As a once-robust economy sputters, reports of layoffs have grown as familiar as the daily weather forecast. Among the cutbacks announced and grabbing headlines in recent weeks: 350 dismissed at Barnes & Noble's BN.com, 700 canned at eToys, 1,300 slashed at Amazon, 10,000 let go at Lucent, and a staggering 26,000 downsized at DaimlerChrysler. Layoffs in the fourth quarter of 2000 jumped 54% from a year earlier, according to the Labor Dept.'s Burearu of Labor Statistics. This translates to 226,185 pink slips. And that was just at the big companies.
But if one company's loss is another's gain, this new era of belt-tightening should be good news for small-business owners, right? After all, they've struggled mightily to hire qualified and even not-so-qualified workers in recent years as the economy, fueled by the high-tech boom, soared to record heights.
Not so fast, experts say. Despite all the publicity surrounding layoffs, the labor market remains "still tight as hell," says Ken Goldstein, an economist at The Conference Board. "You would think from some of the stuff you read that everybody's being laid off all of a sudden," he adds, "but it isn't that much." Despite signs of a slowdown, the unemployment rate for January was still just 4.2%. And while it may increase slightly in coming months, Goldstein predicts the jobless rate will be "at worst, 5% by the end of the year."
For small-business owners, that means finding skilled, dependable workers is likely to be as difficult -- or nearly as difficult -- as it has been over the past two years. And as any entrepreneur knows, the consequence of that can be missed opportunities. John Gedeon Jr., owner of General Pest Control, in Cleveland, knows that all too well. He would like to expand beyond three offices, but his 38-person staff is already stretched thin. And he has gotten little response to help-wanted ads in recent months. "If we do secure additional business," asks Gedeon, "how are we going to service it at the same standard?"
Even in areas with a high concentration of layoffs, there's often a mismatch of skills between displaced workers and the needs of small business. In Michigan, fourth-quarter layoffs jumped 133% from the year before, mostly because of cutbacks in manufacturing, according to the Labor Dept. But assembly-line workers, while skilled in their own industry, rarely have the sales and customer-service experience that many small businesses are looking for, says Michael Rogers, vice-president of the Small Business Association of Michigan.
Often, there's a mismatch in pay, too. While Michigan faces a chronic shortage of home health aides, those positions typically pay just $6.50 to $8 an hour -- well below most manufacturing wages, says Patricia Townsend, vice-president and co-owner of 75-employee Abbi Nursing in Kalamazoo, Mich.
Of course, some companies are benefiting from the downturn. "It's become easier to find high-quality candidates thanks to the dot-com and e-consultant implosion," says Larry Reback, CEO of GuideComm Systems Inc., of Chantilly, Va., a systems integrator for telecommunications companies. Michael Korybalski, CEO of another Michigan company, Mechanical Dynamics Inc., agrees. His 350-person company has picked up a handful of high-tech specialists in the past month from failed dot-coms. "It is getting a little easier," he says, "but it's still pretty tough."
Others, too, are beginning to see small signs of improvement. A year ago, the Smaller Business Association of New England advertised for a sales position. No one responded. But recently, when the group ran the ad again, 10 people eplied. "I don't quite know why these people are on my doorstep, but they are," says Julie Scofield, the association's executive director. Still, she notes, it's all relative: "We're talking about having a response, where before there was really silence."
Despite the publicity over "pink-slip parties" for displaced dot-commers, high-tech workers, such as software engineers, remain the most challenging to find. Of the 10 or so positions GuideComm would like to add each months, only seven or so are being filled. In part, that's because the company tries to avoid hiring what Rebak calls "high-tech mercenaries," meaning engineers who've skipped around for higher pay and inflated job titles. "If it looks like they've been a chronic job hopper, we pass," Rebak says.
At the other end of the spectrum, small-business owners complain that entry-level positions often go unfilled because candidates lack basic math and writing skills or motivation. When such candidates are hired, "they don't last real long in a position," says Dan Berry, vice-president for corporate planning at the Greater Cleveland Growth Assn. "And that raises the frustration level of the small company." The skills gap and and the worker shortage are so pressing that the association has launched job-training workshops with local community colleges, churches, and other nonprofit agencies.
So with the labor market expected to remain tight, what's a weary entrepreneur to do? The answers may be familiar: Be creative, think strategically, and use size to your advantage. While small companies can rarely top big ones on salaries and benefits, they can offer other perks that stressed-out employees may value just as much. Examples include flexible schedules and telecommuting. Townsend of Abbi Nursing stresses aggressive recruiting, too. Instead of relying only on classified ads and word of mouth, she hits the pavement, hunting for workers at community colleges and other schools.
Offering employees education and training is also an effective recruiting strategy. In seeking high-tech employees, Korybalski found that paying for part-time college courses in Ann Arbor, home to the University of Michigan, proved a major draw. But his best strategy may be seasonal recruiting. He doesn't bring out-of-town prospects to Michigan during the winter, when temperatures can be bone-chilling. "We save that for the fall," he says. Maybe by then, there will be signs that the hiring climate will be improving, too.
By Julie Fields in New York
Edited by Robin J. Phillips