In previous posts I’ve talked about the U.S. immigration policy and its effect on talent supply. Even if the number of work visas is increased, the supply of new knowledge workers (e.g. college graduates with engineering or professional degrees) is already being diverted from the United States. From 2001 to 2003, applications from foreign students to American universities dropped by 26% while they increased in the United Kingdom (36%), France (30%), and Australia (13%).

They’re going elsewhere

A 2005 study by the Pew Hispanic Center revealed that temporary legal visitors (the vast majority of which are skilled workers and university students) dropped to 185,000 in 2004 from 268,000 in 2000.

There’s also a major increase of skilled workers returning to their homelands. A survey by Duke University found that one in three new immigrants holding high-tech jobs in the U.S. plans to leave. Between 10% to 50% of the R&D staff of Indian and Chinese high-tech firms are returnees from the United States. The reasons are not that hard to understand: with comparable jobs available at home, workers have fewer incentives to tolerate the long waits and uncertainty of working in the United States. This combined with the much higher cost of living in the United States and growing wage normalization across the globe means more graduates are choosing to work in their home countries.

Talent supply and demand

Compounding the problem is the fact that the supply of talent is simply not keeping up with demand. The U.S. produces the highest number of engineers per million residents of any country in the world, but that’s only about 137,000 engineers with bachelors’ degrees every year.

Supply from other countries is not sufficient to meet the global demand. In 2005, Fortune magazine estimated that China was producing some 600,000 engineers and India 350,000 annually. Unfortunately, these numbers have turned out to be suspect. A report by the McKinsey Global Institute said more than half of those “engineers” would be categorized as no more than technicians in the United States. The caliber of their education is simply not on a par with the United States.

The actual numbers are more like 351,000 for China and 112,000 for India. And that’s not likely to increase much, as it takes decades for a top-tier academic institution to get established and start producing quality talent. For example, the Indian Institutes of Technology, considered by many to be among the best in the world, can only produce 5,500 graduates every year, and this is more than 50 years after its inception.

Solutions

The answer to this part of the talent equation is very simple in theory, but much tougher in practice: we need to grow more of our own talent at the college graduate level. Furthermore, we need to nurture and retain the knowledge workers we already have employed. A key component of this nurturing and retention is to give knowledge workers the flexibility and stimulation they desire, either as full-time employees or, increasingly, as flexible workers.

I recently had a conversation with a good friend of mine who is an Executive Recruiter. I posed the following question to him: “How has the executive job market really changed in the last few years?”

His reply was interesting.

In short, he stated that the rules of this new executive job market are different.

While employers are still interested in hiring top talent, they are also much more cautious and selective. Due to recent corporate scandals, the ongoing economic instability, and greater outsourcing, companies are increasingly looking for executives with entrepreneurial mindsets and the ability to see a global picture. But more importantly, they are looking for executives who can quickly make an impact.

In prior markets, a candidate’s impressive credentials were paramount and highly sought after. Now, the prized possession is the immediate application of practical “soft” skills (e.g. leadership, adaptability, long-term vision, strategic thinking, etc.)

In essence, companies are more interested in hands-on executives who have proven they “will do,” not those who claim they “can do.”

How do you measure the willingness and ability to do something? Past experience and a proven track record of success are the best and only indicators I know.

This is exactly what M Squared Consulting delivers to clients every day. We deploy seasoned talent on all our engagements. These are experts who have “been there and done that.” Our consultants have the targeted expertise to step in and immediately add value to any given situation. They are able to drive results for clients because they have the “will do” confidence, attitude, and skill that can only come from experience.

For this very same reason many of our consultants fill interim executive roles with clients, and occasionally are asked to join on as regular employees.

In what may well be the first of many such moves by governments and private industry, the state of Utah recently announced that it will be implementing a four-day workweek.

With gas prices well over $4 a gallon creating an unprecedented burden on many workers, on June 26, Gov. Jon Huntsman announced the Working 4 Utah initiative. Beginning in August, state government service hours will be extended from 7 a.m. to 6 p.m. Monday through Thursday.

The change means the Division of Motor Vehicles, Division of Natural Resources and other state offices will shut down on Friday, along with many other offices that deliver services to residents.

But essential workers - for example, highway patrol troopers, Corrections officers and state parks - will not be affected, although their administration offices will close. Utah courts, public schools and colleges will not change, nor will the Governor’s Office.

The goal, Huntsman said, is to help conserve energy by not heating and cooling buildings, reduce gas consumption for commuters, and provide an incentive for state workers that could be a recruiting tool.

“We live in a dynamic, ever-changing environment and it’s crucial that we take a serious look at how we can adapt and maintain our state’s unparalleled quality of life,” said Huntsman in a statement about the program.

Huntsman’s office estimates that 1,000 of 3,000 state buildings will be closed on Fridays, cutting energy costs by about 20 percent. Huntsman also said he thinks the change will encourage residents to take advantage of services online and employees to telecommute in cases where it is practical. “I think we’re onto something that long term is good for the state,” the governor said.

Utah is the first state in the nation to make the change on such a large scale, although other states, local governments, the federal government, as well as companies have made the change on a smaller scale. They all recognize that moving to a four-day workweek not only helps save energy costs but also appeals to younger workers who want to reduce their carbon footprint and desire more flexibility.

Nine of Utah’s 15 largest cities already offer some type of four-day work schedule. After a year, the program will be evaluated to ensure there are savings and worker productivity has not dropped.

