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Posts Tagged ‘Buzz’



The Buzz- November 2011

Giving Thanks.
Posted Tuesday November 22 2011 by in Newsletters
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It’s been a tough 4 years for the US economy. Unemployment is still dragging the overall economy down; if people don’t have jobs, they can’t buy homes or can’t afford to pay the mortgage on homes; plus they consume unemployment benefits and don’t pay taxes. It’s a morass, which takes time and political resolve to fix. Sadly, political resolve is similarly dragging the overall economy. But then there are the 92% of Americans who have jobs, who are paying taxes and mostly paying their mortgages.

The employed represent an interesting transitional challenge for all employers over the next couple of years. 50% of working Americans will be eligible to retire next year. 50%. That’s a LOT of people. This includes everyone who is on a formal pension plan: unions, government, military, etc. Therefore, eligible to retire doesn’t necessarily mean leaving the work force. As an example, both GE and Philips have early retirement programs that subtly push out their most tenured baby boomer managers. But many of these baby boomers will begin to enter an extended ‘peri-retirement’ period of their lives. Most baby boomers don’t want to fully retire; and most baby boomers don’t want to fully work, either. So balancing the boomers’ expectations of quasi-employment, with the needs to be fully staffed will represent an interesting management challenge to the Gen X’rs who are anxious to push the boomers into rocking chairs.

At the same time, 53% of employees claim to be ‘burnt-out’ and 44% of employees are either receptive to leaving or ready to leave their current employer. Employee engagement levels hover around 33%, with ‘almost engaged’ at 24%. The combination of those numbers is roughly equivalent to levels in 2008; but still represents a pool of employees that are disengaged or largely going through the motions of 43% of the employee base. The engagement levels are highly correlated with age, with Boomers 36% engaged and GenY’s 23% engaged.

What’s this all mean? It means that the War for Talent, which is here and growing daily will be uniquely shaped by quality of life issues that we’ve never faced before. Management of engaged part-time producers seems illogical; but it’ll become far more commonplace over the next ten years. The ability to retain employees will largely be a complex mix of offering challenging assignments and quality work environments with flexible hours and variable vacation benefits. Keeping talent will require some managers to simply say ‘thank you’ for being here; others may be far more challenged to provide enough interest to keep tenured employees.

Attracting new talent will also bring new approaches. ‘Filling a job opening’ will give way to creating an enticing opportunity to unique talent that may not be actively looking. The need for professional recruitment practices will grow and won’t be marginalized by internal recruiting departments that are largely charged with ‘filling openings’. Recruited talent is markedly different than applicant talent. The techniques, interviewing process and approach to attracting are profoundly different. Yet, most companies treat recruited talent like applicants and lose them before the offer stage.

Currently, US companies experience an average turn-over of employment of 13%/yr. That means that a company would need to hire 100% of its current employment every 5.5 yrs. There has to be a better way to attract and retain talent and to keep them actively engaged in the business. Companies with the highest levels of engagement report 19% higher average earnings than companies that have average engagement levels. In companies with low-engagement scores, their earnings are 44% below average. There’s something to attracting and retaining talent who is engaged in the business. It starts with recognizing that talent within your own company and developing a process to retain them. Quality talent attracts additional quality talent. The trick is to recognize how to identify quality talent; yours and others.

It’s been a remarkable year for us. We’ve hit our second largest revenue in our history and have a large backlog into next year. We’re actively interviewing and hiring for our own office and feel very bullish on 2012 and beyond. The numbers are strongly aligned behind us: the retirement of Boomers, the alienation of disaffected quality talent and the need for our client companies to meet the demands of adapting to the rush of technology into a traditionally staid industry. We’re excited for the future and we’re also very thankful for the trust of our clients and candidates.

It’s that time of year when collectively as a nation we say ‘thanks’.

To all who read this… thank you.

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Listen…and Keep Your Job.

Posted Tuesday July 26 2011 by in Blog
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Earlier this summer, Craig Chappelow and Jean Brittain Leslie, contributors to The Wall Street Journal, wrote a pretty compelling argument for uni-tasking. In an article focused on keeping your career on course, they mirrored the points made in this month’s issue of The Buzz: 

“Learn to listen. Hearing isn’t the same as listening. Turn away from your email and concentrate on the person talking to you. Don’t be passive. Ask questions to make sure you understand. Stay in the moment and take notes to help you remember key points. Show people you’re really hearing them. Air Force Col. Trent Edwards, Commander of the 28th Mission Support Group at Ellsworth Air Force Base, learned to listen differently in response to feedback from his team and his family. He realized he was using a “war zone” mentality in non-war zone settings. With tours in Afghanistan and Iraq, Edwards describes his previous approach as “very action-oriented. Everything was always go, go, go. Now I try to listen with more patience, with an open ear to try to hear what is being said and also what is not being said.”

via When A Career Veers Off Track – WSJ.com.

