A brilliant essay in the Wall Street Journal (www.wsj.com) this week entitled “How to Succeed in the Age of Going Solo” by Richard Greenwald wisely points out that while anybody can become a consultant, not everyone does it well.  He continues to prescribe what’s needed to thrive as a consultant in today’s business environment.

Some key findings from his research:

Think Long Term

Too many freelancers see their condition as only temporary—one that will go away as soon as economic conditions improve. It’s just a stage between jobs, they figure.

Some of them may be right. But the odds are that most are wrong. They’re going to be on their own for a long time. So freelancers need to think in terms of the long haul, preparing for a marathon, not a sprint.

Understand: This isn’t easy. Many of these people have known only 9-to-5 jobs, and it can be scary to think of freelancing as all there will be.  Scary, but necessary. Because if a freelancer views the condition as temporary, it’s almost a guarantee that however long it lasts, it won’t go well. Unless you think about it as a job itself—requiring time, investment, thought—you won’t get much of a return. Waiting for business to find you is not something successful consultants do. Clients know a halfhearted attempt when they see one.

Join a Network

The image many of us have of the lonely consultant toiling on his or her own is touching. And dated.

Most successful consultants are in a network or community of consultants. These networks are important sources of new clients; most consultants, in fact, say they get as many clients from these networks as they do from client referrals. What’s more, an increasing number of consultants share work, taking on bigger projects that require more hands. In this way, teams of consultants can function like a small boutique firm.

Have Your Own Space

We have long been told that one of the joys of working on your own is being able to putter around in your pajamas and bunny slippers. And such flexibility is, no doubt, an attraction of consulting.

But there’s a limit, and successful consultants say that having a work space separate from your living space is crucial. Clients do not want to have an important phone conference interrupted by a nagging two-year-old, a TV in the background or the sounds of street traffic. Most freelancers I spoke to have a space in their home that is solely for work—a bunker, as it were.

Others have started using shared spaces that provide a quiet space and a cubicle or desk to call your own. These spaces, called co-offices, often have other incentives. They give freelancers a place to go, which helps them keep schedules. They usually also provide a receptionist service, so someone always answers calls. And they provide a sense of workplace that is something many consultants complain about missing.

Think Like an Entrepreneur

Here’s probably the most important ingredient that distinguishes the most successful consultants: They think like entrepreneurs.

Too often, freelancers drift from project to project. That’s a mistake. They need to have a business plan or mission statement. If all they do is take everything that passes over the transom, they will be viewed as a nonspecialist in a world of specialists.

Consultants are known for the work that they do, and this often means the work they don’t do. With a mission statement and business plan, they can decide if a certain job is worth it. Sometimes the short-term gain in income becomes a long-term loss in reputation.

This doesn’t mean you should starve: Sometimes, any work is good. But too many consultants say yes to anything that comes along, so when the perfect project arises, they might be too busy to take it. What’s more, in this competitive world, prospective clients want to know what projects you’re working on. If they aren’t impressed, they may not hire you. So being able to say no to certain work, referring it to someone else, is a sure measure of a certain level of success.

To learn more about joining M Squared’s elite network of consultants, visit http://www.msquared.com/consultants/introduction.html

The cover story in the current issue of BusinessWeek entitled “The Permanent Temporary Workforce” is a fascinating read about the state of the American workforce.  The article describes the hardships faced by those affected by layoffs, and how many companies are turning to temporary help to protect profits in the economic downturn.

But in contrast to similar articles in recent years, the authors here point out that the current recession has fueled a “leadership on demand” phenomenon, meaning that many of the temporary workers are white-collar professionals, not “sneaker-footed admins”.  Many are seasoned professionals who relish the flexibility of a free-agent lifestyle.  “People with sought-after skills can earn more by jumping from assignment to assignment than they can by sticking with one company,” the authors write.

Déjà vu?

In her groundbreaking book, “A New Brand of Expertise: How Independent Consultants, Free Agents, and Interim Managers are Transforming the World of Work,” published in 2001, M Squared Consulting founder and CEO Marion McGovern tackled this very subject in some depth.

