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TCU Magazine "Academe"

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Studying reasons

Good help in bad times

When the economy nose-dives, smart companies mine for top-shelf employees. The practice is known as countercyclical hiring.

By Rick Waters '95

A recent study predicted that the Sept. 11 terrorist attacks will reverberate through the U.S. economy for years, wiping out more than 1.6 million jobs in 2002 alone.

Losses will hit cities with exposure to the tourism and airline sectors hardest, but they will also spread across a wide range of industries, from entertainment to financial services, according to the Milken Institute, a Santa Monica, Calif.-based economic think-tank.

While a definitive toll can't be calculated, evidence of job losses are evident in the news. Ford Motor Co. made headlines this winter when it announced plans to cut 35,000 jobs nationwide. Enron slashed 4,000 before its infamous collapse.

But the news is not all bad for job seekers, said Bob Greer, TCU associate professor of management and lead author of a study on countercyclical hiring. The best companies are always in the hiring mode, he said, sometimes not in spite of a bad economy but because of it.

Consider it contrarian hiring. Normally, in strong economic times, firms compete with themselves in the labor market. But just as some investors buy stocks when they are beaten down by a bear market, some employers go after key managers and professionals when a recession puts thousands of workers on the street.

"The benefit is an opportunity to get bargains," Greer said. "It's a risky strategy, but it is equally risky to assume the talent will be there when there's an upturn."

The primary risk is that employers will increase their costs when business is contracting. Neither Wall Street nor a board of directors may approve higher spending when everyone else is getting smaller.

A second risk is a public relations backlash. Many of the companies in Greer's study were cutting jobs because of a recession while simultaneously upgrading their key talent in other areas. The approach makes greater business sense if a company has the resources, but it can also alienate workers.

More than 100 companies responded to Greer's study, which involved analyzing employment and stock market data and a subjective survey of human resource managers. None agreed to be identified to the media or consulting firms.

"Firms do it, but they don't like to talk about it," said Greer, whose study was published in the Journal of Business Research and has been featured on CNBC's "Squawk Box" and in at least a half-dozen newspapers. "It's most appropriate for companies that do a good job of planning for the future."

The study concludes that companies that practiced limited countercyclical hiring realized a significant increase in profits within two years. They also had a stronger pool of minority applicants, helping them achieve diversity goals.

Greer will not claim cause and effect. Those companies also tended to have other forward-thinking practices, such as investing heavily in training and management development and pursuing affirmative action, which contributed to the results.

The strategy is best done on a small scale and is particularly effective in luring workers in specialized or technical fields, such as engineering and research and development. But in general, contrarian hiring is not an easy sell. Human resource managers may agree it is a good strategy but not one embraced by their bosses.

Private companies may have an advantage. They can take a longer-term approach on hiring, just as they might with buying an office building.

The ideal scenario is to run a booming business during a downturn. Then a company has the resources and opportunity to add top hires. Example: Lockheed Martin, which won the joint strike fighter contract last fall. Engineers are drawn to the project regardless of the economy because it represents the next generation in fighter technology, and Lockheed won't have to worry about losing top talent to dot-com upstarts.

For those without degrees in rocket science, returning to college is a viable alternative, but they should remember that talent is always in demand, in good times and in bad.



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