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The Buzz- May 2010

Posted Thursday July 7 2011 by in Newsletters
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May 2010
Volume 11 Issue 5

Egret’s 6th Annual Women in Industry Survey
By Ted Konnerth

I’ve attended the NAED conferences since 1985 and for the past 6 years I’ve conducted a survey of the number of NAED badge attendees who have female first names. Albeit, this is not the most scientific survey but the results confirm the overall perception I’ve had of our industry for the past 25 years; we are a male-dominated industry. There are elegant rationalizations for that; the distribution industry was launched in it’s current form from the end of World War II, when the returning soldiers represented an extraordinary influx of labor at a time of government sponsored construction projects; where the availability of materials was a major contributor to the efficiency of our re-birth from the War. The industry was virtually started by servicemen and has remained virtually male-only for 60+ years. Dad’s turned the business over to sons, and a handful of daughters, but a strategic process of attracting a diverse workforce into distribution and even electrical manufacturers simply never gained traction. Look at the results for 2010*:

Year   Category # of females Total # Attendees % Female
2005 Distributor 20 322 6.2
2006 Distributor 22 316 6.9
2007 Distributor 21 323 6.5
2008 Distributor 25 396 6.3
2009 Distributor 9 159 5.7
2010 Distributor 22 254 8.7
         
2005 Manufacturer 27 381 7.0
2006 Manufacturer 17 358 4.7
2007 Manufacturer 17 331 5.1
2008 Manufacturer 23 348 6.6
2009 Manufacturer 21 221 9.5
2010 Manufacturer 23 289 8.0
         
2005 Total, above 47 703 6.7
2006 Total, above 39 674 5.8
2007 Total, above 38 654 5.8
2008 Total, above 48 744 6.5
2009 Total, above 30 380 7.9
2010 Total, above 45 543 8.3

My professional interpretation? No significant changes in diversity. In fact, based on 6 years of reporting, 2010 represents the nearly exact median performance over those years for both participant categories. It is good to see that attendance is coming back up; the recession hit 2009 attendance very seriously. It is also of note that the women in industry luncheon is back on the program, with a total pool of 45 prospective attendees, that’s got to be a pretty intimate meeting.

In general, for the size of the membership, the overall attendance is pretty small. The program is ‘ok’, with the usual economic commentary and a presentation on theft control, both worthy topics but in light of the crash, wouldn’t it make sense to address revenue strategies? Diversifying customers or markets, margin strategies to grow sales with or without margin decrements, etc.?

I have my own biased view on the industry. Although I spent 16 years on the manufacturing side of NAED meetings, I still feel that NAED as an organization has largely ignored the issues of attracting and retaining talent; and diversity hiring is a rarity in any NAED agenda. The number 1 challenge for the electrical industry for the past 5+ years has been the availability of quality talent. The ability to attract talent in this economy is actually better than in boom times, but the topic is ignored. I will probably get a dozen curt replies to this newsletter from men who simply say they don’t care about diversity in the industry. Bluntly put, diversity hiring is essential for no other reason than the current labor pool isn’t predominantly white guys any more.. it’s women and minorities and old and young, all selling to customers who are just as diverse as America. And take a hard look around NAED; it’s a bunch of old white guys who are resisting the chance to broaden and grow their company. There’s a reason the industry is splintering into more specialist companies every day (datacom, energy, solar, etc.), the leadership is resistant to change.

In short, do you want to grow and become more profitable? Then start to mirror your customer base or differentiate your business into minority-owned companies.

*The results for 2010 are reported using a few rules that have been maintained since the inception of the survey: I simply count the first names of every female attendee who is listed as a distributor or a manufacturer/VAR. For every name I find that is non-generic specific (Chris or Pat, etc), and I don’t personally know of them, then I accumulate those names into a total and assign 70% as male and 30% as female. For the 2010 survey, I had a total pool of uncertain names of only 3 (so 2 were considered male and 1 female); not enough to hugely impact the statistics.

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The Buzz- June 2010

Posted Thursday July 7 2011 by in Newsletters
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 June 2010
Volume 11 Issue 6

Fragmentation 
by Ted Konnerth

Life was simple when electrical meant 120 volts or higher. High voltage was high voltage, and low voltage belonged to people who installed doorbells. Then alarm systems became popular, along with security systems and dimmers went from line voltage to electronic. Ballasts went from magnetic to electronic and motor controls began talking to PLC’s and the explosion of computer technology in the office led to ‘premise wiring’. Throughout the steady expansion of electronics and low voltage controls, the industry became more complex, not less so. The issue of trade influences became murky; who actually installs premise wiring or occupancy sensors?

 The industry is in a rapid state of fragmentation. Corporations that are renowned for their sales of sophisticated switchgear, motor controls or variable speed drives are hiring electronics engineers, partnering with electronics vendors and meeting regularly with electronics distributors. The definition of ‘electrical’ has become as confusing as the definition of a US-made automobile.

As the channels fragment, the clear borders of who builds what, who sells what and who buys and installs what is in flux. The rapid growth of new alternative energy sources such as wind and solar have created a new industry virtually overnight. The design, procurement and installation of solar is a maze of conflicting sources of influence. Electrical distributors have mostly dragged their feet in transitioning to new technologies. The traditional channel partners are now being sorted into narrower identities.

Lighting companies are now either traditional or LED.  Adding LED into traditional channels is murky at best. The path to market for traditional lighting companies hasn’t changed dramatically in over 50 years. Lighting reps ruled the roost for the new construction channel and still remain largely in control. But the advent of LED technology has introduced literally hundreds of new companies, all with the same message of better, faster and cheaper and all trying to garner a portion of the huge US market. Lighting reps have ignored the retrofit market, the ESCO market and the industrial market; abdicating those segments to their ‘partners’; the electrical distributors.

What happens to those markets when the electrical distributors don’t step up and promote LED lighting products to their industrial or remodel or ESCO customers? The nascent LED companies have stepped into that void. LED companies are currently selling millions of dollars of equipment every day to customers who are simply not being well-represented by traditional channel sources. The creativity and  efficiency of the new entrants’ approach to the market is surprising and elegant. The gamesmanship of the past with huge overage payouts and secret deals won’t ever go away, but the market share size will dwindle.

