Staffing During the Recession

During the great recession of 2008, our company reduced its staff from a high of 50 to 25, a painful experience for everyone involved. Fast forward to late 2011, however: We’ve expanded our markets and products, and company sales are now extremely strong, ensuring full production into the second quarter of 2012. It’s a significant milestone for us to report that we’re again in hiring mode.

We’ve always said we would rather have a first-rate employee running a second-rate piece of equipment than a second-rate employee running a first-rate piece of equipment. And we take this concept a little further in that we don’t just want first-rate employees – we want stars, people who bring extraordinary contributions to our team.

Interestingly, it has never been easier to staff our company with star employees than during this recession period.

Boomtime hiring
There’s an obvious answer to why it’s easier to hire today: The pool of available employees is bigger, because fewer competitors are hiring during this seemingly never-ending recession.

In contrast, let’s look at the challenges we all faced developing and maintaining our staffs during the previous boom times. The biggest difference, of course, is supply and demand. In a boom, if you’re vying with competitors for talent and expect to win, you have to become the most desirable employer in the market. This means offering the best salary, benefits package, working conditions, opportunities for advancement, environment, and culture.

The challenge after the hire – and in many cases the more daunting challenge – becomes retention. If your company is a bad place to work, people don’t want to stay. And if you do provide a good work environment, the possibility of having your employees poached by another company comes to the fore.

During the boom times, companies often resorted to actively seeking out employees of competitors. Although our company has always tried to be ethical about hiring people away from competitors, it’s sometimes difficult to avoid this situation when other shops’ employees come knocking at your door. We operate in a “right to work” state, meaning people have the right to work where they choose (non-compete agreements are almost impossible to enforce in Nevada). Yes, we have hired employees from competitors, but it has been and continues to be our policy not to actively recruit from them.

Other shops, however, apparently did not have this same hands-off approach when it came to poaching. Our company has a reputation of having an excellent staff and low turnover. We’ve invested heavily in staff training and cross training and, as a result, have the ability to “home grow” our professional staff. Our people acquire a wide range of valuable skills. What better way, then, for another company to build an excellent staff without all the expense of a training program than to recruit skilled people away from us? Over the years, we have lost some really key people to poachers. In almost every instance, it was over money. When someone offers one of your staff a huge raise, I don’t blame an employee for being attracted to it.

But there’s a risk to the company employing the poaching recruitment method: Since the poaching company cannot talk directly with the management of the poached company, it must rely on the prospective employee’s self reporting with regard to their virtues or lack of them. It’s all too common that the employee being recruited is someone who in reality is less than a star (to put it generously).

On one occasion, for instance, two employees who were the subjects of a poaching raid had recently been placed on 90-day probation. The competitor seriously overpaid for their talents, thus hurting their competitiveness by paying too much for less-than-stellar staff in skill positions. And, they did our HR Department a favor: It saved us the unsavory task of firing these employees, which was inevitable, and reduced the chance that we would end up having their ultimate unemployment charged against our unemployment insurance account. The moral of the story: If the boom tempts you to poach, you might just end up with a rotten egg.

By the way, another challenge during boom times is the employee actively shopping their services to the highest bidders. Now, a healthy dose of self-confidence and feeling of self worth can be beneficial for any employee. But I think it’s more common during boom times for employees to over-estimate their value to a company – what I refer to as “the prima-donna effect.” It’s not uncommon for an employee who sees him or herself as invaluable to attempt to hold his or her employer hostage. During a boom, these prima-donna employees can shop themselves to competitors and threaten to leave, going to the highest bidder if you won’t match the offer. We’ve had some unpleasant experiences participating at both ends of this game. The recession has all but eliminated this phenomenon.

Hiring during a recession
Why has the recession contributed to us possibly having one of our best staffs ever? Capitalism’s supply and demand rules. One benefit of this market pressure is the drastic reduction of the aforementioned prima-donna effect. People with any sense are glad to have a job. We don’t feel any pressure from competitors to poach our people. In addition, we have set higher standards for employee performance and lower tolerance for behavior that falls below our criteria. As a result, we have eliminated all of our “bad actors.”

When someone fails to perform, we bring him or her in for a session of constructive criticism. We are very specific in where they have fallen short and what they need to remain in good standing. If we don’t see immediate compliance, we put them on probation and begin looking for their replacement. Speaking of looking for replacements, this task has become very easy: Craigslist allows us immediate gratification and it’s free. Also, word of mouth has never been a more effective recruiting tool. Free is always good when it works.

As a result, if we must resort to issuing a pink slip, we have someone to fill the outgoing employee’s chair before it even has a chance to get cold. I know that may sound somewhat cruel and calculating, but the responsibility for an employee doing what is reasonable and necessary to keep their job is theirs and not ours. This is a practice that you can’t institute when you need someone in that position; and tolerating less-than-stellar performance is better than having no one to do the work.

When we look at performance criteria for our current employees, we look at two completely different variables. The first is always performance related. How well do they do their job? Are they dependable? Do they contribute to the quality of our products and services? This is pretty easy to measure.

The second variable, though, is more subjective. Are they pleasant to be around? Are they well liked and well respected? Do they work well with other members of the team? During a boom time, our tolerance for PITAs (pain in the behinds) is higher. But the recession has given us the luxury of zero tolerance for jerks, even very talented jerks. We believe that unpleasant people are poison to our team culture and we now get rid of these individuals faster than people who have issues with professional competence.

In a boom economy, the probability is higher that people in the unemployment pool are not the crème de la crème. That is not true today. Because so many of our competitors have downsized or gone out of business, this has populated the ranks of the unemployed with a lot of quality people.

Star-making through compensation
When there’s such a huge over supply and low demand, employers get a bargain when they hire. And that’s the case now. This, however, carries some responsibilities with the deal. For instance, the initial low wage on a new hire incentivizes us to try a person out. Whereas we may not have considered someone because they are part of the long-term unemployed or because of their inexperience, we now have the luxury of giving them a chance to prove themselves.

All of our people begin with a three-month probation; this way, if they don’t work out, it’s easy to let them go. Because of the low entry wage, it doesn’t cost the company too much for this learning experience and it’s easy to find a replacement if need be.

On the other hand, if they do work out, we offer the opportunity for a raise at the end of the probation. If we’ve hired a quality employee, it would be “penny wise and dollar foolish” to keep them at this artificially low wage. A modest yet significant initial early raise gives us the opportunity to show the new hire we’re fair by recognizing their worth. And because this raise is modest, we retain the opportunity to provide raises over shorter-than-normal intervals if they’re merited. So if the new hire proves to be a true star, we can make every effort to bring them to a salary that is commensurate with their value to the company. If they’re that good, then retention through compensation fairness becomes the most important concern.

Through practices like these, we’ve been adding more and more stars. In fact, I think we’re well on our way to developing our best staff ever – and given our past staffs, that’s saying a great deal.With our business on a significant upturn, it has been beneficial for us to take advantage of the economic conditions in this labor market. I think we have also learned some HR lessons from this experience that will stand us in good stead when the overall economy improves.

Craig Miller is a principal shareholder in Las Vegas-based Pictographics (www.pictographics.net) where he is also director of military and law-enforement projects, the company's defense-contracting division.