By
Mike Russiello

Introduction

In the Internet-enabled global economy, skills are the dominant factor in the hiring process. In this white paper, we will explore the reasons for this, as to what it means to both employers and individuals.

Note our reference to the hiring process, rather than to the job itself. This is an important distinction. While skills are no more a predictor of job performance than they ever were, they have become the key to the hiring process itself.

Definition

We include knowledge, skills, and abilities in our use of the word "skills". Thus, a deep understanding of the home health care industry, the ability to ride a bicycle, and being a good listener would all be included in our usage. Another way to look at it is that skills include anything you can apply to add value to an organization, even if it's just a smile.

Drivers

Why is the employment market skills-based? Three things have happened to bring this about:

1. The new employment paradigm - where the individual now manages his or her own career -- has made it OK to change jobs frequently

2. Workforce demographics - encourages frequent job shifts and is making it easier for talent to move to where it is needed (and valued) most.

3. E-recruiting - has supercharged the velocity of the market and adopted skills as its currency

First, the massive layoffs of the late 1980's and 1990's erased loyalty between companies and their employees, delivering the harsh message to individuals that they should trust only themselves to manage their careers and that it's acceptable to leave a company for greener pastures at any time. Next, the scarcity of qualified workers is forcing employers to encourage job changes and driving both companies and governments to tear down barriers to allowing talent to move to where it's needed most. Examples include trade agreements, such as NAFTA, and 401K plans. Finally, e-recruiting has provided the forum and the technology to transform the employment market into something resembling a financial market, using skills as the common standard or currency.

The new employment paradigm

In the new employment paradigm, individuals manage their own careers - and they gladly accept this responsibility. There is little or no enduring loyalty between a company and its employees, and it's now acceptable to change jobs frequently to maximize professional opportunities.

Proof is evident in Interim Corporation's 1999 emerging workforce study. This study clearly describes the new paradigm in contrasting emergent against traditional employees:[i]

The Interim study goes on to conclude that the US workforce includes 100 million "emergent employees" and about 29 million "traditional employees".[ii] If you were recruiting staff, which group would you pursue?

The new paradigm both yields benefits and confers responsibilities. The benefits are the ability to customize your career as you wish and the ability to receive market value for your skills every step of the way. The responsibilities require that you keep your skills up-to-date in the face of quickly developing technology, and that you do not expect to receive anything in return for skills that have become obsolete.

In the new employment paradigm, people identify far more with what they do than with whom they are doing it for. Anytime is a good time to discuss your next career move. And people are always interested in what skills will be hot in the future - and how they can acquire them today.

The key here is that the new paradigm has introduced the notion that it's acceptable to change jobs frequently. With job changing now an acceptable practice, workforce demographics are forcing companies to both publicly encourage job shifts, through aggressive recruitment advertising, and remove any barriers to doing so.

Workforce Demographics

With a shortage of qualified workers, the market value of in-demand skills accelerates beyond the ability of employers to compensate their current employees competitively. Hence, workers whose skills are in demand feel they must change employers just to receive the market rate for their skills. In fact, other employers, desperate for more people, are encouraging it.

Using conservative estimates of economic growth, John Sumser of Interbiznet shows that the US workforce shortages of today will be at least three times worse in 2010 than they are today.[iii] If you think it's bad now, just wait a few years. In another study, McKinsey notes that the number of people ages 35 to 44 will actually decline by 15% over the next 15 years.[iv] Also according to McKinsey, 75 percent of top corporate executives surveyed said that their companies are either chronically short of talent or suffer talent droughts.[v]

As worker scarcity increases, economies are forced to use existing talent more efficiently. This means that talent must be allowed to move around quickly and easily. Increasing efficiency requires that various barriers must be torn down, among them:

1. Benefits programs tied to longevity that impose a penalty on frequent job changers

2. Long hiring and interview cycles that cause periods of low utilization for individuals

3. Geographic and cultural barriers that slow or prevent talent from reaching the place they are needed most

4. Internal barriers such as poor corporate information systems regarding the skills of employees that prevent optimum allocation of resources

These barriers introduce friction into the market that developed economies can ill afford. Essentially, the global employment marketplace of the future must facilitate the flow of human capital , much like the world's financial markets help monetary capital flow across all types of boundaries and borders.