Electronics companies have a different mindset. They focus on rapid innovation, often with little regard to the end-user of their products. They march to a mantra of better, faster cheaper and let the end customer decide how to apply their products. Electrical manufacturers carry much more embedded costs and traditional relationships that naturally cause their product development cycles to be slower and their product life cycles to be much longer.

It’s a difficult mindset to promote a high priced product with the expectation that it will be twice as robust and half the cost in the near future. Electronics manufacturers regularly work with their customers (mostly electronics distributors or retailers) to mitigate the effects of price degradation. Other than pure metals manufacturers whose cost of goods sold can be attributed to over 75% metal (wire, connectors, conduit, etc), it’s rare for electrical manufacturers to regularly entertain a dialog on price erosion from their channel partners.

The absorption of electronics into ‘electrical’ is changing the game. Electrical distributors are naturally technology-averse, as are electrical manufacturers. As an easy example, we queried 800 electrical distributor executives 60 days ago to ask them if they are currently selling LED ‘bulbs’ (another testament to cultural change, as bulbs have slowly replaced the more elegant term ‘lamps’). Less than 100 were selling them, of the 100, less than 10 were actually stocking them. LED is clearly the wave of the lighting future, and that future began over a year ago, yet the traditional mindset has been to promote items once there is a demand for them. LED demand is being built by the new LED companies, not the traditional manufacturers. As such, it will be some time before those LED companies will ever show up on the doorstep of electrical distributors. In the meantime, they’ll just sell them.

The electrical industry in large measure abdicated the premise wiring market to the ‘low voltage guys’ and literally watched as CEDIA created a national standard and a separate mode of distribution and installation. Solar and wind has also begun a new channel of distribution and solution selling. ESCO’s still tend to buy their products from electrical distributors, but that channel has already begun fragmenting away from the traditional approach. ‘Energy saving’ is the new premise wiring. As distributors slowly explore how to serve that market, the new entrants in this market; focused on faster, better and cheaper will carve out a new channel and reap the benefits.

I’ve met with scores of manufacturers, from huge traditional manufacturers that are industry icons to the small, nimble startups and I’m convinced the industry has changed in fundamental ways that will leave the current list of players to ‘play’ in a much smaller sandbox than ever before. If you’re in lighting and you’ve not noticed that Mitsubishi, Samsung, Toshiba, Smart and Citizen were in attendance at Lightfair; then you’ve already lost share. Both Asian and US electronics companies have the financial wherewithal, the staying power and the technology leadership to completely change how lighting is sold in the US. They will not enter the market playing the game the same way as it’s been played. The same statement can be made in varying degrees for those manufacturers of switchgear, controls and automation. The game is on and it’s going to be exciting.

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The Buzz- July 2010

Posted Thursday July 7 2011 by in Newsletters
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July 2010
Volume 11 Issue 7

Diaspora
By Ted Konnerth

Diaspora: (“a scattering [of seeds]“)* is any movement of a population sharing common national and/or ethnic identity. The term diaspora refers to a permanently displaced and relocated collective.

I view the current transformation of the electrical industry as a diaspora. We’re at a unique time in history, we’ve endured a deep recession which has cast off thousands of narrowly trained, qualified talent and that talent is slowly being absorbed by companies that may not have been in existence five years ago. The LED industry is most apparent, with the emergence of 400+ new companies into an existing commercial lighting industry there was a need for industry-savvy talent. Those companies have slowly added industry talent to help them shape their products to meet customer needs. These newly hired employees will likely never return to the companies of the past; in essence, they’ve been scattered and permanently displaced into a world that didn’t exist 5 years ago.

The trends are similarly ongoing for the emerging markets of alternative energy sources. There is need for people who ‘get’ how to sell power generation, and power control systems for what is basically DC power into vertical markets that didn’t even know they had a need for solar or wind power. The same holds true for control systems, smart building technology, variable drives, and wireless sensors and alarm systems. The electrical industry, as it has existed for decades is no longer the same. The electrical industry has expanded exponentially and with that expansion, the traditional players remain with a smaller pie than they enjoyed in the past. The remodel, retrofit, energy-reduction market is largely developing outside of the traditional electrical industry. The blurring of the lines between electrical and electronic is a permanent affliction.

“Electrical bids” will now be comprised of the traditional parts: switchgear, lighting, wire/cable, devices, etc.; but now there are the additional bids for ‘electrical work’ that include: premise wiring, alarm systems, power generation, control systems, building automation systems, day-lighting controls, demand supply systems, light pipes, etc. Each of those products have a physical presence, within the same walls or plenums, but the trade specialties are narrowly defined, as are the manufacturers and distributors of those goods.

This diaspora has profound impacts on the recovery process. The electrical industry has lost significant quantities of talent to this new market. The ability to hire experienced talent for the economic recovery is already being hampered. The experienced talent has been scattered, displaced and unlikely to return to those companies who abandoned them in the down times.

We see several trends that are of concern to our clients:

  1. Hiring process. The hiring process to select and appoint a new employee has lengthened considerably. Time kills every deal. Delaying on a decision creates emotional responses that are unfavorable to concluding a hire. The candidate feels neglected or uninformed and goes away to another offer or remains with their current employer. Advice: if you’re not ready to hire, don’t start interviewing. It’s an enormous waste of time, money and emotional capital if you can’t make a decision quickly and lose the candidate you spent weeks in processing.

  2. Candidate reluctance. Clients have a belief that since the unemployment level is so high, a candidate is dying to accept any offer, under any terms. This is a complete myth. College-educated unemployment is less than 5%. Quality people are not standing in lines begging for work. There are some qualified people out of work, but the bulk of the people you would want to hire aren’t desperate.