In particular, in the chapter about why many professionals choose “free agency”, Ms. McGovern’s writings are more relevant today than ever:

“Whether it is control over where they work, their hours, or their vacations, overwhelmingly it is a desire to make work fit into their lives and not vice versa.  One of our consultants of Dutch descent explained that she became an independent practitioner because she thought that American vacation structures were untenable; being used to at least six weeks of vacation annually, she couldn’t continue in the American mode of two weeks per year.  In today’s 24×7 world, time has a currency all its own.”

She continues….

“Some consultants want control over what they do, a sphere of influence that as a mere mortal in a large enterprise was beyond their reach.  At M Squared Consulting, we see this often with the alumni from large consulting firms.  Exposed to many types of industries and products, they may have been able to indentify the type of work they most enjoyed, but they may not have had the opportunity to do it again.  For these individuals, the type of work – the “what” – is most critical.

So in addition to being prescient, McGovern’s book illustrates that there are some long-term trends in place affecting American business, and the savvy consultant can take advantage of the opportunities that present themselves and thrive in today’s work environment.  And challenge, pay, and control are not the sole discretion of either the employer or employee.

With its collaborative approach, long-term relationships, and commitment to the success of both its clients and consultants, it’s no wonder that M Squared Consulting attracts top-tier professionals to its network.  To join the M Squared consultant community, please register on our website at http://www.msquared.com/consultants/join.html

A 2008 HBR article on Strategy offered that “most executives cannot articulate the objective, scope, and advantage of their business in a simple statement.  If they can’t, neither can anyone else.”  It’s a challenging statement, certainly, and a powerful reminder that employees will become frustrated and resources wasted when no clear strategy exists for a company or its lines of business.  Many companies look to M Squared Consulting when faced with this dilemma.  With guiding expertise, clients can develop a well-understood statement of strategy that aligns employee behaviors with business goals.

In a related editorial on talent strategy, Dr. John Sullivan, a well-known thought leader in HR, offers that an agile talent management strategy can be the perfect model for today’s economy. 

An excerpt:

“As the general business environment has become more turbulent, and technology combined with consumer demand has driven significant shortening of most product lifecycles, the complexities of delivering really strategic impact through talent management have ballooned. While competency management systems, career path planning, and multi-year development cycles may have made sense decades ago, that simply is not the case today.

Organizational agility is something the majority of human resource functions are not designed to enable or support. In fact, most traditional HR systems, including those in talent acquisition, hinder agility by imposing rigid control structures with process cycles that take months and even years to execute.

You can’t hit a moving target that changes location unpredictably every six months using processes that take 18 months to execute!

Examples of Agile Talent Management

A key characteristic of organizational agility is the ability to rapidly shift idle resources. Like most airlines, Southwest Airlines was affected significantly by the most recent downturn in the U.S. economy. While competitors were busy slashing payrolls, Southwest instead cut back on hiring and temporally redeployed idle recruiters (more than 80 of them) into other areas of the business where work needed to get done, in line with the recruiter’s abilities. The shift enabled Southwest to maintain access to the talent it would need when hiring demand ticked up and simultaneously enabled the organization to catch up on project work elsewhere that added value in the current economic state.

While using idle recruiters to accomplish work elsewhere in the organization was a new trend this downturn, it by no means is a stellar example of organizational agility.

Enterprise-wide efforts that are emerging include:

• Temporary redeployment of top performers into development roles where the primary mandate is knowledge-sharing and collaborative solution development to emerging issues (Numerous companies)
• Creation of flexible talent pools that grant temporary project-based access to top talent by managers without budget or need for permanent hires (Coors)
• Business unit/team prioritization schemas that enable simultaneous investment/cost-containment efforts across the enterprise (HP)
• Counter-cyclical process execution, i.e. taking advantage of economic cycles by executing growth-mode processes during downturns and vice versa (Slide-College Hiring)
• Redefinition of labor needs to allow for extensive use of contingent and alternative labor types that aid real time increases/decreases in labor cost (Google)

The unifying theme in these examples is that firms need a strategy that allows them to respond rapidly with a customized solution, whenever something in the business environment changes.”

