Whether the August jobs report on Friday shows a net gain or loss in the U.S. labor force, the long-term trend will likely remain the same: a sputtering job market featuring short-term rises countered by lingering global economic uncertainty.
According to economists surveyed by CNNMoney, the report will probably show a modest gain of 120,000 jobs, keeping the unemployment rate steady at 8.3 percent.
The job market for executives tells a similar story. Employers appear to be standing pat as they wait for more economic certainty before hiring senior leaders. For talent managers, this wait-and-see approach can be a dangerous game to play.
According to Mark Anderson, president and chief economist of ExecuNet, a private network of 250,000 senior executives, a majority of senior-level talent are either actively looking or preparing for their next career move. An uptick in executive hiring could lead to an exodus of highly qualified leaders from your organization.
“Don’t wait for the turn to address the retention of your top talent,” Anderson said. “You should be working on it now in terms of communicating roles and directions and how those people are going to grow and be challenged within the organization.”
Like others in the current labor market, executives are experiencing higher levels of joblessness and are looking for their next move. Anderson said the executive jobless rate of about 4 percent, while about half that of the general labor market, is above the 2 percent range that should be expected in a growing economy. The end result: skittish executives actively pondering their next move.
“If you want to protect your talent, you’ve got to protect it before they make the decision that maybe I should be looking on the other side of the fence,” he said.
Slumping Growth, Hidden Opportunity
According to ExecuNet’s survey of 168 executive recruiters, one in five companies expect to add executive jobs over that period while 25 percent plan to freeze hiring. Thirty-nine percent were confident the executive hiring market would improve in the next six months.
“Currently they’re not expecting companies to be laying off people, they just look at them as putting more positions on hold and taking more of a wait-and-see attitude,” Anderson said.
While not the worst news, it’s not exactly great news for hiring. Anderson said executive recruiters’ confidence is an effective barometer of economic conditions.
“They predicted the bottom of the last recession in 2003-2004 and also predicted the peak six months ahead of most indicators,” he said. “It’s been a very good leading indicator of what’s going to be happening six months down the road or so.”
Statistics from a professional association of executive recruiters tell a similarly mixed tale. According to second quarter figures released by the Association of Executive Search Consultants (AESC), executive search revenue fell by 6.1 percent from the second quarter 2011 to the same period in 2012. This drop was mitigated by a quarter-on-quarter increase in 2012 of 8.6 percent.
The year-over-year drop looks more dramatic because 2011 was a particularly strong year with revenues nearing their 2008 peak, said Peter Felix, president of AESC. He said the decline and deterioration in confidence that began in late 2011 and continued early this year appears to have ended.
“Broadly speaking, you actually see this year a marginal increase which on top of the increases of the previous two years is encouraging,” he said. “It’s particularly encouraging because it’s in spite of a pretty awful period of economic uncertainty.”
If there’s one consistency to the executive recruiting market, it is its recent inconsistency. Anderson said the last two years both started positively only to flatten out in the second and third quarter, but the overall sluggishness masks pockets of growth and opportunity.
ExecuNet’s survey showed the greatest growth opportunities in the health care, technology, life sciences, business services and energy sectors, as well as for executives in functional areas such as business development, sales, marketing, engineering and operation management.
“You’re going to see a war for the right talent,” Anderson said. “We see a lot more focus on having the right skills rather than just being a [chief marketing officer] or a [chief technology officer]. Those right skills are centering around not just strategy, but really being able to execute on the strategy and execute quickly and crisply by developing and managing high-performing teams.”
‘Wait and See’ Different Than Just Waiting
Despite the slow-moving indicators, executive recruiters remain optimistic about the market. AESC’s data indicate that North America showed a quarterly increase of 4.2 percent in executive search revenue, driven in part by growth in technology and financial segments, but balanced by a slowdown in recession-hit Europe and a cooling in Asian economies.
“I’ve been surprised by how resilient the market has been,” Felix said. “We obviously see that as an indicator of good times ahead when eventually things settle down.”
The murky numbers make demand for executive talent difficult to foresee but that shouldn’t stop talent managers from taking action.
“It is very difficult to predict but what we do know is that executive talent doesn’t just come off the machine,” Felix said. “It takes time to mature — investments in education and all sorts of socioeconomic issues are at work to influence the supply of talented executives particularly on a global scale.”
While external demand may be hard to predict, executives’ internal demands from their talent management leaders aren’t. They are looking for opportunities to add to their skills and make themselves more marketable in an uncertain business environment, Anderson said.
That adds up to a double-barreled challenge for talent managers. Provide development opportunities that will boost leader retention on one hand while also helping the company navigate a slow-growth environment and find competitive advantage.
“How do you take advantage of this slow-growth economy and how do you find competitive advantage or markets that are developing that can help you grow within that?” Anderson asked. “It can’t be wait-and-see business management, but it is a wait-and-see hiring situation.”
Felix said the current market is an opportunity to educate business line leaders about the state of the executive talent market and what’s needed to find and develop leadership talent. Many may have the impression that high unemployment means it should be easy to find people. That’s not the case when it comes to in-demand executives.
“You often find the line executive doesn’t get it at all,” he said. “They’re really singing off a different hymn sheet.”
When demand picks up, executives will start moving and create significant churn in the executive job market. At that point, it may be too late.
“There’s a lot of pent-up pressures where people are not moving to a great degree but as soon as opportunity starts to appear, companies are going to be faced with a lot of retention issues,” Anderson said.
Mike Prokopeak is vice president and editorial director at Talent Management magazine. He can be reached at firstname.lastname@example.org.