  3. Rising salaries. Offers are being refused for lateral or minimal raises over current financial positions. The market hasn’t turned completely into a candidate-driven one, but the signs are there.

  4. Thinning pool. With the electrical diaspora, quality people are moving to new companies, learning new technologies and applying those technologies into traditional channels. They’re not likely to return to the past. That leaves the pool of experienced talent thin, and getting thinner.

The industry has changed. Those of you who haven’t changed, have been relegated to a smaller market. There’s still plenty of opportunity to make money in that smaller pool, but recognize that technology will expand the channels, not decrease them and that will ultimately lead to a battle for traditional products sold through nascent companies in a bundled sales process that will disintermediate the traditional players.

It’s exciting. It’s going to be an extraordinary run for many of us for the next decade. In short, “if you’re not changing faster than the world around you, you’re backing up”.

*Wikipedia

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The Buzz- August 2010

Posted Thursday July 7 2011 by in Newsletters
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August 2010
Volume 11 Issue 8

Talent acquisition in a declining supply
by Ted Konnerth


Most people assume that with high unemployment, the availability of quality talent is as easy as posting an opening and waiting for the flow of hundreds of well-qualified applicants. Let’s disabuse you of that notion and begin by using facts:

1. Unemployment is 9.5% of the working population

2. Unemployment for those with a college degree is 4.8%

3. Baby boomers have begun to retire, with estimates of that pace predicted to quicken as the stock market and therefore retirement accounts return to levels prior to the Great Recession.

4. Emerging markets in the electrical industry are attracting experienced talent away from traditional employers, thereby depleting the available pool.

5. Levels of employee engagement are at record low levels, which will drive employers demand for more replacement talent*.

With the recession slowly subsiding, the electrical industry in particular will be facing a remarkable demographic tsunami. With the boomers marching away, new companies attracting talent with dreams of large equity plays in investment-owned startup companies and a historically low level of recruitment emphasis at college graduate levels, the industry will be caught in a war for talent unseen in recent history.

In just 4 years there have been over 400 new manufacturers of LED products, plus the entrance of global players in wind and solar energy, plus the large growth of electronics development in both existing companies and new entrants. The sum of those effects is that all of these companies have needs for experienced talent who understand the complexities of the electrical industry: channel partners, specification influences, buying influences and product needs. The current level of available experienced talent is already low; despite the constant din of news media reporting the millions of unemployed people.

The majority of the unemployed are laborers; skilled or unskilled. Their plight is unlikely to dramatically improve going forward as many of their jobs have been shipped offshore. Additionally, the talent skills that the emerging companies need today require far more education than traditional laborers. College or technical school diploma-level attributes in IT, computer sciences, electronics and semi-conductors are in high demand. 

The US is already in an engineering shortage. We’ve seen wage increases for engineering talent grow dramatically over the past 3 years as companies have made extraordinary concessions in salary offers and added benefits to attract qualified engineers: relocation, signing bonuses, vacations, etc. Major corporations have constant openings for electronic and electrical engineers. Smaller companies are making multiple offers to engineers to try to attract them.

The war for talent issue has been moving forward for the past ten years. We were all forewarned this day was coming, but in the teeth of a deep recession it’s difficult to rationally increase hiring to prepare for the imminent shortage. Leading companies are already doing exactly that. Our larger clients in distribution have been hiring for the past year, and the manufacturers are just recently addressing their needs for the coming growth period.

If there is a call to action, I would suggest three specific actions:

1. Enact retention strategies for your top talent immediately. Losing a key contributor is extremely costly, not just in the replacement costs, but in the lost down time to ramp up the replacement.
 
2. Implement succession plans for the top talent. A recent study found that less than 50% of corporations have a defined succession plan for their CEO’s.

3. Create a recruitment plan that addresses three issues:

a. Building a bench. Start a college recruitment program.

b. Direct recruitment department. Focused on the college recruiting and the lower level positions that experience higher turnover rates, an internal recruitment organization can effectively meet these needs.

c. Sourcing partnership. For critical talent, that can only be identified through direct recruitment processes, identify a third party firm who can partner with your organization, acting as a pure recruitment organization and as a talent scout for opportunistic hires when ‘best athletes’ become available.


The next ten years will be exciting on so many levels: new technologies, new markets of growth and a melding of electronics and electrical into changing channels. There will be winners and losers in this battle as always, but for those who view the path to winning through attraction of qualified talent, the odds will be significantly higher.

*The Herman Group – www.hermangroup.com
Global Employee Engagement Declining

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The Buzz- November 2010

Posted Thursday July 7 2011 by in Newsletters
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November 2010
Volume 11 Issue 11

Downsizing and Making Money
by Ted Konnerth

The recession has ended, officially at least. Those of you who are ‘officially’ out of work can apparently relax now. With unemployment still hovering around 9.5% and the ‘discouraged workers’ adding an additional 10+%, it will be some time before the working population will be absorbed; regardless of which political party sits in Congress. Employment has always been the province of independent companies, and those companies have always been cautious about hiring during or shortly after emerging from a recession. However, there’s an interesting underbelly to downsizing. In a February article in Newsweek, they reported on a study by Danish researchers that found that corporations who downsize as their solution to economic declines actually delivered negative stock returns. The larger the layoffs, the larger the negative impact on shareholder value. Additionally, productivity fell with layoffs as well. Finally, S&P 500 companies who downsized remained less profitable than those companies who did not downsize.

