The Small-Business Brain Drain

A new job-market study has some unsettling news for entrepreneurs: Seasoned managers prefer working for larger, more stable employers

Reversing the trends of past economic downturns, increasing numbers of managers and executives were turning their backs on small-business employers during the second quarter of 2001 to seek new jobs at larger companies.

According to a survey of 3,000 job-seeking managers and executives, conducted by international outplacement firm Challenger, Gray & Christmas, only 54% went to smaller companies in the second quarter of 2001. That was 12% lower than the preslowdown second quarter of 2000, when 62% of managers and execs looking for work took positions at small outfits.

In 1992, before the economy began its healthy run through the '90s and with the U.S. near recession, 71% of the job-seeking managers and executives found refuge at small firms. Challenger sees today's flip-flop in this behavior as potentially dangerous for small business, which could have a difficult time bouncing back without skilled, experienced managers, and executives when the economy begins to recover.

It may be that their own success through the '90s has put small business in this precarious position.


  John A. Challenger, CEO of Challenger, Gray & Christmas explains it this way: "At the time of the last recession, small businesses, while not entirely shielded from the economy, offered slightly more job security than large companies, which were basically slashing thick layers of middle management in an effort to become more streamlined and efficient.

"Today, many small firms are just as active as large corporations when it comes to importing and exporting, so, when the foreign markets suffer, as they are now, small businesses are as adversely affected as their larger counterparts."

Not only are managers and execs seeking refuge in employment at larger companies, fewer are leaving the corporate world to start their own businesses. During the 1991-'92 recession, an average of 15% of jobless managers and executives started their own firms. Challenger's study shows that over the last four quarters, since the economy began to falter, the average percentage of managers and executives starting their own companies has been just 6%.

By Robin J. Phillips in New York

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