So, what both HBR and Dr. Sullivan are reinforcing is that the value of a clear, agile strategy cannot be underestimated.  It will energize and empower employees, and raise the long-term financial performance of your organization.  Contact M Squared Consulting to learn more.

M Squared helps clients attain market leadership through the intelligent use of the high-end flexible workforce.  Consequently, we closely track the economic and social factors that affect working professionals.  And in the current economy, “baby boomers” (those persons born between 1944 and 1964), face particular challenges.

Prior to the economic slowdown, companies were focused on preparing for the exit of baby boomers from the workforce. While many boomers are staying on the job longer to compensate for their depleted retirement accounts, they will retire sooner or later, and talent managers need to take both those factors into account.

“You probably will see less of an impact as far as the retirement of the baby boomers than [was] originally thought,” said John H. Hudson, CEO and owner of The Growth Coach of Ventura County and author of Choosing the Right Path: Insights on the Changing Face of America’s Workforce. “I’ve talked to a number of people, and essentially they aren’t sure what they want to do in this next chapter of their lives, but they really don’t want to continue to do what they’re doing.

“The problem is if they are not able to leave the workforce on their own terms, organizations are going to have to deal with a lot of older workers who are there and don’t want to be, but are sort of held captive because of their economic situation.”

In order to re-engage boomers who were originally planning on retiring soon, Hudson suggested providing them with more free time.

“Many organizations are going more to telecommuting, part time [and] those sorts of situations - allowing people to have more free time but remain engaged and not have that brain drain occur in terms of people just walking away from the workplace altogether,” he said. “Organizations are going to have to think about how [to] keep that level of talent, history and information in the organization in creative ways, so that it’s not the same situation where [workers have] to do a 9 to 5 every day as they have been for the last 30 or 40 years of their lives.”

In addition to meeting the needs of boomers, companies also must ensure they continue to prepare for the coming boomer retirements.

“The first thing companies must do is understand the magnitude of the problem, including the knowledge and skills at risk - and it’s going to be different for different organizations,” he said.

“Secondly, they’re going to have to develop a strategy to capture and transfer knowledge and core skills from these retiring employees and to identify and retain new workers with those critical skills, either internally or externally, to fill those gaps.

“Third, they’re going to have to manage and measure the progress of the entire effort. They have to have metrics to measure how well they’re doing because capturing critical workforce knowledge and skills can’t be left to chance.”

Hudson said using soon-to-be retirees as trainers and coaches and having them assist in the identification and mapping of key job competencies would be good for both the organization and the boomers.

“If organizations allow [boomers] to walk out the door, that loss of experience and skill will drop straight to the bottom line in terms of lost productivity,” Hudson said. “That’s how organizations remain viable - the experience base and the knowledge base of how things get done - if that walks out the door, we start to lose a lot.”

Knowledge retention, knowledge transfer, and the intelligent use of talent are issues that we are passionate about at M Squared.  We remain focused on providing our clients with innovative, flexible consulting solutions delivered through the skills of our people and the abundant expertise that resides within our consultant network.

I recently came across two interesting data points which provide some important clues to what the emerging, post-recession, marketplace for labor might look like.

These data points have extra significance because in recent weeks we’ve seen an increase in consulting opportunities across all our practice areas, and we’ve also begun to notice a tightening of the knowledge worker labor force.

You might ask, how can it be that we’re still hearing about the recession and unemployment almost every night in the news, yet you’re saying there is both business opportunity and a lack of talent in the market?!

Here’s my explanation.

First of all, unemployment statistics are a lagging indicator. The rate of unemployment in the market will peak long before the government agencies report it. A much more reliable indicator of labor market trends is Gross Domestic Product (GDP). When it grows, the labor market will grow.

Second, unemployment for those with a college degree or higher (i.e. the knowledge workers that M Squared Consulting depends on to deliver results for clients) remains at near historic lows. The reality is that many members of the knowledge workforce have delayed their retirement. Once we begin the post-recession economic cycle we will see an increasing number of Baby Boomers (the most educated and experienced component of the current labor marketplace) begin to retire from the workforce. I predict this dynamic will cause a renewed war for talent.