I had dinner with an old friend from Lutron who told me that they didn’t downsize any employees throughout this protracted recession, same for Southwest Airlines, and the same for several smaller client companies of ours who simply decided to stick with their employees and prepare for the emergence. I’ve always felt that the slash and burn tactics of the Fortune 500 companies who feel compelled to slash workers to thwart poor ratings from Wall Street delivered more employee disaffection than productivity gains.

In the recent months we’ve all read the latest debacle of Rexel / IESC / Gexpro report hundreds of fresh layoffs and all I can think of is the number of people who have had their lives disrupted due not to their personal performance, but to the inability of IESC to adequately integrate their merger. I read The Synergy Trap* years ago and believe it should be required reading for any company who embarks on a strategy of growth through acquisition. The short moral of the story from Synergy Trap is that over 80% of acquisitions fail to bring positive shareholder value from the merger. And the ‘synergies’ that are always baked into an acquisition typically don’t materialize. Companies exist solely through the combined efforts of the people who work there; ripping the fabric of a company to move it geographically or by merging it into another company takes extraordinary skill and a fair amount of luck.

I left Cooper Lighting 12 years ago; just prior to the official announcement of moving the HQ to Georgia. Today, despite numerous acquisitions and a move to ‘cheaper labor’ in Georgia, Mexico and China the company revenues are still less than when I left and the profitability is lower. The division has endured a 4-time turn-over in senior management and has lost market share. Similarly, the Philips acquisition of Genlyte Thomas has rendered hundreds of employees effectively displaced by either downsizing or loss of their long-term brand identity. Henry Ford once famously said that he deliberately wanted to pay his employees more than competitors so that they could afford to buy his products. The current tenure for new employees is less than 34 months. Stability has become passé. At what cost?

At a time of the year for ‘giving thanks’, who looks to their executive leadership and reflects on the tactics of the past 18 months and says truthfully; Thank you? I’m sure the employees of Lutron, Southwest and a handful of other premier companies like them do. But are huge layoffs truly necessary at a time when most corporations are sitting on huge cash reserves, with minimal debt?

The unemployment challenge will come back, as will housing as will credit relief, but ultimately the tactics of the past 2 years will adjust the mindsets of employees for many years to come. Layoffs carry extraordinary costs that are seldom accounted for on a balance sheet.

Thank you to the companies and people who have been supportive of Egret throughout the past 11+ years. We’ve seen a huge increase in business and we truly appreciate the support from all of you.

*Sirower, Mark. The Synergy Trap. New York: Free Press of Simon & Schuster, 1997.

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The Buzz-December 2010

Posted Thursday July 7 2011 by in Newsletters
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 December 2010
Volume 11 Issue 12

References, Job-hoppers and Talent shortage
by Ted Konnerth


We’ve conducted roughly 70,000 interviews over the past 11+ years. We’ve successfully placed over 500 new employees and we’ve weathered two deep recessions, so we feel pretty good about our track record. Nationally, “WE” are facing a talent and hiring condition that has never been faced before. Despite the daily dirge of bad news about unemployment, let me give a few other statistics:

  • The average tenure of a new employee is 34 months (and that includes CEO’s)
  • The unemployment rate for college graduates is 3.8%
  • The predicted number of jobs for Gen Y employees is 8 jobs before they’re 40 years old
  • Reference recommendations correlate to performance at a value of 0.29 (which in statistic-speak means the predictability is less than 9%)
  • Over 35% of resumes are fraudulent, over 75% have mistakes or ‘little white lies’
  • The level of open job postings has hit a record high level

Most companies don’t believe there is a talent shortage. With 9.8% unemployment it’s easy to assume your next engineer, branch manager, marketing director or operations manager is sitting outside your door with his/her resume in hand and the desire to go to work on Monday at a 25% discount in compensation. If only it were true.

The talent pool is very thin right now. We only work in this industry so our view is limited to people who work and succeed in the electrical industry and we don’t recruit people out of automotive, healthcare or paper companies. The pool is additionally thinned by the housing market; relocations are very problematic for a household to move if their house is currently at a low equity or under water. The ability to sell the house and provide cash to buy into the new market, despite the lowered values is in many cases untenable. Job security for most companies has been seriously damaged by the deep recession and companies’ reactions to that through aggressive downsizing, so we’re at a unique confluence of competing challenges; employees are more open to leaving their current company, but they’re very limited in where they can go, geographically.

We’ve seen a significant increase in companies adding talent over the past 90-120 days. All of these positions are net-adds, not replacements. So the market has already shifted, the talent pool is poised to hearing options, but the creativity of those options will have to cater to the needs of the prospective new employee.

There is never a ‘perfect’ employee, just as there isn’t a perfect employer, yet employers are still functioning as if the talent pool is unlimited and they have the ability to design the perfect employee on an assembly line; complete with a life-time guarantee. That isn’t reality, the talent market right now is considering multiple offers, expecting significant flexibility in work/life balance and not anticipating finding their ‘last job’, but gaining experience and building a resume for the next challenge.

Hiring is now best perceived as an investment. Define the problem that needs to be solved, find the talent to solve that problem and ensure the return on investment is favorable; regardless of the tenure of employment, the compensation terms or the overall cultural ‘fit’. Hiring has become transactional, not relational.

Hiring processes have to adapt quickly as well. The days of 2-3 rounds of interviewing, reference checking, test regimens, credit checks, background checks and drug screens will leave most talented people feeling exploited and un-trusted. Every company will make occasional bad hires, but if the hiring process is viewed as an investment strategy, then the task will be to mitigate bad hires with quicker reviews and assessments of performance as part of the on-boarding process.

Reference checks are uniformly meritless, yet the habit persists due to legacy processing. Reference checks add legal and governmental risks, they inject opinions from people whose motivations we don’t know and they provide cursory information that is rarely predictive of future performance.

