Talent Crisis

Thursday 5th October 2000

When Clear Communications' Peter Merry asked employees what they wanted to make their working life a little more pleasant, the obvious answers - more money, more holidays, less work, please - didn't flood his in-tray. Sure, they were there, but what many people wanted wasn't all that difficult to deliver. Mountain bikes to exercise on, decent coffee, somewhere they could bring the kids without causing chaos. "I've had 20 years in this game," says Merry, the trendily titled business transformation and human resources director. "In the old days, we'd have laughed at these sort of suggestions and carried on to talk about money and holidays. Now we take them seriously."

As a result, Clear staff dress as if every day is "casual Friday" and can take a lunchtime spin on the company-owned mountain bikes; they use "chill-out" zones in work areas (informal meeting areas designed by the employees from that work area); their children sit in high chairs and play with toys in the cafeteria while the grown-ups happily drown in real cappuccino. "We've got a long way to go, but at least we are recognising we need to be appealing to our staff. We are trying to create an atmosphere within which they can flourish from a creative and performance excellence point of view."

By the way, Clear also sped up its share participation scheme and implemented 14 weeks' paid maternity leave and four weeks' holiday. But aren't these things the norm in overseas corporates like Microsoft or Starbucks? Hell, you have to supply coffee and tea by law. Are mountain bikes and coffee machines really so hugely innovative or different from the norm?

Basically, yes.

When Unlimited asked six recruiting companies to name the most innovative workplaces, well, to be honest, there wasn't much choice. We ended up with plenty of overseas names and a few New Zealand companies (see "Cushy number, great tactic", page 52), but only a couple of locals got ticks for really smart practice. Some recruitment agencies wouldn't give a gold star to anyone.

That's a worry. Because, in case you've been hiding under a blanket lately, there's a new fight out there, folks. In its 1999 report The War for Talent, consultants McKinsey & Company picked talent as the single most important business resource in the next 20 years. Where once companies battled for market share, they are now fighting for people. Headhunters aren't just working on top executives, but also have lesser corporate mortals in their sights. Overseas companies are using the Internet - and big salaries - to lure our best people overseas. And it's going to get worse. New Zealand figures are hard to come by, but US e-recruitment guru Kevin Wheeler estimates there are 2.5 million jobs open across all sectors in the US, though only one tenth of that number (250,000) of active job seekers. The average time people stay in jobs has fallen significantly in the US, and is now only 13 months (it's 18 months in New Zealand and also falling). And it's getting more expensive to hire people. In the US it's not unusual to pay 45% of a new employee's first year's salary in recruitment consultant fees. In New Zealand it's more like 15% to 18%.

Trouble is, the majority of New Zealand companies don't even know there's a war on. Few have developed any tactics. And even fewer are carrying them out successfully.

We are losing the talent battle. Do we mind? Not enough.

"There is a war, and employers have already lost. The terrible thing is that New Zealand employers don't know it yet," says Alistair Sutherland, chief executive of recruitment firm Morgan & Banks.

The two key problems
The easy way out is to blame the government. True, there are external problems companies can't do much about. The perceived persecution of business people through taxation and the employment relations legislation is proving the last straw in driving talented people overseas - at least that's what some employers say. Others point to the currency and the impossibly high salaries being offered in places like London and the US. Still more worry that the lack of top, grunty jobs in New Zealand is forcing ambitious executives to look elsewhere.

But these factors don't give the full picture. According to Sutherland and human resources specialists like Pohlen Kean, employers are losing the talent war all by themselves.

There are two key problems. The first is the failure of executives to think innovatively about recruitment and retention of staff. On the one hand, you have Lampen's 2000 salary survey predicting the skills shortage will get worse, and the latest Morgan & Banks Job Index showing a record 40% of the 1200 employers surveyed expecting to increase staff numbers during the July to December 2000 period. On the other hand, you have only 10.5% of the companies Morgan & Banks spoke to seeing "attraction recruitment strategies" as their most important human resources strategy. "Employer of choice" is bandied around, but is more likely to mean a coffee machine in the cafeteria and three weeks' paid maternity leave than anything more innovative.

