Recruiting and Staffing Trends to Watch For in 2004

The U.S. economy has shown consistent improvement throughout the last half of 2003, after a sluggish first half. Corporate profits are strong, and many companies report beating financial analysts’ expectations. As of mid-November 2003, the Dow Jones Industrial Average is up about 15 percent for the year, while the Nasdaq Composite Index is up about 40 percent.

    Thus far, however, broad consumer confidence in the economic recovery has been tempered by the perception that it has been largely a jobless recovery. While the number and frequency of layoff announcements were down sharply in 2003 compared with 2002, companies remain hesitant in committing to new hiring. Despite strong new-job creation in August, September and October, unemployment still hovers around 6 percent, though it appears to have turned the corner and to be on the road to recovery.

    The unemployment rate paints a deceptive picture of the job situation, though. With a sizable demographic group entering the workforce, the U.S. economy has to create more than 50,000 jobs each month for unemployment to remain unchanged. Recent months have seen both new-job creation and a rise in temporary-help services, trends that indicate a job-market recovery is under way. In fact, more than one-quarter of a million new jobs were created in September and October. Even so, it will take a while for these trends to affect consumer and corporate confidence. Thus, companies will remain cautious when hiring in 2004 and will seek to get the most value from the hiring they do.

    This new economic reality is shaping how recruiting and staffing is managed by companies in a dramatic way. Look for this to become most evident in several key trends during 2004 and beyond.

    1. A modest return to new-job creation. A conservative approach to adding new staff will persist in 2004, especially as companies explore the potential for outsourcing and/or moving jobs offshore in manufacturing and segments of the services industry. However, most industries expect a moderate revival in new-job creation in 2004. This will start slowly, but as consecutive quarters of strong business and economic indicators accumulate, there will be less perceived risk associated with staff increases. A growing concern, though, is a shortage of talent in nursing and education.

    2. Increased use of temporary and project-based labor. Given the cautious approach to hiring, companies will make greater use of temporary and project-based labor in 2004 as a means of adding much-needed staff while maintaining flexibility in adjusting staffing levels quickly. Growth in temp hiring midway through 2003 has already been a leading indicator anticipating recent new-job creation.

    Several of the newer technologies for managing temp workers will be a big bonus to companies. Ideally, workforce-management professionals should manage temp staffing as part of their larger system of workforce planning and management. This should make it easier to connect permanent staffing and contingent staffing with a company’s business goals.

    3. Greater investment in internal mobility. One of the looming fears for human resources professionals is that a strong U.S. economy and job market could result in disruptive job-hopping among their workforce. There is concern about “survivor syndrome,” a backlash among employees who have survived layoffs only to face double the workload with little increased compensation and few advancement opportunities. The fear is that many of these survivors have mentally checked out, and remain on the job only because of a lack of other prospects. A strong job market would provide them with those sought-for options.

    To address this, organizations are investing in new internal-mobility policies and programs to provide opportunities for employees to remain with the company in new roles while minimizing the disruption of such internal moves. With new-job creation already starting to heat up, this could soon become a priority in the new year.

    4. Broadening use of workforce-management measurement and analytics. A major challenge facing human resources is the need to quantify the alignment between the objectives of the business and the results of the workforce’s efforts. This requires the ability to apply financial discipline and models to the measurement of a company’s return on investment from spending on talent and human resources-related processes. This is being driven by COOs and CFOs in an effort to understand how value is being created within the organization. At the same time, this data helps human resources in its effort to evolve from a cost center to a value creator.

    Performance measurement, analytics and reporting will be one of the most important challenges facing the human resources profession in the coming 18 months. Forward-thinking organizations are already taking steps to deploy the systems, tools and processes to gather this vital data to establish performance baselines and enable more informed decision-making around talent acquisition, deployment and management. In short order, all human resources departments will be called on to demonstrate their ability to measure the impact of their processes and manage human resources as a business.

    5. Integration of staffing with performance management and learning. An evolution in recruiting management is under way. This change builds on the growing need to better measure and communicate the results of workforce-management efforts, to explicitly link individual and group performance to organizational goals, and to better retain and use talent. Recruiting and staffing is responding to this by integrating external hiring with internal mobility and career management, by integrating staffing with performance management, and by connecting workforce management with learning and development.

    This final trend is only now beginning to emerge. The coming 18 months will see significant change in the capabilities of recruiting providers and, more dramatically, in the scope of these capabilities. Vendors are already announcing new capabilities, and alliances and acquisitions are changing the solutions being offered by recruiting and staffing providers.

A year to remember
    Overall, 2004 will be a transitional year in recruiting and staffing. There is moderate optimism for a recovery in the job market in general. More important, the interest in new processes, measurement systems, services and technologies represents a growing commitment to a better infrastructure for workforce management. Many of the trends unfolding in 2004 are central to the realization of a more strategic role for human resources and staffing.