The next 5 years will be the onset of the War for Talent; as predicted in the early 90’s. Its arrival was predicted to occur as the Boomers begin to retire in ever increasing numbers, which begins this year and goes forward for 15 more years. Talent acquisition will strain relationships between senior management and human resource departments as headcount expense will grow disproportionately over the next several years. An investment model of talent acquisition will assuage most of that tension, if HR and IT can devise financial models of individual performance and impact on an earnings statement.

The next 5 years will bring significant growth, but only if the talent is available to support it. Employee retention programs should be implemented immediately and acquisition strategies should be refined to provide for faster decisions and less intrusion into the candidate’s life.

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The Buzz-March 2011

Posted Thursday June 23 2011 by in Newsletters
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 March 2011
Volume 12 Issue 3

Thin slicing
by Ted Konnerth

It’s a fascinating process to help client companies find key talent. It starts with the ‘needs analysis’; which is roughly akin to designing Superman. We’re advised that a degree is required; with a minimum accum. MBA highly preferred, they have to relocate, they have to be within a compensation range, must have a specific or minimum number of years of industry experience, they have to pass drug tests, psych tests, personality profile tests, have a clean driving record, no criminal record, have strong leadership skills, have experience managing a certain size of business, etc. Some clients even imply we should narrow it to a specific age band; which is of course, illegal and dismissed by us. 


Recruiting is a process of setting ‘filters’; every item listed above is another filter, which means the size of the talent pool has to be large enough to provide qualified candidates who survive all of the filters. Realistically, the talent pool and employee/employer relationships have changed since the ‘shopping’ days of the past. The sheer number of eligible bodies who can step into senior or management level positions right now are short by 10,000,000 between Baby Boomers and Gen X. Despite the Great Recession, there simply aren’t enough people to fill the growing openings of the departing Boomers; who have officially begun to retire. So why create a ‘job description’ that effectively eliminates most qualified candidates?

Let’s take the degree issue. Bill Gates and Michael Dell would take exception that a degree is required to succeed in business; even in a technology business. Degrees are conferred for completing course work, satisfactorily. Applying that course work to real life isn’t always a guaranteed success. Degrees are meaningful, but the task at hand should be to identify the problem or opportunity that lies ahead and find someone who has already solved that problem, even if he is a she with no degree.

The same logic follows for test regimens. Testing makes sense for specific skill sets: engineering, CAD, typing, finance, IT certifications, etc. Rejecting talent because they fell below an arbitrary qualification level on an internet-delivered test of 40 questions isn’t the magic bullet of hiring. Tests must be tested for long term success in the same industry and same functional position to be of any scientific merit. Statistical reliability that predicts performance of any manager or senior executive is unproven in the vast majority of tests. It’s a data point, at best. At worst, it’s a waste of potential talent and money.

Talent is an operating expense. There should be a measurable ROI for talent. That talent should be selected to ensure that the current tasks are completed to the level of expectation; which renders a positive ROI. The average tenure for a new employee right now is 34 months. The tenure of a new CEO is less than that. Let’s focus on attracting someone who can deliver a strong ROI in three years or less. If you’re able to create a retention program to keep them longer than 3 yrs, then you’re simply ahead of the game; keeping a contributing employee for longer tenure. Talent acquisition should begin with defining what the existing problems are and what solution sets you’d like to see and then devise a plan for attracting someone who has actually faced those problems before, successfully.

In short, creating barriers to entry is simply thin slicing; taking a dwindling talent supply and creating arbitrary filters to restrict the supply to fit a normative structure that is no longer in parity with the reality of today. Everyone wants to achieve perfect hiring, but people aren’t perfect, neither the hiring authority nor employee. And stark reality is that we no longer hire for ‘permanent’ positions. There aren’t gold watch ceremonies any more and not just because gold is above $1400. Trying to fit a restless population into a structured three-ring HR binder of job descriptions, coupled with a series of thin sliced ‘must have’ attributes is no longer a model for growing your business through strategic talent acquisition. 

Define your objective and recruit talent to achieve it. It should be as simple, and as hard as that.

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The Buzz-February 2011

Posted Thursday June 23 2011 by in Newsletters
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 February 2011
Volume 12 Issue 2

It’s a Numbers Game
by Ted Konnerth

I returned from Strategies in Light last week after three days of conferences, technical presentations, booth meetings and client visits spinning with the usual overload of information. SiL is the largest conference dedicated to High brightness LED technology. As such, it’s a conference on ‘emerging trends’ in the electrical industry. Part of the presentation always includes macro-economic summaries of the market for LED. The biggest number was that the market grew 93% last year. That was not a typo, it was 93%, globally, at a total revenue of $10.8B. The $10.8B includes all HB LED applications, of which backlighting for TV’s, laptops, mobile phones is the majority usage. The revenues assumed for commercial lighting applications (fixtures and lamps) were $900M, in 2010. The conference is managed by Pennwell and they have exhaustive research in the LED space, built from the individual dies and reactors up. Where the numbers get murky, are at the market level projections.

The projection for LED usage in commercial lighting is an average annual growth rate of 39% through 2015. This would put LED commercial lighting sales at $4.5B by 2015, four years away. The adoption curve for commercial lighting though will be, and is, far faster than the conference numbers demonstrate. There are several reasons for the murkiness of LED adoption within commercial lighting:

  1. There are over 1400 lighting manufacturers in the US alone. Of those, over 1200 are privately held, so numbers reporting is obscured and unavailable.
  2. LED adoption has occurred primarily at the end-user level, not through the traditional electrical industry channels, so tracking of LED success is virtually hidden from any of the traditional players; distributors, manufacturers and even contractors.
  3. LED sources include over 400 LED manufacturers, most of those from Asia, some working on a strict import model, others working on an OEM-based market and still others working on a collaborative basis through licensing agreements, or other financial relationships.