David Newick, managing director of recruitment consultants IT Futures, estimates only about 30% of New Zealand companies even realise they are facing a potential recruitment/retention problem, and of those, only a handful are putting any tangible programmes in place to address the problems. "The misconception in the New Zealand market is that money is the panacea for getting and keeping people. The answer will lie in being innovative and proactive."

The second problem runs deeper and at times touches on prejudice and racism. Simply put, we're not using the talent that is actually out there. Whether it be women with children unable to return to the workforce because of employers' lack of flexibility, older people rejected as incapable of being retrained, Asians forced into menial jobs or unemployment because no one will give them a job, or overseas talent not being actively recruited, we are wasting significant pools of talent. Call it discrimination, call it a lack of imagination, it's definitely stupid.

No one knows better than Bai, a Chinese-born engineering graduate with a degree from China, a masters in mechanical engineering from the University of Auckland and plenty of experience in computing. He arrived in New Zealand five years ago and started sending out CVs. Company after company turned him down. His English wasn't perfect, they said; he didn't have local experience, they said; he wouldn't fit in (they didn't say, but implied). Hundreds of CVs later he decided to do a masters degree, got an exceptional mark for his thesis and again started job hunting. No luck. Earlier this year Bai abandoned his ideal of staying in New Zealand (his girlfriend is here and, damn it, he likes the place) and he started applying for jobs overseas. He soon had three international job offers on his plate, and eventually took a position in Singapore, lured by the $90,000-equivalent salary and the fact that executives had flown to Auckland to interview him and then offer him the job. He has just left New Zealand and will soon be followed by his girlfriend.

Talent crisis? You can say that again.

Innovation at work
Figures show some companies are already taking steps. The Lampen salary survey shows redundancies and staff turnover is down this year compared with 1999. Only 32% of the 662 employers interviewed in 2000 had seen any redundancies at their companies in the past 12 months, the survey said, as against 70% in the 1999 survey. Moreover, another 25% had experienced staff turnover of more than 20%, as compared with 31% the year before. "Part of the reason [for this change] is the skills shortage," says Lampen marketing manager Karen Steans. "Before, employers could be arrogant, but now the balance of power has shifted to skilled employees. Employers are saying: 'Oh help, the skills shortage is right in front of us,' and they are realising their best weapon is trying to hold on to the people they have."

Take Clear. There are still echoes of the old corporate, like the executive suite on the fourth floor, the ear-marked car parks and the uniformed receptionists, but the message seems to be getting through. One Clear employee Unlimited talked to said she was staying with the organisation despite not liking her boss, because she liked the change in philosophy.

"I feel good about what's happening. All of a sudden, the employee has become the number one priority. It's not just how much money, but what benefits you want; what they can do to make the work environment more fun."

A key thing for employers trying to retain people, according to Karen Steans at Lampen, is looking at your employees as individuals, not groups of people. Often it isn't the big things that matter to staff, she says. Instead, it is small things such as flexibility in hours. "They should be saying: 'As an employee, this is what we want you to achieve. It's not important when you are here and when you are outside.'"

Another important mind-set change needed is in how companies recruit new staff. Changes to the employment market now are similar to those that hit manufacturing and retailing when import tariffs and domestic protection was withdrawn. In post-liberalisation New Zealand, stores and manufacturers used to dictating to their customers were suddenly faced with consumer choice. Quality and marketing improved. In the present-day para-llel, the power has shifted to the employee from the employer, and companies will have to use every power of persuasion to get the best staff on board.

Hence the new HR buzz words, "recruitment branding" and "employment branding" - the process of developing a brand for your company (not your products) so that your best employees and the sort of people you want to hire in the future see your organisation as a great place to work.

"Companies need to think like marketers and find or make a key point of difference for themselves. Not to their consumers but to their employees," says Heather Kean of Pohlen Kean.

