The Incredible Disappearing Workforce

If you thought the recession meant you no longer had to worry about a tight labour market, think again. The labour crunch is making a comeback and could stick around for 15 years

It’s an anguishing moment for a business owner to turn down several million dollars’ worth of work. But Rajesh Ahuja had no choice. In the current construction boom, builders are clamouring for the services of Ahuja’s mechanical-contracting firm. Dependable Mechanical Systems Inc. has the finances, knowledge and experience needed for projects such as installing heating and plumbing systems in institutional buildings. But the Vaughan, Ont.-based business is consistently short of one essential element—skilled workers—forcing Dependable to turn down so many projects it will cut the company’s 2011 growth rate to half its fully staffed potential.

Ahuja, the firm’s president, says he’ll do about $15 million in business this year, up from $10 million in 2010. But, he laments, “Our revenue could be at least 30% to 35% bigger if I had the right people working with me.” That’s about $5 million worth of forgone revenue. Ahuja says that since the recession, his company has experienced worsening shortages of foremen, plumbers, pipefitters and sheet-metal mechanics: “We’ve advertised every day for six months for these jobs, but rarely do we come across a guy who meets our qualifications.”

Faced with an industry-wide scarcity of skilled labour, Dependable has sometimes wound up taking a chance on people who claim to be qualified but prove to be not up to snuff. “I was scared leaving some of these guys on-site,” admits Ahuja, whose firm has spent heavily to fix these subpar workers’ mistakes. Dependable now has slashed its error rate by developing project-planning software that it painstakingly uses to allocate its most rare resource: experienced foremen. This ensures it always has someone on job sites to give the less-reliable workers the supervision they need.

And, rather than settle for the limited employee pool in Dependable’s own sector, the firm now recruits skilled people from related industries, then retrains them. That eats into profits. “I have to spend 12% to 15% of my margin on training,” says Ahuja ruefully. “But if I didn’t do that, I wouldn’t be able to grow my business at all.”

Skills shortages are bedevilling far more sectors than just Ahuja’s. Growing numbers of businesses are struggling to find the people they need as shortages spread into more industries, occupations and geographical areas. If you thought the recession meant you no longer had to worry about the tight labour market that was so painfully evident in 2006 and 2007, think again. The labour crunch is making a comeback.

Forecasters suggest that tight job markets will give employers chronic headaches for at least the next 15 years. If you haven’t already crafted a strategy for attracting and retaining employees despite this challenge, it’s time you did. Fail to adapt, and you’ll risk losing out to businesses that are responding to this increasing threat to companies’ growth prospects.

Read the full article at http://www.profitguide.com/manage-grow/human-resources/the-incredible-disappearing-workforce-30216