Even as Chicago-area chief executives toast the good times of a record economic expansion, some are wondering where their next good employee will come from.
The tight labor market is becoming a serious problem for Chicago business, reaching across industries of all kinds and thrusting itself to the top of executives’ lists of worries. That’s one of the primary lessons of a Chicago Tribune survey of chief executives at the region’s 100 biggest public companies.
“There is no magic formula for attracting and retaining good people,” said Richard L. Keyser, chairman and CEO of Lake Forest-based W.W. Grainger Inc. and a participant in the survey. “People expect to obtain personal growth, a good work environment and recognition, as well as adequate compensation.”
And even providing all those benefits may not be good enough, as executives are learning, because other companies are rushing to provide them too. Many firms that, in the past, had their pick of hundreds of qualified applicants now are forced to beef up benefits packages and salary scales and consider such amenities as exercise facilities and catered meals to attract employees and keep them happy.
In the Tribune survey, 93 percent of CEOs said finding qualified employees ranks at least as a “somewhat serious” problem for their companies. Even more telling: The percentage of CEOs who regard employee attraction as their “most serious” problem surged to 10 percent this year from 1 percent last year, and the percentage who think the problem is “very serious” climbed to 34 percent from 28 percent.
And although employee attraction emerged as a dominant concern in this year’s Tribune survey, other survey highlights showed CEOs to be ebullient about their companies’ prospects for growth in a still-robust economy.
In the survey, 90 percent of CEOs predicted that their companies will do better financially this year than last year, while only 5 percent said they believe their companies will do worse. (The rest expected performance to be the same.) Moreover, nearly 4 in 10 of the CEOs said they expect Midwest economic growth to be better in 2000 than last year–up 6 points from a year ago.
About 4 in 10 said slow growth overseas has hurt their companies, and most were lukewarm in their assessment of the Federal Reserve’s policy of raising interest rates to cool the economy. Two-thirds said the policy was “somewhat appropriate,” while 8 percent said it was “not at all appropriate.”
But it was the employee attraction problem that took center stage. And technical workers, the CEOs reported, are the scarcest of all.
Dennis J. Keller, chairman and CEO of Top 100 company DeVry Inc., which provides technical training and other advanced education, is seeing the shortage of skilled labor from two sides: the booming demand for the employees DeVry trains and the tight supply of faculty members to train them.
“It’s true our company has a big need for people and it is taking us longer to fill jobs, especially for people with technical skills,” he said. A typical job that took six weeks to fill two years ago now takes nine weeks to fill, he said, “and for technical people it takes two to three times as long.”
W.W. Grainger’s Keyser adds that the difficulty of finding qualified workers “has been particularly acute in the dot-com arena.”
While Grainger is aggressively pursuing business-to-business e-commerce, the company has found its earnings under pressure from the cost of building its electronic marketplace. In its latest quarter, it reported that profit fell 27 percent, largely because of its Internet expenses. Keyser said Grainger this year is expecting its sales on the Internet to total about $400 million. That’s a bit less than 10 percent of the company’s total revenue.
Chicago economist Robert Dederick said companies are trying to think of all possibilities in an effort to retain workers. “On a trend basis, the labor market is still tightening,” said Dederick, a consultant to Northern Trust Co. “We finally see that wages are starting to firm up, and there is a modest rise in benefit costs.”
About half of the CEOs participating in the Tribune’s survey said their companies expect to add workers this year, up from 40 percent last year.
A separate survey of information technology executives found they expect a national shortfall of almost 850,000 skilled workers in the next 12 months.
The survey, by the Information Technology Association of America, found that about 1.6 million high-tech workers will be in demand over the next year, in addition to the current workforce of 10 million. Companies will seek to fill more than 600,000 technical support positions alone.
Economist Sung Won Sohn of Norwest Corp. in Minneapolis said the pressure for higher pay is most intense on companies when workers switch jobs. In hot areas of technology, he said, workers making $60,000 are often able to demand as much as $100,000 when they switch to another employer. “This is occurring at a time when many companies are giving their workers raises of only 3 to 5 percent a year,” Sohn said. “This is making them restless, and encouraging job-hopping.”
Economist Ian Shepherdson, of High Frequency Economics, Valhalla, N.Y., said “unsatisfied demand [for workers] leads inexorably to faster wage growth, and in the three months ending in March, earnings have risen at a 4.8 percent annualized pace–the fastest for 2 years. That’s not good.”