Doing that isn't too hard (see "Sell the company", page 78), but requires a new mind-set and an investment in recruitment and retention only some are prepared to apply. For a start it is hard to quantify how much it costs to hire staff - or to lose them. If you simply take the basic cost of a recruitment agency fee and some advertising space, anything spent on recruitment branding or retention strategies seems a waste of money. But the real costs of recruitment include staff time, training, production down time and possible loss of business and experience with the previous incumbent. US research has estimated the total costs as between 1.5 times and 2.5 times the annual salary that position is worth. Put another way, 20% staff turnover at a company with 100 employees on an average of $50,000 would set your company back a whopping $1.5 million each year. Lose a new person after only six months, just when he or she is coming up to speed, and the whole sum is wasted. "You might think you are spending $8000 to recruit someone. In reality it might be more like $60,000 to $120,000," IT Futures' David Newick says.

Redundant stars
So there is a little progress on the workplace front. But fresh thinking about the second problem, the under-tapped skill base, is much harder to find.

Take nurses. It's no secret there's a critical shortage of nursing talent in New Zealand. Nurses can get better salaries overseas, or more social hours in the non-nursing sector. Yet a Ministry of Health survey released in July found there were almost 7000 registered nurses in New Zealand who weren't working in the profession, but - and this is the important bit - were keeping their practising certificates current. They hadn't ruled out being nurses again in the future - in fact, 76% of the 3500 non-practising nurses that returned the questionnaire said they would consider returning to the profession.

So why didn't they? Money - or lack of it - is an important factor. But money wasn't everything. Most said they needed more flexibility in hours and/or more childcare support. They were sick of the stress caused by under-staffing and they felt they had been working in a profession that wasn't generally well valued and where their voices weren't being heard by the bosses. So they left.

Looking outside the Pakeha/Maori standard is one option - an option we are resolutely not taking. Figures from the New Zealand Vice-Chancellors' Committee on Graduate Destinations show that while 22% of Pakeha and Maori graduates are unemployed six months after leaving university, the figure is as much as double for Asian graduates (33.9% for Indians and 38.2% for Chinese and other Asians). Remember, these are graduates from New Zealand, not overseas, universities.

In 1999 the Equal Employment Opportunities Trust carried out a survey of Sri Lankan migrants into New Zealand. They picked Sri Lankans because census data showed this group was the most highly qualified (96.5% of those surveyed had a tertiary qualification, 75% had held professional positions before coming to New Zealand and 92% were fluent in English). The results showed 32% had been unable to get a job, and of those employed, 54% had to take lower positions than the ones they previously held. Nearly 50% of the total respondents said they had faced discrimination, mainly from employers (65.5%) or recruitment consultants (56%).

"If the Sri Lankan experience reflects that facing other immigrants, then too many New Zealand organisations and recruitment consultants are involved in wasteful and potentially discriminatory practices," says the report.

Take Kong. Her mechanical engineering degree from China, eight years of experience working in aircraft maintenance for a Chinese-US joint venture and flawless - though slightly accented - English was not enough, in the first three years she spent in New Zealand, to get her a job. Eventually she too decided to go back to school and will complete a masters degree in mechanical engineering later this year and go to Australia in 2001.

"Most of my friends have shifted to Australia already," says China-born Sarah, who is working as a personal assistant, despite being well qualified and speaking perfect English. She believes Australia's cultural diversity makes migrants far better accepted, and well-qualified people don't have problems getting jobs. "Seven or eight friends have moved to Sydney or Melbourne over the past few months and 100% found jobs within a month. Most of them couldn't find work here." Sarah, like most of her friends, would prefer to stay in New Zealand, but is taking her family across the Tasman as soon as she's finished her masters degree.

Stuart Bennett, general manager of IT recruitment company Morgan & Banks Technology (MBT), is angered by the attitudes of many New Zealand employers who are either blatantly discriminatory or just narrow minded about the skill-set they want.

