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Headhunters beat the bushes

Shortage of skilled workers crosses sectors

Duncan Mavin
The National Post
November 23, 2005

Kevin Hall has seen the shortage of skilled labour in Alberta first hand. Recruiting mid-level managers means more "beating the bushes" to find candidates, says Mr. Hall, co-managing partner at executive search firm Ray & Berndtson in Calgary. Typically, he talks to 40% more executives than a year ago before he has a handful of candidates. "There's a war for talent out there," he says.

But what has surprised Mr. Hall is how many sectors are touched by the shortage. Walking to the office, he passes countless restaurants with "help wanted" signs. When he picks up his car at the local lube shop, new employees are under-skilled and offer "crappy" service.

"Even the guy who owns a little coffee shop in my building bemoans almost daily about his staff problems and his turnover and how he can't get people," Mr. Hall says.

Of course, in Calgary, everybody, from rig workers to human resources managers to receptionists, is susceptible to the draw of the almighty energy dollar.

However, when Canada's unemployment rate hit a 30-year low of 6.6% in October, with 204,000 new jobs created so far this year, the flip side of stellar job-growth is a labour shortage that is striking across the country and across many sectors.

Almost three-quarters of Canadian companies say attraction and retention of talent is the most critical issue facing their organizations, with more than half concerned about the retirement of skilled Baby Boomers, according to a survey from financial services firm Deloitte & Touche LLP. Eighty-six percent of companies polled say they are experiencing or expect to experience shortages among salaried staff, and 66% say the problem extends to staff paid by the hour.

Even more alarming is that two-thirds of respondents said the talent shortage is dragging down Canada's productivity, yet less than half of businesses appear to have concrete plans to address the issues.

On a recent tour across the country, David Emerson, the federal Industry Minister, admitted to worrying about "the limited potential for growth" in the nation's workforce. He suggested solutions would include better management training to encourage entrepreneurship and "more efficient integration of trained and skilled immigrants into the economic mainstream."

Meanwhile, skilled labour shortages remain a reality for many sectors.

In Toronto, Marilyn Eddy, senior associate at Lannick Associates, an executive headhunter, says supply and demand is "way out of whack" in the financial services sector, too. October alone saw 26,000 new jobs created in finance, real estate and insurance.

"It's the equivalent of a hot housing market," says Ms. Eddy. Like home buyers bidding above the asking price, hiring companies have to offer salaries that break their pay structures, and they must be willing to move quickly to secure the candidates they want.

But a shortage of talent means short lists of candidates have fallen from more than five, to three at most, Ms. Eddy says. "Sometimes we do a hire based on a short list of one." She says she is even turning away clients because their demands for talented staff are not realistic given current shortages.

Sandra Lavoy, who headhunts technology talent for clients of recruiter Robert Half Technology, says a 93% rise in tech projects this year, compared with 2004, has driven salaries up between 5% and 15% in the past year.

But some clients are disappointed. "I can't find certain software engineers," she says. "The market has changed and good candidates are hard to find."

Those sorts of shortages are in part a result of industry-specific issues -- such as increased regulatory work in the post-Enron financial sector or a cyclical update of hardware and software -- but they're also due to factors affecting the whole economy, such as the impending retirement of a large, highly skilled section of the population. In finance, for instance, it's estimated one-quarter of all chartered accountants will retire in the next eight to 10 years.

That ageing demographic also affects many smaller companies, says Garth Whyte, executive vice-president of the Canadian Federation of Independent Business. He warns that 45% of the federation's members say they want to sell up -- mostly to retire -- in the next five years, but only about 10% have a formal succession plan. "What happens to 20 employees when the business owner leaves?" he asks.

"A terrible hand-off" could result in significant job losses, especially as he estimates that CFIB members are responsible for as many as 80% of recent new jobs, and make up as much as half of the Canadian economy.

Mr. Whyte says CFIB members are feeling the pinch of a challenging competitive environment -- the high dollar, strong global competition and rising energy costs -- but they have not yet shed employees on the same scale as bigger manufacturers because of the shortage of qualified people.

In manufacturing, approximately 129,000 workers have been tossed on to the scrap heap in the past 12 months, and 2005 has seen months of labour unrest or last-minute, strike-avoiding deals involving thousands of Canadian workers disillusioned by the prospect of job losses, the proliferation of short-term employment contracts, and unsatisfactory pension payments in, for example, steel, automotive, and transportation industries.

Yet Jayson Myers, senior vice-president and chief economist at the Canadian Manufacturers and Exporters, says much of Canada's manufacturing sector is faced with a complicated dichotomy that sees organizations laying off workers at the same time as they face a shortage of qualified labour.

While companies under pressure from a higher dollar, surging energy prices and increased competition from China and India, is now added the problem of recruiting skilled labour, are laying people off, those same companies are restricted in their efforts to reorganize and avoid closing down because they are unable to find staff with the right skills.

According to a recent CME survey, 78% of Canadian manufacturers say skill shortages will have an affect on future innovation, and more than a third say they expect labour to be a strategic issue shaping the sector in the next 10 years.

Mr. Myers says closures and redundancies are inevitable, but if Canadian manufacturing is to survive, companies need access to quality labour. "It can't be business as usual any more," he says.

However, 40% of manufacturing companies say the availability of qualified labour is getting worse, compared with 5% who see an improvement. Meanwhile, CME estimates 255,000 manufacturing employees are set to retire by 2010 -- many of them senior people with years of experience -- yet the sector needs 400,000 additional skilled workers in the next 15 years.

"Manufacturers in Canada are going to have to become more specialized and more flexible," Mr. Myers says. "That means the capabilities within the labour force are going to have to change, as well. You may not have the people you need right now to meet the requirements of a much more innovative type of manufacturing."

At E.H. Price, a Winnipeg-based manufacturer of air distribution products, chairman and chief executive Gerry Price says the survival of businesses like his requires a fundamental shift away from large scale production toward niche manufacturing. That has forced him to reduce overall employment in a "terribly unhealthy" market for Canadian manufacturers, even though he is always searching for new engineers, technologists and software developers, which are in high demand.

National Post 2005

© 2005 Ray & Berndtson



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