August 2009 ExecuNet Recruiter Confidence Poll

Executive hiring by healthcare companies is expected to set the pace for management recruitment across all industries now through the end of 2009, according to ExecuNet’s latest Recruiter Confidence Poll. The survey found that nearly 150 responding executive search consultants anticipate seeing the most executive hiring in the healthcare space, followed by the clean/green technology sector, energy/utilities, and the life sciences market, including companies in the pharmaceutical, biotech and medical sectors. Senior management hiring in the publishing and media/advertising/entertainment industries is expected to be the weakest, extending a longstanding trend line.

“With the economy showing signs of stabilization, corporations are beginning to strategically upgrade their leadership teams and fill positions that were put on hold during the downturn,” says Mark Anderson, President and Chief Economist of ExecuNet. “In light of the deep cuts many companies made during the past eighteen months, the pace of job growth during the year ahead could be stronger than expected in many industries.”

In the poll a representative sample of executive recruiters are asked what industry they anticipate yielding the highest growth of management hiring in the next six months. Here are the top ten responses from the poll:

• Healthcare = 13.8%
• Clean/Green Technology = 10.6%
• Energy/Utilities = 9.1%
• Life Sciences (pharma, biotech, medical) = 8.4%
• Environmental Products and Services = 7.2%
• High Technology = 6.3%
• Tie-Business Services = 5.3%
• Tie-Government/Nonprofit = 5.3%
• Defense/Aerospace = 5.2%
• Financial Services = 5.1%

Source: ExecuNet Recruiter Confidence Poll 8/09

The Aging of the American Workforce - Pew Research Center

The aging of the American workforce has accelerated during this recession, both because older workers have stayed in the labor force longer and younger adults are staying out of it longer, according to a recent study by the Pew Research Center.

One government estimate forecasts that 93 percent of the growth in the U.S. labor force through 2016 will be among individuals ages 55 and older.

By a ratio of nearly two-to-one, survey respondents said they would prefer a job that offers better security (59 percent) over one that offers higher pay (33 percent) but less stability.

Yet even in the face of widespread layoffs, pay freezes and involuntary furloughs, nine-in-ten employed adults say they are either completely (30 percent) or mostly (60 percent) satisfied with their job. In recent decades, the Pew study reports, levels of job satisfaction have tended to remain stable through good times and bad.

As it turns out, older workers are the happiest workers. Some 54 percent of workers ages 65 and older say they are “completely satisfied” with their job, compared with just 29 percent of younger workers. That’s because a much higher percentage of older workers is working not because they need to, but rather, because they want to.

While we are in the midst of a recession it might seem inappropriate to bring up the war for talent. But the market reality is this: even with overall unemployment rising, employers are still challenged to find the talent they need.

As many companies are discovering, while this labor market might be flooded with job seekers, that doesn’t necessarily mean they have the needed talent. In particular, companies can’t always find people with the exact skills and experience they need, when and where they need them. Today, it’s also not uncommon to hear executives express frustration about under-skilled, inexperienced, unproductive, and even unreliable employees who will quickly jump ship for another opportunity.

As you might expect from the generation that has had such a significant impact on our society throughout their lives, the Baby Boomers will also dominate this talent market discussion for the next decade.

How can this be? Aren’t the Boomers supposed to be retiring?

Well, let’s start with the fact that they are the single largest component of the U.S. workforce, so their effect is huge. Then, layer in the fact that with the economic downturn many leading-edge Boomers who under normal circumstances might now be retired (or nearing so) must continue working in order to replenish their battered retirement savings. Finally, we must recognize that the next generation (Gen X) is half the size of the Boomers and quite simply has not had enough time in the workforce to build up the same level of knowledge and experience.

The New War for Talent

Baby Boomers were born between 1946 and 1964, which means that today they are somewhere between the ages of 44 and 63. Many worked their way up the corporate ladder - they are happy to continue working in their area of expertise, where their wisdom and experience are valued. Others are choosing to embark on second, or “boomerang” careers.

