Where Does It Begin and End?
Understanding the Employment Cycle

Many new words and phrases have become a frequent part of the business lexicon in the past few years—right-sizing, down-turn, recession proof, succession planning, just to cap a few. Unfortunately, most of these have a negative connotation—they refer to a sagging economy and the impact on the general condition of business.

When the economy turns down and revenues begin to decline, as well, business leaders are forced to rethink their business strategies, or at least turn to the chapter that holds the plans for a business decline. In that shifting of gears, much time and energy gets spent on right-sizing the organization—trimming spending, delaying large investments, or cutting back on non-essential programs. And when all other options have not stemmed the tide, there comes the difficult decision to cut back on employment.

Your company may have been well positioned before the economic downturn began, although your industry may have suffered significant reductions in business demands. The long road of growth came to an end in mid-2000. Your historical revenue charts show the organization peaked in April or May 2000. Revenues leveled off and followed typical seasonal trends. Unfortunately, in late 2000, revenues began a decline that continued through 2001 and 2002. During this long-term slide, plans at your company may well have been activated to focus on staff reductions.

This is not new to most of you, unless you have spent the past few years as a castaway as Tom Hanks was a few years ago. Any of us who have been around the block a few times have seen this before. But what may not be as familiar is a graphic depiction of what a typical employment cycle looks like as so many organizations have faced the changing economics. That chart is included here.

Most likely, your company carefully engineered each stage and each level of the cycle as it applied to the business situation. The good times (stages 1 – 3) are just a memory. Over the past two and one half years your company worked diligently to protect the top performers and middle consistent performers (stages 4 – 6). Hopefully, those who were asked to leave the organization were in the bottom quarter of performance (stages 7 – 10). And though there are no sure guarantees, the decline may now have hit bottom and is preparing to start its rebound, enabling the employment cycle to move into stages 11 – 13.

“All well and good,” you say, “but at my company people were let go as part of an acquisition or merger.” Very true. Recessions create strange bedfellows. Part of the right-sizing phenomenon may be the elimination of whole business parts, closing offices, or just responding to an executive edict of having to let a certain number of employees go regardless of performance histories.

We are not trying to put forth answers here, but rather provide a context to better understand the employment cycle graphic and to help you visualize the reality we all face in leadership.

Manpower Survey Reports Employer Pessimism

The economy may be showing some early signs of recovery in some areas, but Manpower, the nation’s largest staffing company headquartered in Glendale, Wisconsin, reports in its 27th annual survey that we are not out of the woods yet. The company collected the most recent data in April during the war in Iraq and the SARS crisis, which analysts say could account for some employer pessimism. Following are some excerpts.

Three out of four employers expect to cut jobs or hold off on hiring this summer, contributing to the worst employment market since the early 1990s.

Although 20 percent of employers in the survey said they plan to add jobs, competition for work is expected to be high. Six percent are uncertain about their employment plans.

Art Ayre, state employment economist for Oregon, said his state has lost 8,500 manufacturing jobs in the last year, but he is expecting a slight rebound for his state and for the rest of the nation in the third quarter. “We’re still waiting for some indication that we’ll achieve stability and then actually gain some growth,” Ayre said.

The education and nondurable goods manufacturing sectors are facing the biggest impact, with each group’s employment levels for the third quarter the lowest in 20 years, according to the survey.

Education jobs are at their lowest level in 27 years of Manpower data, with more employers expecting to cut jobs than those who are expecting to increase jobs.

Employment estimates across the United States are relatively consistent, with the South reporting slightly stronger hiring expectations and the Northeast expecting the slowest hiring pace for the third consecutive quarter.

  (Reported by the Associated Press, 6-17-03.)

USA TODAY Snapshots®
From USA Today, February 3, 2003
How workers found their latest jobs