He remembers a group of Iraqi migrants, largely doctors and engineers, who arrived in New Zealand after the Gulf War. The Medical Association froze out the Iraqi doctors, Bennett says, even though many had done their internships in the UK. And most New Zealand engineering companies simply weren't willing to accept an Iraqi engineer. "There was one man who had been a doctor in engineering at Cardiff University in the UK and who'd lectured in Sheffield. His English was perfect. One of the big civil engineering companies in the Waikato was looking for someone. First of all they said: 'He won't know how we do things here.' Then it was: 'He won't be able to supervise local staff.' This was a man who had led projects in the Middle East supervising people from a dozen different nationalities. This man sat in the dole queue for five years. Then along came the Internet. He sent his CV to a few universities in the US and his last problem was which of the five job offers to accept."

At the moment, Bennett and his team are working on a project spearheaded by China-born MP Pansy Wong, who is concerned about discrimination against Chinese immigrants. MBT interviewed 50 Chinese migrant IT workers who hadn't been able to find jobs and found a good 10% had the skills and language ability that should have - but hadn't - allowed them to walk into a job any time. A further 30% to 40% had general IT experience and were suitable for jobs, but needed more training in terms of specific computing skills. The rest struggled with language. Bennett estimates 20% of IT jobs remain unfilled after six months. Some of these Chinese people have been sitting at home for up to 18 months.

So why aren't they in jobs? "There's a cultural gap. No doubt about it ... These people are very capable, but there's definitely an element of cultural adaptation to work in the New Zealand environment. In return, the New Zealand employer needs to show a level of tolerance and acceptance."

It isn't just foreigners. Mergers and automation have taken lots of numerate, computer-literate people out of the banking and finance sector. With training, Bennett says, these people could easily do many of the IT tasks being sought in the New Economy. The problem is age. Many are over 40 and people won't take them on.

"People have the idea that age is a barrier to learning new skills. In my experience the critical issue is a person's willingness to learn. I'd sooner take on a re-trained 50-year-old where you are going to get performance and loyalty and a lot of commercial knowledge than a young guy who's going to come in and whizz off in six months or a year for more money."

What is needed, says Trudie McNaughton, head of the EEO Trust, is a change in corporate mind-set to not just tolerate different cultures in the workplace, but to see diversity as adding value. New Zealand society is getting more diverse, she says, and migrants or older people, for example, can provide valuable insights into the behaviour of customers or potential customers in their particular social group. A US study of Standard & Poor's 500 companies found the companies rated in the bottom 100 in equal opportunity terms had an average 8% return on investment, while those in the top 100 had an average return of 18%.

"We value diversity in a selfish sort of way," says Peter Scott of PricewaterhouseCoopers in Auckland. "It is the diversity of our people that assists us in being innovative and it is through innovation that we bring real value to our clients."

Our companies also need a willingness to invest in training - particularly of staff at lower levels. "Although employers have found it difficult to recruit the right people, many are unwilling to train current or potential staff in the skills they require," Lampen's 2000 salary survey found. "Most of the training provided by employers relates to product knowledge rather than people skills or competencies." This is short-sighted, says Lampen's Steans, in the IT market, for example, where high-level technical people are now often being expected to go out and talk to customers. Take call centres - or contact centres as they are increasingly called. Hosting call centres for overseas companies is potentially a huge growth market for New Zealand, but for that we need people with good product and technical knowledge, but also strong problem-solving, sales and people skills. Then we have to make sure we provide them with a good work environment - not the traditional sweatshop conditions traditionally associated with the job, or, as is already happening, the best people will be picked off by call centres in other countries.

Training doesn't come cheap - it requires money and, more importantly, time in terms of coaching and mentoring - but what are the consequences of not training? New Zealand's appliance industry knows the answer. Cost-cutting and government changes to the apprenticeship rules in the 1980s and 1990s has cut the number of appliance servicing apprentices in the whole country to 33 - that's half the number needed to fill the jobs becoming available. "There will be a crisis if we keep doing nothing," says Trevor Douthett, chief executive of Wellington appliance group LV Martin & Son. "People say they cannot afford to train people. The reality is we cannot afford not to."

