By Ian J. Cook

The number of people who are suggesting that the need to focus on retention is no longer necessary due to the current economic climate is surprising. A combination of media hype, sizeable jumps in the unemployment rate in Canada and B.C., the continued bad news from south of the border and a lack of a clear end to the current economic decline have led people to believe that there are no jobs anywhere.

This leads to the assumption that all employees will be working hard to maintain their positions, that there is an abundance of skilled people out there waiting to fill any empty role and so spending money on retention is irrelevant. The assumption based on the external data is that the economy will keep everyone in their jobs and working as productively as possible. This assumption is not only wrong, it’s potentially damaging to the future success of your organization.

The first problem is with the interpretation of the absolute numbers. Indeed the unemployment rate has been rising at a dramatic rate: 0.8% increase in January alone. However, it was at a historic low and both B.C. and Canada are still set to experience a labour shortage over the long-term. The projected unemployment rate is set to hit the seven per cent range which is still far lower than the ten -12 per cent of the 1980s in B.C.

With the unemployment rate hovering around the six to seven per cent range, it means there are more candidates for each role but it does not mean there is an abundance of highly qualified and skilled candidates for each role. When quality counts – as it always should in hiring – then an unemployment rate of six to seven per cent is indicative of a neutral market and not necessarily an abundance of talent. Hence knowing who your most critical people are and holding on to them remains a strategic priority.

Another part of the false assumption that retention is unnecessary is that there are no jobs for people to move to. Again a more detailed review of the data and the dynamics of job markets suggest this is dangerously wrong. A study in the U.S. of the dotcom bust established that overall 1.2 million gross jobs disappeared during this period. However during the same phase 7.6 million net jobs were created.

To understand the details of this we have to look at what tends to happen in recessions. There is a well-established cycle where either laid off or disengaged employees opt for the severance package and branch out on their own to pursue their dream of re-writing their industry and putting their entrepreneurial and innovative skills to work. Although accessing capital is harder due to the nature of the economic crisis, it is not impossible. These start-ups create all kinds of new opportunities and with many stock option plans underwater they find it easier to attract high quality, more risk-oriented people — the sort that tend to drive an organization forward.

A look at B.C. stats shows that the impact on job losses is not symmetric. Even in January with its rapid rate of job decline the number of jobs in the professional, scientific and technical category increased by 4.6 per cent, in health care by 2.2 per cent and in insurance, real estate and finance by 1.5 per cent. Not all sectors of the economy have collapsed and this means there is still opportunity for good people to find new roles.

One further recent statistic which suggests that the job market is far from dead comes from the McKinsey Quarterly’s monthly survey of business confidence. Started in October last year, this survey has been tracking business confidence and responses to the crisis. One of the indicators tracked is the intention to recruit people who would not otherwise be available. Between January and February this indicator increased by over 100 per cent suggesting that many organizations have adjusted to the slower economy and are looking out to see how to build the strategies and capabilities they need to succeed in our new economic order.