A study by a group of Brigham Young University researchers released earlier this month found that city employees working four 10-hour days were more satisfied with their jobs, had fewer conflicts at home and were less likely to look for a new job elsewhere than those working the traditional five days a week.

The move towards more flexibility in the workplace is a positive long-term trend. As the world of work becomes more virtual, knowledge workers continue to demonstrate that they can deliver results far beyond the boundaries of a traditional 9-to-5 workday. The most talented knowledge workers often place a premium on work/life balance and as a result gravitate towards working situations that enable it. By allowing workers to have flexible working arrangements progressive organizations will gain a competitive advantage in recruiting and retaining the talent they need.

The soaring price of gas is in the news each day, and at the top of economic and political agendas. It could end up being a major catalyst for a radical re-design of how work gets done in the U.S.

Spiking gas prices will have many short and long-term effects. Many of us feel it each week when we fill up our cars at the gas pump. Consumers are beginning to see price increases as the effect filters down throughout the supply chains of countless products and services.

Gas prices were also a topic of conversation at the recent Society for Human Resource Management (SHRM) Annual Conference & Exposition held in Chicago. According to John Challenger, CEO of Challenger, Gray & Christmas, a Chicago outplacement firm, the U.S. workplace is in for a fundamental change. “The country is coming to terms with permanently higher gas prices,” Challenger said.

Employees are hurting, so companies and even government agencies are responding by offering compressed work schedules, four-day weeks, telecommuting, gas cards and car-pooling.

These are much more than just short-term patches. They are the beginning of a revolution in the workplace that will result in productivity and deliverables being the central measurements of work, rather the number of hours logged by employees. They also dovetail with other trends like the talent shortage, globalization and a 24-hour workday that spans across time zones.

“The idea of a set workday or a five-day workweek doesn’t make sense,” according to Challenger. “It’s not about the time you put in. It’s about the work you do.”

SHRM is also focused on gas prices. At the conference’s opening press event on Sunday, June 22, the organization highlighted its recent poll showing that companies are increasingly offering flexible schedules and telecommuting to help workers cope. “Many employees are taking the commute to work very seriously,” says Steven Williams, SHRM director of research. “It’s an economic issue now. It’s not just a hassle.”

Many companies are also beginning to question their travel policies and meeting planning, with a goal of minimizing unnecessary travel and leveraging technology to collaborate and communicate virtually instead of face-to-face.

As a gallon of gas continues to climb well above $4, it is even changing the way companies thank employees. Gas cards are becoming popular incentives for employers to give out. They are also increasingly be used by marketers trying to sell products and services to cash-strapped consumers.

More changes are on the way. In addition to providing their full-time employees with greater flexibility, companies will expand the use of the flexible workforce, tapping into highly skilled independent experts to get defined projects and initiatives done. Much of the work done by these flexible knowledge workers can be done remotely.

The Knowledge@Wharton newsletter (http://knowledge.wharton.upenn.edu) recently published a series of articles on the subprime mortgage crisis. Here’s my re-cap.

The subprime mortgage crisis started as a small tremor and has now turned into a massive earthquake, threatening to plunge the U.S. economy into its first recession since 2001. Who is to blame? There is no single culprit. Wall Street executives, overeager borrowers, and aggressive lenders all let their eye for opportunity trump their nose for risk.

The crisis has its roots in the U.S. housing boom that began early in the decade right after the dot-com meltdown. Low interest rates allowed home buyers to take out larger loans, giving them money to bid up home prices and ultimately buy “more home” than they could truly afford. At the same time, advances in loan securitization and automated mortgage underwriting made it easy and profitable for Wall Street to convert newly issued mortgages into securities that could be sold to investors.

Wall Street found new ways to turn risky mortgages (the subprime loans originally designed for borrowers with low income or poor credit) into securities that looked almost risk-free. Investors were eager to buy these securities, which promised higher yields than U.S Treasury bonds and other “safe” holdings. Big mistake.

The first signs of trouble began to appear in 2006. Most subprime loans came with adjustable interest rates, and growing numbers of borrowers were falling behind after annual interest-rate resets began to push up their monthly payments. By the summer of 2007, prices of securities based on subprime loans were in a downward spiral, as investors worried they would not get the interest and principal payments promised. Surprised about the depth of the subprime problem, investors started to lose confidence in many other types of securities that were based on various forms of debt. As a result lenders became reluctant to lend.

Worried that this credit crunch would stall the economy, the Federal Reserve began an aggressive series of interest-rate cuts and initiated new lending programs to brokerage houses and commercial and investment banks, accepting risky mortgage-backed securities as collateral for the first time. Congress and President Bush approved an economic stimulus package early in 2008, and Washington was thrown into a debate over whether to help the estimated two million homeowners at risk of foreclosure. It even became a stump issue for the presidential candidates.

While the credit crunch is showing signs of easing, the analysis and finger-pointing is likely to continue for some time. How can borrowers and lenders be helped without encouraging risky behavior in the future? Should the system for turning loans into securities be modified? Is the patchwork of regulatory agencies pieced together since the 1930s equipped to handle today’s financial and economic issues?

Time will tell.

In the meantime, the financial services industry has much work to do in order to clean up their books and also prevent a disaster like this from occurring again. The management consulting industry will likely be an early beneficiary: as the large financial institutions reduce their workforces and cast out the “responsible” executives there will be a lot of clean-up work to be done. Many of these downsized knowledge workers, now seasoned industry experts, will elect to return to the workforce as consultants.