Firms must restore recruitment equilibrium

IN 2003, practice accounting was facing a skills crisis. Too many people had been shown the door during the economic slowdown, resulting in a severe skills shortage. And as the cost of retaining and recruiting people went through the roof, some unscrupulous recruiters took advantage. The delicate skills balance on which the health of the industry depends was seriously out of kilter and it took time and money to find a new equilibrium.

With that in mind, it’s worth considering where we are today. We’ve come through a recession, economic turmoil continues and fears of a ‘double dip’ persist. But has the industry, so far, fared better this time round? To answer that question, we recently surveyed senior executives from across practice to find out. The results were both encouraging and alarming in equal measure.

Simmering discontent

There is both good news and bad news for practice employers. First, the steps they took to cut costs, while retaining key skills were broadly successful. Firms clearly learned the lessons of 2001/2, using a range of measures alongside redundancy, including overseas and client secondments as well as long-term leave on reduced pay. The good news is that the majority of employees believe these strategies have succeeded (65%).

However, despite this relative success, the research suggests there are significant challenges ahead. Respondents indicated that employers failed to keep key employees happy as the ‘expectation damping’ effects of the recession fell away – just 9% of respondents feel employers have been ‘very successful’ in this regard.

Based on our experience of the past six months, it seems this perception is driven by employees expecting immediate promotion and/or pay increases as reward for sharing the financial burden of recession. This conclusion is supported by views as to the likelihood that employers will make the right people decisions during a recovery – just 8% are very confident that employers will make the right decisions.

Anecdotally, it appears that this perception is being driven by the way employers are reacting to resignations – as those with in-demand skills seek career and/or financial gain by accepting job offers from rival firms. Based on our dealings with leading firms, many are using counter offers to persuade valuable staff to stay.

In many cases, this amounts to huge pay-rises and/or promotion – though there does not seem to be a clear strategy behind each decision. That is, members of staff handing in their notice are being given pay rises elevating them far above comparable colleagues in terms of remuneration, or promotions that over-ride established team dynamics and career paths. Again, this anecdotal view is supported by quantitative feedback – only 37% feel these decisions are being driven by a clear plan.

As a result, key employees are running out of patience – 82% of respondents are not willing to stay for more than one year without some assurance of a pay-rise or promotion. Of them, 22% will leave almost immediately and 43% are prepared to stay for six months or less. Overall, employee satisfaction has plummeted from a high of 7/10 prior to the recession to 5/10 now.

Find a new equilibrium

As the managing director of a recruitment consultancy, you’d be forgiven for assuming that this is all good news for me. You’d be wrong. Our success is based on working in partnership with our clients and offering our candidates genuine, unbiased career advice.

Over the past few months, we’ve turned away dozens of people, either because we did not believe a move motivated by short-term financial gain was right for their long-term career, or because they had unrealistic expectations of promotion.

That might all sound counter-intuitive, but it’s no. We rely as much as the employers on that delicate skills balance. Engaging in a feeding frenzy now would not be sustainable. It would destroy the relationships and reputation on which our long-term success depends and we’d be riding roughshod over the careers of countless people.

Instead, I believe recruiters must play a role in helping to find a new equilibrium. We will continue to do our bit by giving candidates the right advice, even if it is not what they want to hear. But employers need to take control of the situation, too, by getting on the front foot and re-assuming control.

First of all, don’t make counter offers. They are a tempting short-term solution, but create more problems later – a reputation for counter-offering encourages people to see resignation as a means of securing a promotion or pay rise. In any case, they rarely fix the underlying issue, as those who accept counter-offers nearly always leave within six months anyway.

Widen the net

Second, as the baby boomers come up to retirement age and the talent pool shrinks, it’s time to start widening the net in the search for high-quality talent. Secondments overseas can work for all parties. There are plenty of Australasians who would love to come to the UK for a couple of years and farsighted employees in the UK will know that overseas experience is now a key step on the route to partnership.

But the overarching issue is the need to communicate better, making individuals accountable for their own performance and career path. You’d be surprised how many people who want to make partner have no idea what they need to do to get there. A clear career plan with milestones that they are responsible for achieving is the key to managing expectations.

It is a mistake to simply kick the problem down the road. One firm has recently promoted more than half of its managers in tax. I’m sure there were good reasons for doing this, but the majority of these people will expect to make director in a couple of years, which is completely unfeasible and they’ll end up leaving.

In the end, applying these quick fixes to long-term problems only creates much bigger and expensive problems for the future – and that does not make sense for anyone. Instead, we all need to take a deep breath and get on with finding that balance again.

Darren James is managing director of Definitive Consulting