The fact is, with their decimated retirement accounts many boomers can’t afford to retire. Others recognize that in addition to the monetary rewards they receive there are many psychic rewards from their careers, so they have no plans to ever retire.

The US Bureau of Labor Statistics (BLS) reports that by 2010, more than 51% of the workforce is expected to be 40 or older, a 33% increase since 1980. The number of workers aged 55 and older will grow from 13% of the labor force in 2000 to 20% in 2020.

All of this is good news for employers because most companies are operating much leaner than ever before, and they need to cost-effectively find the most experienced, skilled people they can in order to achieve their objectives.

How to Leverage the Boomers

Now is the perfect time for organizations to assess their workforce. Strategic business owners and executives should evaluate their workforce demographics and the key positions within their organizations in order to identify current and projected talent gaps. It’s also time to develop programs that will strengthen knowledge retention and sharing throughout the company in preparation for the inevitable “brain-drain” that will occur when the Boomers exit the workforce.

How can employers retain the key knowledge and information that is resident in their workforce?

First, they must recognize who has the knowledge. If they want to hold onto Boomers they must adapt to their needs. Many forward thinking organizations are developing policies and programs geared towards recruiting, retaining, and training older workers. Key options that will help attract and retain these mature workers include flexible work arrangements (such as adjustable schedules and job sharing) and should also part-time or contingent employment options. Fortunately these types of work arrangements require lots of self-discipline and maturity, which the Boomers have in abundance!

Next, companies should institute mentoring programs to help train the next generation of knowledge workers and business leaders. Companies concerned about retaining institutional knowledge can’t afford to have their older employees walk out the door with a career worth of expertise and experience.

Finally, employers must have an honest dialogue with their seasoned team members to help them plan for the next phase of their careers. Companies that demonstrate loyalty towards their older employees by offering flexible employment options, will be rewarded with loyalty in return.

Conclusion - Experience Counts

Because of their proven talent, Baby Boomers will be in high demand for the balance of this decade and beyond. They add value not only to employers’ bottom lines but also to the long-term health of our workforce and our economy.

It is a phenomenon we see every day at M Squared Consulting. When clients want experienced business professionals, those seasoned experts who have translated their knowledge and insight into consulting expertise, they call us. Our talent-on-demand business model is an enabler for companies who need seasoned experts, focused on delivering results. We also enable seasoned experts, who no longer want a full-time role, to bring their expertise to market as consultants.

In the final analysis this whole discussion can be distilled down to two words: Experience counts!

It should come as no surprise that many “older” workers are delaying their exit from the workforce. The recession has ravaged most retirement accounts, a fact that is most damaging for those nearest to retirement: the Baby Boomers.

A recent poll by Watson Wyatt, a global HR consulting firm, finds that 44 percent of those aged 50 and over plan to delay their retirement, compared with only 25 percent of those under 40. Although the average planned retirement age for all employees is 65 years old, half of those aged 50 or more plan to retire at age 66 or later.

“The economic crisis has affected many worker’s retirement plans and nest eggs, but those nearest to retirement have been especially hard hit,” says David Speier, senior retirement consultant at Watson Wyatt. “Older workers do not have the time to offset declining retirement account values. For many, the only choice is to delay retirement.”

Three-quarters (76 percent) of older workers (aged 50 to 64) cited the decline in the value of their 401(k) accounts as the most important reason why they are planning to postpone their retirement, followed by the high cost of healthcare (63 percent) and higher prices for basic necessities (62 percent).

Experience Counts

This phenomenon is a double-edged sword for employers…

It will be good news for many of the companies who in recent years have acknowledged they are unprepared to facilitate the transfer of key business knowledge to a new generation of knowledge workers. They now have more time to document critical knowledge and processes, and train the next generation. The downside is that companies will be saddled with inflated benefit costs and subsequent hiring issues once the Boomers do begin their inevitable retirement and the War for Talent again comes to the forefront.