LED is already ‘here’. The trends for the overall electrical energy transcend pure LED sales, though. The implications of adoption of LED, or SSL (solid state lighting) is that the system is basically DC in nature and coupled with low power consumption lends itself to incorporation into new energy solutions. The possibilities are exciting for LED full adoption, such as:

· Emerge alliance. This nascent organization is developing DC distribution policies and systems to integrate DC power distribution into large areas of DC consumption; primarily large data centers, where hundreds of servers can be run on DC current and save the power losses associated with rectifying and/or inverting AC/DC. This model has proven to be an effective approach, although a lot of work is still required to achieve conformance on standards, etc. But consider the potential for residential DC power supply: attached to solar panels, distributed through a residential project to supply all DC devices; computers, TV’s, sound/security systems, and now LIGHTING, makes the application feasible. Plus it caters to the growing ‘off-grid’ movement. RV’s already run appliances on DC, so those products could also be adapted for a DC distribution. The day will arrive when a residence will come complete with two panels: AC for larger power needs, including power equipment and stoves, heating coils, etc. and DC.

· Off-grid lighting. There are millions of trails, landscape applications, rural environments where lighting could be feasibly and economically supplied without trenching power to the site through the use of SSL, with its low current requirements, and a solar panel and battery system.

· Death of incandescent. It’s here, we just don’t quite know the funeral date yet, but incandescent isn’t a good system. It creates more heat than light, the labor costs associated with changing them and the energy to drive them no longer make sense. So now it’s only a matter of time before they go away. Any incandescent application with long burning hours is an easy one to replace now; chandeliers, exit signs (they’re still out there), quartz floods, etc. they’re all an easy target for immediate replacement.


The issues embedded within the transition to LED are complex and worthy of a far lengthy discourse, but installing and controlling SSL will eventually become the province of those trades who install electronics, not electrical systems. So the future of lighting as an electrical component will go the way of premise wiring; either adapt to an electronics certification process, or abdicate lighting all together. 

It’s an exciting time in the industry; the people who will seize that opportunity will be the next generation of ‘players’. Those who insist on keeping it the way it’s been for 50+ years, will be selling wire and panels for DC.

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The Buzz-January 2011

Posted Thursday June 23 2011 by in Newsletters
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 January 2011
Volume 12 Issue 1

EPACT and YOU
by Ted Konnerth


I returned from the SSL Summit conference this week where I heard a presentation on the Energy Policy Act of 2005. EPACT, as it is commonly called has been around 5 years. It offers rebates; CASH rebates to companies, business owners, lighting designers, engineering firms and installers. In addition to EPACT, a project can also earn IRS credits on top of the rebates, PLUS state rebates on top of the EPACT rebates and tax credits.

Funny thing about our industry, we’re so inbred we refuse to listen to new ideas. The entry of those damn new companies: LED, Wind, Solar, Environmental controls, etc. just confuse the way things have always been. I imagine every electrical manufacturer and distributor and design firm read the same annoying ‘trends’: non-residential construction is predicted to be down in 2011, therefore we need to adjust our budget to reflect a modest increase in revenues. The recent TED Mag supplement that contained the summary of a roundtable of industry leaders spewed the same pabulum we’ve heard for years: residential is down but will come back a little, non-resi is down, industrial may see some growth, exports are up a little, metals prices may be a contributor to top line, etc… 

The market for remodel (which includes energy remodeling) is estimated at 10 times the market potential for new construction. TEN TIMES the market potential. There is 71 BILLION square feet of privately held office/industrial space and nearly that same size in governmental space. So, who can figure out how to sell to that amount of potential? Let me give two quick examples: a company that has never been in commercial lighting just landed the contract to replace the majority of the light bulbs in Macy’s (we used to call them lamps, remember?). How big is that? Macy’s has 2,000,000 sockets. One of my clients just landed a $30,000,000 order to relight a large client of theirs. $30,000,000! Neither of these companies were reading about the ‘soft non-residential construction market’ or ‘depressed housing market’. They didn’t know they couldn’t write this amount of business in these ‘tough economic times’. They simply presented a solid, professional, cogent ROI model to the owner of those properties and walked away with multi-million dollar orders. In neither example, did the current value-stream (sic) channel work. In both examples, NO OTHER traditional channel member ever approached them about the opportunity to help them modernize their buildings AND make money in the process.

EPACT represents an opportunity to sell any equipment that reduces energy, to any existing building and earn up to $1.80/sq ft rebate, paid in cash from the US government. The State of GA will pay up to 45c/sq ft in rebates on top of that same rebate. The IRS will allow that same building owner to recover the non-depreciated value of the equipment being removed as an expense deduction AND possibly allow the new equipment to receive a fast depreciation schedule of less than 7 years. This is money that literally can cover most of the cost of the actual remodel project; for FREE. Banks will actually lend against this financial structure and discount the loan based upon the size of the rebates; if you’ll agree to share some of that incentive with them. How many construction projects actually bother to apply for these credits? 3%.

Want to help your kids’ schools modernize their building? EPACT will send the CASH rebate to the installer and/or design firm that generates the project to reduce energy. Why? Because school districts can’t receive tax rebates, so the money goes to the people who create that demand. Private schools can receive the money. But it starts with someone actually saying; here’s a good idea, let’s CREATE demand rather than wait for our contractor to land a bid, at ridiculously low margins.