There's plenty of proof that these barriers are being dismantled, including:

1. Hiring cycles for non-executive employees now average less than two weeks, significantly shorter than the month-long hiring cycles common at many Fortune 500 corporations only a few years ago.[vi]

2. Through the North American Free Trade Agreement (NAFTA), Canadian citizens can locate permanently in the U.S. as long as they are employed in one of a broad range of occupations.

3. The US Government has increased its quotas for immigrant workers operating under the H1-B visa program by percent.[vii]

4. Corporate 401K programs and other deferred-compensation programs now dominate traditional pension plans among employers.

5. Increased implementations of corporate skills inventory systems in large companies are intended to better optimize the way existing human resources are deployed.

6. A healthy portion of large-sized help wanted ads in the Washington Post employment section encourage individuals that there's never been a better time to change.[viii]

7. The US Bureau of Labor Statistics estimates that 10.2 million workers (7.8 percent of the workforce) are employed in temporary or contract jobs.[ix]

These examples show how workforce demographics is breaking down barriers to frequent job changes while encouraging skilled professionals to make the decision to move on. And this process is just beginning. Next, we'll explore how e-recruiting is supercharging the talent marketplace and driving skills to become its currency.

Has job-changing frequency gone up? The proof is difficult to dispute. Consider the following:

• According to the US Census Bureau, men ages 45 to 54 had been on their jobs an average of 9.4 years in 1998, compared with 12.8 years in 1983.[x]

• The U.S. Department of Labor says the median tenure for workers age 25 to 34 with an employer is just 2.7 years.[xi]

• By the time today's average worker reaches 32 years old, he or she has held nine full or part-time jobs, (U.S. Department of Labor).[xii]

The rise of e-recruiting

The demographic forces that are breaking down barriers to frequent job changes and encouraging people to move about are providing intense fuel to the e-recruiting revolution. As a result, the use of the Internet in matching employers with job seekers is skyrocketing. Consider the following statistics:

• The number of resumes posted on the Internet is skyrocketing, going from 4.9 million to 7.650 million in 2000. [xiii]

• There were 2,500 websites performing commercial job matching in 1998, and this number was growing at 25 percent per year.[xiv]

• The percentage of companies using the Internet for recruiting purposes went from 17% in 1998 to 45% just 12 months later.[xv]

• There were 29 million job postings on the Internet in 1998, and this number is growing at 20% per year.[xvi]

• Employer spending on e-recruiting, $105 million in 1998, will reach $1.7 billion by 2003[xvii]

• Cisco Systems receives 81% of its resumes via the Internet.[xviii]

e-recruiting is truly transforming the employment market. For the first time, it's easy to apply for a job right from your desk at your current workplace. With minimal effort, you can post your resume on several web sites and make it available to recruiters at literally hundreds or even thousands of companies. Alternatively, you can search through hundreds of thousands of job openings with a few clicks of the mouse. You can even create e-agents that will search for jobs for you, notifying you of jobs that meet your very specific criteria the instant they're posted. These capabilities increase efficiency by shrinking the hiring cycle - in financial terms, the time per transaction is reduced.

e-recruiting, with its massive resume processing systems, has changed the way resumes are produced. No longer is a well-formatted, good-looking resume necessary to impress. In fact, a plain, unformatted resume is almost universally preferred. Why? Because unformatted text is easier for a computer to analyze as it attempts to extract your name, address, email, phone, and all of your skills. This process must work well, since the data extracted from your resume is used to perform keyword searches.

The e-world relies on keyword matching, and it is likely to remain that way for quite some time. Keywords let employers search resume databases. Keywords let job seekers search job postings. Beyond geographic and salary data, what are the important keywords? Skills.

According to Fortune Magazine, "chronology is out. KSA is in. That stands for knowledge, skills, and abilities." [xix] If your resume doesn't clearly list your skills, it will not get the attention of a desired employer. Alternatively, if your job posting doesn't clearly list the skills you are seeking, it will not attract the attention of job seekers. Game over. It's that simple.

e-recruiting is also helping to tear down the barriers discussed above. What's the latest trend in online job hunting? A number of websites have appeared that help people operate as independent contractors or free agents. Some experts estimate that more than 10 percent of all high tech workers are independent contractors or temporary workers.[xx] These sites go beyond mere opportunity matching, which is intensely skills-based. They also provide virtually all traditional employment benefit programs - such as health insurance, life insurance, payroll tax management.

