Is this the second war for talent?
Simon Howard suggests that the economy may be on the brink of another crisis in the employment market...
My last Indicator column ended with a wager that the recruitment market was on the turn, although none of the figures had then proven it. Well, three months down the line and no-one can dispute what the data is now showing; the recruitment market is recovering.
According to the Report on Jobs, demand for permanent and temporary staff rose for the third consecutive month in August, and the rate of increase accelerated, to the fastest since March 2001. Not only did demand rise, but the CIPS/Reuters Employment Index showed private sector employment rising for the first time since May 2001, and although manufacturing employment fell for the 46 th consecutive month, it did so only marginally and at the slowest rate since January 2001.
It would also seem that the trend is set to continue as the RoJ Vacancies Index rose at its fastest rate since February 2001 while newspaper recruitment advertising is also showing signs of recovery (although still down year-on-year).
So, what are these numbers telling us? Is this simply a recovery in a traditionally cyclical market, or could this be the start of something more significant? Well, my money is on both.
Sure it's a cyclical recovery in a market which has lived through some strange times. The recruitment market could only have gone down after reaching such ridiculous highs in 2000, and demand from employers has continued to decline ever since. But this has been despite a basically sound economic backdrop where the economy has not been in recession, and where interest rates and inflation have both been low. But most significant of all, employment has remained high and unemployment is still modest.
And there's the rub. The economy is showing every sign of recovery, but it is going to recover (i.e. grow at an increased rate) from a position of near full employment; and that has never happened before as previously there has been plenty of slack to be taken up in the labour market.
So are we on the verge of another outbreak of hostilities in the War for Talent? My vote would be yes, but a very different War for Talent from the last one. And here's why...
McKinsey's coined the phrase 'War for Talent' in the late 1990's, and was based on their analysis of changing demographics and what effect the retirement of the baby-boomers would have on the demand for younger management talent . This was also at a time when the recruitment markets for technical and executive skills were driven by a series of abnormal events, culminating (in the UK) with EMU, Y2K and the dotcom 'revolution'.
Initially the concept had real currency, and phrases such as 'talent pools' and 'talent management' were able to become part of the HR lexicon. But before long, in those very management and technical markets where the concept had such currency, the 'war for talent' fizzled out: the IT market shrank beyond all recognition, the City lost much of its high paid talent and the dotcom revolution became a bubble.
So why might there now be a War for Talent II, particularly if the first turned out to be such a non-event? Quite simply, WFT I was pretty exclusive and principally about senior and specialist staff, while the WFT II will be about everyone else.
While the principal drive to WFT II will be a growing economy with near full employment, other factors will come into play too. First, there is little slack within workforces and so one employer's filled job will soon become another employer's vacancy - what I call the recruitment multiplier effect. Second, there has been very limited movement and progression for people over the past three years, and so in some quarters there is a pent-up demand to 'move-on'. Indeed the recent survey from Cahoot showed that over 75% of people would change job if they could.
So it would seem conditions are ripe for WFT II. Of course it won't happen overnight, it won't be universal across the country or industries and there are some trends which will slow it (not least, the export of service sector and manufacturing jobs to the developing world). But it would at least be prudent that when you next meet your finance team to discuss numbers, you'd better make sure that there's plenty of give in the recruitment budget.
A longer version of this article first appeared in Simon Howard's Indicator column, People Management, September 2003. 