In an economy where writing business is at a premium, there are opportunities to create new business that are simply ignored. Call it arrogance, call it ignorance, but it’s literally ignored. Our current channel strategy is breaking down; new companies are seeing opportunities where existing companies refuse to look. The game isn’t the same; the ability to sell now requires the ability to ‘sell’! How many distributor or rep or manufacturer organizations have the financial selling skills to present a professional ROI proposal to an end-user CFO or CEO to prove to that company they could remodel their building and be cash-positive from Day One? Not many. Why? Because we train our salespeople to not lose orders. We train our salespeople to maintain the business they have; our sales organizations are mired in the history of how we’ve always done it before.

It isn’t the same. Change or become irrelevant, it’s your choice.

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The Buzz-April 2011

Posted Wednesday June 22 2011 by in Newsletters
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 April 2011
Volume 12 Issue 4

Egret’s 7th Annual Women in Industry Survey
By Ted Konnerth

 Diversity: the condition of having or being composed of differing elements: variety; especially: the inclusion of different types of people.
For 7 years, we’ve reviewed the number of women attendees as a small viewpoint into how the industry is changing. Albeit, this is not the most scientific survey but the results confirm the overall perception I’ve had of our industry for the past 25 years; we are a male-dominated industry, and worse; we’re not changing to meet the demands of the near future. There are elegant rationalizations for that; the distribution industry was launched in it’s current form from the end of World War II, when the returning soldiers represented an extraordinary influx of labor at a time of government sponsored construction projects; where the availability of materials was a major contributor to the efficiency of our re-birth from the War. The industry was virtually started by servicemen and has remained virtually male-only for 65+ years. Dad’s turned the business over to sons, and a handful of daughters, but a strategic process of attracting a diverse workforce into distribution and even electrical manufacturers simply never gained traction. Look at the results for 2011:

 Year Category # of females Total # Attendees  % female
2005 Distributors 20 322 6.2%
2006 Distributors 22 316 6.9%
2007 Distributors 21 323 6.5%
2008 Distributors 25 396 6.3%
2009 Distributors 9 159 5.7%
2010 Distributors 22 254 8.7%
2011 Distributors 15 243 6.2%
         
2005 Manufacturer 27 381 7.0%
2006 Manufacturer 17 358 4.7%
2007 Manufacturer 17 331 5.1%
2008 Manufacturer 23 348 6.6%
2009 Manufacturer 21 221 9.5%
2010 Manufacturer 23 289 8.0%
2011 Manufacturer 24 282 8.5%
         
2005 Total, above 47 703 6.7%
2006 Total, above 39 674 5.8%
2007 Total, above 38 654 5.8%
2008 Total, above 48 744 6.5%
2009 Total, above 30 380 7.9%
2010 Total, above 45 543 8.3%
2011 Total, above 39 525 7.4%

My professional interpretation? No significant changes in diversity. In fact, based on 7 years of reporting, 2011 just supports the bigger issue that NAED is losing relevance. The sheer total attendance numbers are practically a joke. Only 500 people in a $100B industry go to the National Leadership Summit?. The organization that welcomes ‘inclusive ideas’ is in fact formulaic and predictable; which is exactly why the same old white guys play golf and wine and dine all night with the same old distributors. It’s social, and there is nothing wrong with that. However, while the world is changing rapidly with the infusion of electronics into core ‘electrical’ realms, the changes that are roiling the industry are largely hidden from view. When will we talk about the fact that LED has the potential to disintermediate the second largest product segment from every ‘electrical’ distributor in the country, as can DC power distribution, ‘off-grid’ energy solutions, and smart building and smart grid solutions? 

12 years ago, when Egret first applied to join NAED, we were told that NAED’s goal was to add diversity to its membership and provide diverse content to its conferences. The quote from the President at the time was that “NAED strived to be an inclusive organization”. Sadly, over the past 3-4 years they’ve added only 3-4 new manufacturers who focus on Solar energy and/or LED lighting solutions; plus an additional 2-3 distributors from outside the US. Diversity should add strength to an organization, even if those diverse members provide services or ideas “to the detriment of other members”. (see NAED’s membership rules)

The regional conference program presentations have consistently provided information on how to effectively manage gross margins, maximize inventory turns, prevent theft, sell more effectively and figure out SPA’s. The National conference traditionally has content of global trends or political trends and a mélange of panel discussions on vendor/customer relationships. 

NAED is simply a formula, the only significant changes in the past 10 years is that the hotels are no longer Marriott’s and they’ve stolen the ‘speed dating’ format of the buying groups to enhance ‘networking’

While the beer and cigars are flowing on the tee boxes, reality is that the game is no longer the same. And the need to attract people into the conference who actually see the future are largely ‘excluded’ within NAED. The program content never addresses the direct to end-user market for alternative energy products, or the lack of electronic training for electrical distributors, which will eventually move those trades and products away from the electrical distributors. I have not seen a program presentation on how to assess, isolate, attract and retain new innovative talent. Talent is the #1 issue facing every company in America, but the issue is also ‘excluded’ in NAED.

In short, do you want to grow and become more profitable? Then you need to attract people who look at this industry as a step into the future; where electronics and low voltage applications will dominate controls, lighting and all computer applications; including TV’s, sound, security, voice and all computing.

Diversity brings new ideas, new approaches and often a difference of opinions on how to proceed. It’s what made America strong. Let’s break down the barriers and promote real idea exchange, with women, minorities and consultants who view the industry from the sidelines. Some of these people play golf, too.

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