Already, the skills shortage has pushed wage rates up, which in turn has pushed up charge-out rates to $48 an hour. These could rise to $60 an hour if the problem isn't solved.

Our one great advantage
Unlimited reckons all is not yet lost. With the market for talent increasingly global, New Zealand companies have one great advantage over those in many countries in the world - New Zealand is a great place to live. It's a place where many talented people - particularly from places that might not be so great whether because of pollution, conflict or climate - would love to live. All we have to do is provide the right work and cultural environment to find and use the talents of these people.

Take this example. Jeff Wilkinson, manager of Christchurch-based software house Compaq ADC, reckons he has few problems attracting and retaining staff. The company, which started in 1987 with five people, now employs 80 and is still growing. Average tenure is four to five years but quite a few staff have been there longer than 10 years (remember this is a computer company). ADC loses about two or three people a year, of whom a few come back.

Compaq ADC's major advantage: Christchurch. What?

"There are very talented people committed to staying in Christ-church. People in Christchurch tend to be loath to move away, and Lincoln, Canterbury and Otago universities are all pushing out graduates who want to stay in the area," Wilkinson says. "In Christchurch there are not so many job opportunities." In theory, all Wilkinson has to do is be open-minded about the people he employs, provide as much as possible a great working environment, and he reckons he should be able to get the pick of the crop.

So what's the good experience of an 80-person firm in Christchurch got to do with New Zealand's wider talent problem? People are heading overseas from Auckland and Wellington faster than you can say "hen's teeth". So extrapolate the ADC scenario to a wider New Zealand context. Wilkinson admits he's unlikely to attract people who don't want to live in Christchurch, but his argument is that there are enough people who do. In the same way, New Zealand can't force the people who want to go overseas, whether for salaries or experience or whatever, to stay, and shouldn't be trying to.

What we should be doing is making our working environment as flexible, exciting and innovative as possible for the people who do want to live in New Zealand, and for those thinking of returning here. Accept we can't match the salaries, but accept also there are many people who - for family or lifestyle reasons - would choose to come here or not to go overseas. First, we have to be prepared to see the talent in the people already here. Wilkinson, who is involved in every staff interview and has the say in every hiring, says a key factor is looking at the quality and the potential of the person, not at the skills they may or may not have. He hired a Dutchman, for example, with a PhD in mechanical engineering and good people skills. "He was very personable and had a heavyweight PhD," Wilkinson says. "He'd been to five employers in Christchurch and they'd all asked him: 'Do you know Visual Basic?' He learned Visual Basic in about a week."

Then we have to get our HR policies right so we can attract more skilled people and keep the ones who want to stay. Our companies should be global employers of choice and our country the best place to live.

Nothing to it.

Cushy number, great tactic
One of the most-quoted corporate legends about the bad ol' days of pre-Roger Douglas New Zealand is Lion Nathan and the beds. Do you know, reformists used to whisper to newly arrived journalists, Lion used to have beds in the brewery so workers, having imbibed too much of the sponsor's delicious product during their morning session, could have an after-lunch snooze.

The Employment Contracts Act and global competition soon put paid to that, they would finish smugly.

But what's all this? The beds are coming back. In these days of skills shortages and talent wars, having a bed in the office for under-the-weather workers (or breast-feeding mums) is seen as enlightened practice, not stupid indulgence.

Maybe it was a good idea after all. Here are a few more.

Life friendly: Family friendly workplaces have been around (in theory - and sometimes even in practice) for a while. But giving employees with kids special benefits like time off or flexible work practices pisses off the rest of the workforce which, oddly enough, wants to get a life, too. So the new buzz word is "life-friendly" workplaces where companies try to encourage balance between all employees' work and non-work lives. The big challenge, says Heather Kean of recruitment consultants Pohlen Kean, is not just having a policy, but having leaders seen to be role-modelling that policy. If you meet the boss in the lift and he remarks that you are "starting late again today", that's not encouraging flexibility, says Keane. "People need to feel that they don't have to put 'going to the dentist' in the diary when they are actually going to a school sports day."

