Dick Stieglitz "Unemployment Paradox"

The current recession has produced a curious paradox: unemployment is rising even as many companies struggle to fill vacant positions. What implications will that paradox have when the recovery heats up? What should executives do today to prepare their organizations to grow? Those questions are the subject of this interview with the author of "The Dragons of Change" Dick Stieglitz.

The Consumer Confidence Index is rising and surveys report optimism among business leaders despitegloomyApril labor statistics. Unemployment claims rose to 637,000 and 13 million people were unemployed, andunemployment is projected toreach 15 million before the recession ends in 2010. The report also said there are roughly three million vacant jobs that employers are looking to fill. Sounds like promising news - but it's not. Instead, it indicatesa widening gap between employer needs and worker skills. People who have lost jobs in shrinking industries like manufacturing, construction, and retail generally lack the skills required for open positions in growing industries like health care, education, green technologies, and government. At the same time, the worst fall in 50 years in real estate values has frozen unemployed workers in place because they can't afford to sell their homes and move.

The recession is transforming theeconomy - and such transformations don't happen overnight. As bad as it is today, the skills gap will create even worse challenges for employers and the unemployed when the economy begins to expand. The most optimistic economists predict it will take three years of sustained growth to absorb the unemployment created during this recession. Unemployment will stay painfully high because job seekers lack the credentials to enter areas where new jobs are being created. For employers, the bad news is they may be forced into bidding wars to fill positions from a frustratingly small pool of qualified candidates.

So far, manyunemployed people are clinging to a desperate hope that things will return to "normal." It's hardto accept that their old jobs aren't coming back, and it will take years to rebuild their savings. For example, many of the 27,000 people laid off when Chrysler entered bankruptcy won't be rehired when it emerges. People in severely depressed rust-belt statesare shunning well-paying jobs in southern states that are recovering because they are reluctant to move and retrain themselves. Similarly, laid-off Wall Street workers are grappling with the stark reality that they must change their lifestyle and accept a job that pays less. It will probably take several years for the realization to sink in that we are living inan entirely new "normal."

Employers need to change their thinking as well, recognizing that the "perfect" candidate may not exist. Some jobs in emerging industries require skills that salary, no matter how high, will be insufficient to attract enough qualified candidates until a new generation of workers can be trained. For example, the financial crisis has produced a demand for accounting specialties that far exceeds the labor supply. To solve this dilemma, employers and governments must fundtraining programs. The stimulus act, unfortunately, provided little funding to retrainworkers.In the mean time, employers will be forced to accept imperfect fits to fill vacancies, and the unemployed mustaccept lower pay to start new careers.

These broad economic shifts arouse the dragons of change - the emotional resistance we all feel when we're forced to change. Change is the process of letting go of the old and embracing the new. The chasm between the old and the new is a chaotic but creative period. We struggle to accept that the old is gone, but at the same time we're not sure what the new will be. The uncertainty causes some to runfrom risky new beginnings and cling to the slim hope that things could be like they were. Business strategies that once produced great results, don't work any more. To stay on top in such times, you can't just react to changes. You must anticipate changes, embrace the realities of the changes you see, and use them to advance your success.

Today is the ideal time to hire talent that positions your organization for the economic rebound, but you may want to use alternative hiring techniques. For example, hire future employees asconsultants for special projects to control compensation and verify that they fit your organization. A second idea is to hire employees with deferred start dates and pay them a salary retainer. This technique is particularly effective with new graduates. A third possibility is to hire baby-boomers. Many of them have lengthy experience and are looking for part time work since their retirement has been damaged by 401(k) losses and the drop in real estate values. Companies that put a hiring freeze in effect "until things turn around" run the risk of being forced to hire leftovers. The skills reservoir is as full as it will ever be - now is the time to drink the sweetest water!