EMPLOYED AND UNEMPLOYED LOGS

EMPLOYED AND UNEMPLOYED LOGS/Image: Michael Moffa

Imagine, as some cynics do, that your job in supplying “human resources” is to source workers like logs. Within that paradigm, one way your profit—personal or corporate—can be maximized is by maximizing the flow-through of employee logs to your company or client companies.

As a business model, this one has greatest relevance to independent recruiters with multiple clients and a busy phone. Place as many candidates as quickly as you can. In contrast, a company HR manager is more likely to find a different profit-maximization model more relevant and appealing: maximization of total profit—again defined either as personal or corporate benefit.

Two Models  with Clear-Cut Differences

These two profit paradigms, exemplified in the logging industry, correspond to two ways of harvesting trees:

  • Maximization of rate of ROI (Return on Investment)
  • Maximization of total ROI (or of average ROI, if the average is a “final” rather than an interim or “moving” average).

In the logging industry, the difference between these two is the contrast between hit-and-run, short-term-focused clear-cutting a forest and more prudently harvesting it—the former allowing for very high short-term profits, but with long-term vanishing gains that disappear along with the clear-cut forests, while the latter forest conservation model, in practicing indefinite continuation of harvesting through farsighted forest management, assures—in theory—infinite profits.

But note the presumed difference between the clear-cutting logger and the busy recruiter: Ostensibly, the busy recruiter is not exhausting his human resources by “harvesting” them as quickly or in the greatest numbers that he can. In fact, unlike the logger, the recruiter can eat his cake—or bread and butter—and still have lots more left for tomorrow and beyond, especially if the number of unemployed and those desiring to change jobs stays high or goes higher and also—very importantly—if the number of jobs offered does not correspondingly diminish as part of a broad supply-and-demand downward, recessionary double-dip spiral.

Recruiter Hydraponics

Ideally, but defying theoretical economic commonsense, the perfect business money-making whirlwind-spawning storm is to have both the number of unemployed and the number of jobs increase or at least remain very high. In that instance, the job market becomes like a clear-cut forest that regenerates overnight, like the mythological, magically regenerating decapitated Hydras each of whose nine severed heads would instantly be replaced with two. But, really, how likely is that? Under what circumstance could both the number of unemployed and the number of jobs increase, such that a recruiter would be dizzyingly hard-pressed to keep up with both soaring worker supply and skyrocketing employer demand, thereby ensuring that he could enjoy the benefits and profits of both the clear-cutting and conservation logging models?

Contrary to reflex expectation, there are, in fact, several macro-economic scenarios in which precisely such a twin-boom (in supply and demand) is possible.

High-Velocity Turnover Scenarios

The first is roughly analogous to the economic situation in which even though the supply of dollars is finite, through rapid cash transactions, those countable dollars can theoretically generate infinite income and business through their high “velocity”—with velocity defined as the speed, i.e., the frequency with which money changes hands. In recruiting, the equivalent situation would obtain if a finite number of employees changed hands, i.e., jobs, very frequently—with commissions, where applicable, for the recruiter who places them (assuming no client disillusionment with the recruiter’s hunting instincts). Given whatever reason for such a rapid employee turnover, each up-tick in (temporary) unemployment would be precisely matched by an up-tick in job openings and fillings: one person leaves the job, another is hired to refill it—a familiar process, but with altogether unfamiliar, anomalous and dizzying turnover speed.

Chances are that as even a micro-economic—let alone a macro-economic—phenomenon, this is probably not a desirable route to recruiter riches, since it is virtually certain, for highly skilled jobs, to have dire implications for productivity and efficiency, what with staff turnover being too rapid to prevent major business disruptions and inefficiencies, unless the jobs are non-professional, i.e., require virtually unskilled labor.

In concrete terms, the kind of economic environment in which such a “high-velocity”, clear-cut-yet-unlimited model would be most applicable is that of precisely those job sectors characterized by very high turnover and low skills, i.e., traditionally minimum wage jobs.

