue&with High Tech Workers the Prize
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NYVALE, Calif. -- Employment figures released Friday by the U.S. Bureau of Labor Statistics indicate that at 3.9 percent, national unemployment rates continue at the lowest levels in 30 years. Despite recent downsizing at some Internet and e-commerce ventures and the early demise of others, the tight labor market puts a strain on companies who continue to hire IT workers at a record pace. At 2.5 percent for San Francisco, and 2.2 percent for San Jose, the unemployment rate in major IT hubs is substantially lower than the national rate and drives fierce competition among employers for skilled workers.

Kombat musical chairs

"Essentially what's happening is a brutal game of musical chairs, where technology professionals who are laid off at a dot-com venture or who choose to leave a high tech company know full well that they can find another job immediately," said Doug Merritt, president and CEO of Icarian Inc. "For employers, finding the right employees in sufficient numbers can mean the difference between success and going out of business."

Although WebMD, AltaVista, and Novell all announced layoffs recently, this news needn't overshadow the fact that, overall, the IT and e-commerce sector continues to show strong growth. According to Challenger, Gray & Christmas, an outplacement firm, Net firms cut more than 4,800 jobs in September, but this figure represents a mere drop in the bucket compared to the steady demand for IT workers nationwide. In fact, growth in this sector continues to fuel the U.S. economy at large. "Internet-related employers added 650,000 new jobs in 1999 and now support nearly 2.48 million employees, up 36 percent from 1998," according to a report authored by Dr. Anitesh Barua and Dr. Andrew B. Whinston of the Center for Research in Electronic Commerce at the University of Texas at Austin.

Moreover, reports of layoffs may not capture the revolving door effect where skilled IT professionals leaving one job quickly take another. Demand for IT workers continues to outpace supply: employers will attempt to fill 1.6 million new jobs this year, and more than half of these will likely go unfilled according to the Information Technology Association of America. In particular, computer programmers, software engineers, Web designers, Web salespeople and marketers are in short supply.

Not A Uniquely Dotcom Problem

Brick-and-mortar companies in many industries are not immune from the talent war. Increasingly, traditional companies preparing to integrate e-commerce strategies into their business plans must hire IT workers and high tech savvy senior managers. These companies now compete with dotcom and high technology companies for candidates at crowded talent fairs. Last month, the BrassRing Career Exposition (formerly Westech), hosted in the Silicon Valley reported the largest turnout ever with 8,000 job seekers attending each day of the two-day event.

High Turnover Rates Can Be Deadly

Many of those out shopping for jobs already have jobs and routinely check the market for better prospects. Companies in Silicon Valley report astronomical employee turnover rates compared to the rest of the state. On average, the cost to replace an employee is more than $10,000 according to a 1999 study conducted by Aon America@Work. In addition to costly recruitment services, companies make significant investments in hiring and training. For companies racing for first-to-market status and for those whose future depends on deep product pipelines, the most costly outlay may be hidden -- the price of unfilled positions over time.

Arming for the Talent War

While human resources are scarce, companies are well advised to reevaluate employment-related practices to better adapt to the new requirements of a rapidly changing workforce. "Forward-looking companies are actively looking for ways to keep their current employees happy and productive," said Merritt. "New economy workers by and large respond well to open communication, they like to be involved in the workings of the company, and they value team work highly. Therefore, companies that implement a hiring and retention solution that decentralizes the decision-making process to include managers who will actually work with new hires have a competitive advantage over those who stick with slow, paper-based, hierarchical approval chains. And, companies that use an Internet-based workforce management solution that allows all employees to track their own career advancement are likely to do better in retention rates."

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