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Posts Tagged ‘Recession’



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

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

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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