However, according to a recent Atlantic Monthly article, some employers, reportedly taking nasty advantage of the desperation of the legions of unemployed, including professionals, are offering probationary 60-day-period salaries at virtually minimum wage, ostensibly subject to “review”. If these positions can be refilled without significant disruption or inefficiency, this probationary salary scheme perfectly lends itself to the temptation to routinely replace the jobholder with another, as soon as that period is up, thereby fueling the high-velocity turnover cycle.

Alternatively, if, instead of lowering the job’s wages, an employer utilizes the marketing technique of “packaging to price”, i.e., maintains a wage attractive to employees, while piling on extra duties and hours (on analogy with keeping the price of a chocolate bar low by shrinking its size), employees who catch on to the ploy—however desperate they may be—may simply quit after their epiphany or disgust sets it. This “desperate-but-fed-up” cycle can easily fuel such a high-velocity, high-turnover scenario—at least in a micro-economic setting (the macro-economic equivalent requiring the reduction of much of the U.S. economy to a service-based burger-flipping without adequate ventilation or benefits model). With this kind of profile and dynamic, a business sector, if not an entire economy, can follow the clear-cut-with-instant-replenishment model, driven either by labor supply-side disgust or management demand-side greed.

The actual turnover data for the U.S. do not suggest that such a high-velocity model is or will imminently become the norm. “In the U.S., for the period of December 2000 to November 2008, the average total non-farm seasonally adjusted monthly turnover rate was 3.3%.[1] However rates vary widely when compared over different periods of time or different job sectors. For example, during the period 2001-2006, the annual turnover rate for all industry sectors averaged 39.6% before seasonal adjustments,[2] during the same period the Leisure and Hospitality sector experienced an average annual rate of 74.6%.”

The Interface of Disgust and Greed

Still, if cocky employers lower their ante in the hiring game and attempt to take excessive advantage of the labor buyers’ market that prevails now, the “desperate-but-outta here” workers may become more numerous, and soon joined in their ranks by their soon-to-be-disillusioned replacements. If this sounds purely hypothetical, consider this acerbic commentary by a frustrated job-seeker, cited in that  Atlantic article, “Jobless in America: An Anthology of Testimonials About Unemployment”, September 15, 2011:  “One ad stated, ‘60-day trial at minimum wage to see how it works out.’ So you can fire that individual and find some other poor schmuck to take a go at it?  Would I state in my cover letter that I’d like to work 60 days at minimum effort to see if the job is fun enough to stay?”

Clearly, this exasperated job hunter makes it clear that this kind of high-velocity, clear-cut-the-worker management business model is likely to be matched by a comparable and fed-up job-seeker paradigm: the clear-cut-the-cr*p model.

A clear implication of this pattern of high-speed “harvesting” of employees is that it closely resembles the forestry clear-cutting, short-term profit maximization model. That’s because as word spreads throughout the pool of applicants, that pool will dry up for the specific employer luring and exploiting workers by means of this bait-and-switch, “trial period” tactic. When the phones fall silent and the email inbox is empty, that clear-cutting employer may find himself literally and figuratively “stumped”, with no more “logs” to process.

On the other hand, employers (and recruiters) who adopt the talent-pool “conservation” philosophy will maintain a good reputation among job-seekers, and in the long run operate a more stable business and generate a far more stable income stream, even if a lower rate of profit. This means offering a fair wage and decent treatment—not only of placed candidates, but of all applicants.

The Boom-Time Model

There is, of course, a much less adversarial and gloomy high rate-cum-high average ROI model—one we would all love to welcome back: the boom-times model. Boom times mean, in one form, a humming, expanding economy with huge growth rates, a rapidly growing labor pool, e.g., a boom in the population of coming-of-working-age workers or returning soldiers eager for civilian jobs, combined with soaring demand for everything, including employees, domestic goods and services, and our manufactured exports and abundant natural resources. A workers’, recruiters’ and employers’ paradise!

Nice.

Alas, although not fiction, it’s only history. …

…like the rings of an unutilized, cleanly-cut log.



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