Stay home: Some companies take it even further. Public relations company Global One, which recently set up an office in New Zealand, has two "duvet days" a year as standard for all its operations worldwide. These are days when you wake up and feel completely unmotivated to go to work, says August One's South Pacific director, Ava Lawler. "Sometimes you are just not in the mood. You'd rather stay in bed or sit in a café, see a movie, go shopping. Instead of feeling guilty and calling in sick, you can be honest and simply recognise you need a day to rejuvenate." There are some rules - duvet days can't be tacked on to holidays and shouldn't be taken when they would seriously inconvenience other employees (such as the day you are meant to give a major client presentation).

IT Futures has a duvet days' equivalent - two days a quarter, on top of the company's 15 days a year holiday when employees are encouraged to do something other than work. Employees can choose when to take them, but if they haven't taken them by the end of the quarter, they lose them. And they have to turn the cellphone off. "For me, it's spending more time with my family and improving my golf game," says managing director David Newick. "We are keen to avoid burn-out and stress."

Get lost: August One offers a three-month sabbatical on full pay - used by most staff for travel - for employees who have been with the company for six years.

Talk, you bastards: Esolutions, the newish strategic Internet alliance between Telecom, EDS and Microsoft, is particularly hot on internal communications. Every week boss Jane Freeman gets her 62 staff together for an hour-long meeting to let them know what's going on and to ask for feedback. She also holds weekly coffee sessions with five or six staff members (the staff are rotated each week) to discuss any roadblocks that need sorting out. Every quarter there's an off-site strategy meeting for all employees.

In a recent staff satisfaction survey, 86% said Esolutions was a "fun place to be" and 71% said they would recommend the company to others as a great place to work.

"I love the environment," says Sophie Perham (Esolutions is trialling a no-titles workplace, but Perham's job is online and internal communications). "People are fizzing about the team environment."

More, more: Increasingly, employees are expecting their companies to give them the opportunity to develop new skills. It might be skills that will take them on to the next career step, or simply a chance to learn Russian before their next holiday. Options for employers include paying for staff to take papers at university, giving them discretionary training budgets or working with them to establish their career and life goals and then finding a way to get there.

"Training is expensive, and some employers growl that they are simply paying to train someone to leave," says Newick. They want to see a 5:1 dollar return for their training budget. "In that sort of culture, maybe people will simply train, then leave. But done right, training is part of a rich fabric of a retention strategy."

On yer bike: At Advantage Group in Wellington the staff have developed a scooter race track. At Clear Communications staff have access to mountain bikes at lunchtimes. IT Futures' staff recently all went four-wheel motorbiking. "Key talent these days have a ton of options and if other key talent are saying: 'Hey, we went four-wheel motorbiking,' they are going to be comparing their own environment to that of the others," says Newick.

Head-hunting parties: Canadian Internet giant Nortel Network holds giant parties, not for its customers (well, it may have them as well) but rather for potential recruits. A Nortel recruitment jamboree at a recent computer show in Boston featured food and drink all night for the potential recruits (anyone at the show who could be cajoled into coming) and entertainment by Diana Ross and the Supremes. "People were throwing their business cards at the Nortel guys, saying what a cool company it must be," says one source. Nortel reckons the result was about 150 new recruits.

Wanna job?

Don't be a clever Asian

Percentage of each ethnic group with bachelors orbachelors with honours degrees who are unemployed six months after graduation

European/Pakeha	22%
Maori	22%
Pacific Islands peoples	27.8%
Indian	33.9%
Asian (Chinese and other Asians)	38.2%

Source: New Zealand Vice-Chancellors' Committee on University Graduate Destinations

Best place to work?

We're doing our bit to help win the talent race.

Look out for the Best Place to Work winners in the December issue of Unlimited.

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