The ever-increasing velocity of the Internet-enabled employment marketplace is also forcing companies to reduce their hiring cycles just to remain competitive. Hiring cycles as short as one day are becoming more and more common. There is no longer time to bring in a candidate for a series of interviews. If you attempt to stretch out the process, the candidate will go to the competition. As a result, skills testing is being used to confirm skills without an interview in some cases. This trend has also helped propel skills to the forefront of the process.

There is much proof that skills are emerging as the currency of e-recruiting and the employment marketplace. Beyond resume and job-posting guidelines that emphasize the importance of skills, some jobsites have introduced extensive skills profiles that help you self-assess your skills. Others are implementing online skills testing in various ways. Still others are encouraging job seekers to have their skills rated or "certified" by respected third-party testing companies. Bonafide, third-party skills assessment companies such as Brainbench (www.brainbench.com) are emerging as key partners with e-recruiting sites.

Putting it all together

It started with the turmoil of the late 1980's. Major corporations abandoned their contract with their workers. Next, worsening workforce shortages have caused barriers to the flow of talent across both corporate and international borders to be dismantled. Finally, e-recruiting is transforming the hiring process into a highly efficient, skills-based process.

The need for an efficient marketplace also underscores the need for reliable skills data. Jerry Useem, in an article for Fortune Magazine, said "A frictionless marketplace also requires truth in labeling, and resumes are notoriously untruthful." Thus, the need for qualified third-party skills certification authorities.

So what does this mean to employers and individuals? We explore this below.

Implications for employers

It is imperative that companies understand how the employment marketplace is changing, so they can compete effectively within it. Based on the dynamics presented above, here are some suggestions:

1. Tear down the barriers -- Analyze their benefits packages, policies, and other incentive programs to ensure they do not impose penalties to those who leave the company after an "acceptable" time, typically 2-3 years.

2. Keep compensation in sync with the market - realize that market rates for in-demand skills will skyrocket, and that you must either stay with them, or risk losing key talent. You must also develop a means to efficiently eliminate (or retrain) those whose skills have become obsolete, or devalued quickly.

3. Embrace e-recruiting - Develop and implement an Internet-based recruiting strategy. Ensure that job postings are written correctly, in terms of the skills required. When selecting websites for your postings, look for sites that provide you with the best skills data on the individual. Additionally, encourage jobseekers to present third-party skills certifications as proof of their skills.

4. Streamline the hiring processes - realize you're competing in a market where the top candidates are hired within a week of posting their resume. You must implement a means to quickly qualify candidates based on their skills.

5. Consider non-traditional sources for staff - such as staffing firms, independent contractors, H1B visas, and offshore project teams.

Implications for Individuals

In order to successfully manage a career in the new economy, we recommend that professionals consider the following:

1. Realize unequivocally that you manage your own career -- you alone are responsible for ensuring you obtain successive opportunities that offer growth and challenge, as well as appropriate compensation levels.

2. Never assume that your employer is paying you the market rate - be constantly aware of what this market rate is, and do not hesitate to prove it to your employer if you are under the rate, or move on if that doesn't work.

3. Assume that your skills will become obsolete within 6 - 9 months -- vigilantly pursue training opportunities and map out how you will develop your skills.

4. Obtain a certification each time you acquire a new skill - nothing validates a new skill like a respected, independent third-party. Employers know this and will more highly value a skill that has been validated than one that is "self-anointed".

5. Follow the new resume guidelines - no formatting, list skills carefully and completely

What's in store for the future?

It is very difficult to predict how the employment market will develop in the future. However, with the dominance of skills in the hiring process, and with the continued adoption of e-recruiting, we expect to see the rise of the independent skills certification authority, and the development of a single, accepted repository for skills certification data, which will be made freely available to all interested parties (with the permission of the individual data-owner, of course).

We also expect to see a wholesale increase in the use of skills testing within an interview process as a means of ensuring quality and to compress hiring cycles in order to remain competitive.

About the Author

Mike Russiello is President and CEO of Brainbench, the world's leading independent skills certification authority. Prior to cofounding the company in 1998, Mike was a manager at EDS Corporation, where he successfully lead a large scale software implementation for the U.S. Department of Education. Prior to his operational role, Mike was a salesperson for EDS, and is credited with sales totaling over $500 million. Mike is a graduate of the U.S. Naval Academy, and holds advanced degrees in Electrical Engineering and Business Administration from the University of California and University of Maryland, respectively.