It's never been tougher for companies to hire unskilled workers, and the shortage is going to get worse. Fortunately, some smart companies have figured out how to attack the problem.
In spite of a soft economy, it's never been tougher than it is now to recruit unskilled workers. Here's how some smart companies are attacking the problem
John Boyce had his managers riding buses in downtown St. Louis, trying to hook passengers into working for his cleaning- service company. Pam Medlin handed out her help-wanted flyers to Vietnamese and Hispanic worshipers at churches in Greensboro, N.C. Kelsey August marched from her house in Austin to a nearby grocery store, raiding its cashiers to staff her direct-marketing company. "I'm not proud," August declares matter-of-factly, by way of explanation.
Many other CEOs have been swallowing their pride and, like August, Boyce, and Medlin, have gone to extraordinary lengths in their relentless hunt for unskilled workers. With an unemployment rate of 3.9% at the end of 2000 (the lowest level in 30 years), the nation has seen its labor shortage reach down to the bottom rung of the workforce with a vengeance. And the crunch is expected to persist for many years throughout the labor force. Despite the softening of the economy during the past few months, experts say, demographic factors will likely prolong the shortfall of unskilled workers.
To snag their share of workers, McDonald's and other giants that depend on the unskilled-labor market have been upping salaries and benefits. Of course, if it's tough for McDonald's to recruit those employees, it's even tougher for small businesses that rely heavily on unskilled workers but lack the resources of their large competitors. One statistic underscores how heavy the reliance is: 53% of the nearly 800 small companies surveyed last year by Philadelphia-based TRS Intersearch for American Express Small Business Services reported that a majority of their workers had no more than a high school education.
So great is the distress among small-business owners struggling to find low-skilled labor that some have moved on -- literally. Gregory Howe jousted for years against Oracle, Sun, and other computer-technology giants in the competition for entry-level programmers in the San Francisco Bay Area. Howe lost. Three and a half years ago he relocated his 48-employee software company, BMS Corp., from downtown San Francisco to Denver. In Denver, he says, his strategy of recruiting high school students and training them as programmers is succeeding.
Restaurateur Lorrie Ambrose of Chichester, N.H., has taken even more drastic action. "Every restaurant on the main drag to Concord has a Help Wanted sign," she says. Unable to scare up waiters and waitresses and kitchen help, Ambrose has put her 12-year-old establishment, Dominick's (named in honor of her husband), up for sale.
Selling is one option, of course. But if you choose to stay and fight, how can you compete effectively for workers against the likes of McDonald's?
The question has assumed increasing urgency for Kelsey August, CEO of 43-employee Lone Star Direct. Five years ago the wages she paid her workers were higher than what McDonald's and other fast-food behemoths in the Austin area were offering their entry-level employees. But now she's at a decided disadvantage. McDonald's and Wendy's are shelling out $10 to $12 an hour, compared with the $7 to $8 that she offers her packers and shippers. August's desperate ploy to lure away cashiers from a local supermarket actually did result in some hires, she says, but nowhere near enough.
It took a while, but by and by she stumbled on a better strategy. For a long time August had solicited only full-time employees. When she experimented with placing an ad for a part-time job, she was astonished. Applications flooded in, many of them from young stay-at-home mothers. Realizing that she had hit on a gold mine, she began to recruit aggressively for part-time employees, seeking them, among other places, at local schools and not-for-profit organizations.
Her hires had very specific needs, August quickly realized, and she needed to revamp her terms of employment to accommodate them. For starters she had to grant her young mothers flextime. She also had to offer them a lot of perks, such as a 401(k) plan, tuition reimbursement, and even free massages. "We give them certificates of achievement, we have birthday celebrations, and we do a lot of mentoring. People needed to know we care about them," August says. As a follow-up she has developed a set of training and retention tools, which she markets to other companies. And because about two-thirds of her production workers are high school dropouts, August brings instructors to Lone Star Direct to help her employees earn high-school-equivalency degrees.
"Every restaurant on the main drag has a Help Wanted sign."
Offering lots of perks may seem lavish for a company with $2.3 million in revenues. But she felt she had no choice. "I have to have a better culture," she says, "because I can't pay them that much."
Despite August's ingenuity, she has had to struggle to find workers in an increasingly competitive market. Two years ago she began offering her employees a $200 bonus for each potential recruit they referred to her. The strategy has paid off, not only in the 12 employees she's hired as a result but also in an 80% reduction in her advertising budget for recruitment.
Like August, Bruce Benoit, president of a machine shop in St. Johnsbury, Vt., has been watching the wages at the local McDonald's with a wary eye. Last summer he raised the starting salary at his North East Precision Inc. from $7 to $8 an hour to match what the local burger emporium and supermarkets were paying, and he expanded health-insurance coverage and reduced premiums for his 50 employees. The results were disappointing. The physically demanding, potentially dangerous work at his shop is a lot harder than serving fast food. Mere parity with McDonald's wages didn't suffice. Benoit still couldn't attract the help he needed.