A significant positive factor for employers is that this older talent pool has a wealth of qualities that only come from age (and the resulting workforce experience!) This wisdom is priceless as organizations continue to navigate in these uncharted economic waters and searching for the path out. There is much to learn from experienced business leaders who have confronted many economic, market, and organizational challenges in their careers.

A major part of the value proposition behind M Squared Consulting is that we deploy seasoned experts on our client engagements. These project professionals have years of industry and functional experience that they bring to each client project. Clients benefit from this consulting experience and industry knowledge as our consultants drive results on their critical business issues.

The Bukhara restaurant in Delhi is routinely voted the best restaurant in India, the best Indian restaurant in the world, and one of the top 50 restaurants of any cuisine in the world. I recently read an article that delved into the “secrets” behind its success. Believe it or not there are many lessons which are directly applicable to business consulting.

The restaurant did not get its top rating because of fancy decor. The style can best be described as rustic: diners sit on log benches and eat at rough wooden tables. There is no silverware or fancy place settings - diners eat with their hands at this restaurant. Bukhara takes no reservations, and the crowds regularly line up in the lounge waiting to get in.

Nor has this restaurant built its reputation through culinary innovation…the menu has not changed in 37 years. It offers a simple and straight-forward menu from the northern frontier that features mostly meats and breads, few sauces and even fewer vegetables.

So what makes this restaurant so special? Bukhara simply excels at execution.

Even though the dishes they create are similar to what one could get elsewhere, theirs just taste better. Some of this comes from using the very best ingredients. But most of it comes from the skill of the cooks.

The head chefs at Bukhara have been with the restaurant for more than 25 years. The kitchen is structured in an apprenticeship model, in which new employees slowly learn the craft of Bukhara’s menu and then spend a lifetime working in the restaurant to perfect it.

The kitchen has another interesting management practice.

In most restaurants, staff cook their own meals, often eating whenever they can between shifts. At Bukhara, the head chefs are the ones who do the cooking for rest of the staff, a great example of “servant leadership”. The chefs actually do the work instead of supervising!

The company that owns it is not worried about competitors trying to copy Bukhara, despite the simplicity of its concept. Even if one of the head chefs left to start up another restaurant, taking all that knowledge with them, the system and practices in the kitchen that support the execution of the dishes would not be there, and the competitor would not be as good.

What’s the lesson here?

The entire business strategy of the best Indian restaurant in the world rests on the ability to perfect and then execute what is otherwise a very simple and straight-forward product, something that would appear to be extremely easy to copy. But something that takes an extremely long time to accomplish.

In essence, the secret comes down to perfecting their simple recipes and cooking methods, codifying them into best practices that are retained within the organization and used as a benchmark for all training. Finally, it all comes together with flawless execution.

There are many parallels to the world of consulting, particularly the style practiced by M Squared Consulting. Our business model is built on being able to offer clients best-in-class project professionals from our Consultant Network. These are experts in their field who have made the career choice to be independent consultants. They’ve chosen to be consultants because they enjoy doing the work. Our consultants are world-class experts, who come in with the experience and best practices required to deliver results for our clients.

The U.S. faces an immigrant “brain drain” that could deeply affect the future of our technology sector.

Multiple forces are encouraging immigrant IT professionals in the U.S. to return to their home countries, raising the question: Will we be able to get them back when we finally realize how much we need them?

Here are the major forces at work in this trend:

The Recession

The current economic downturn is playing a big part in sending skilled workers back home. Many outsourced IT workers are returning to their home locations due to cost pressures faced by their clients. If a client sends more work offshore, then the IT worker who returns home is still engaged. So there is a cost saving and no loss of knowledge. If, however, the client terminates the project altogether, they lose the knowledge of the resource and there’s no saying if the client can re-engage that same resource again when the market picks up.

Lures from Abroad

Thousands of skilled immigrant IT professionals are leaving the U.S. for greener pastures elsewhere. Human resources directors in India and China report that what was a trickle of returnees a decade ago had become a flood. Job applications from the U.S. have increased tenfold over the last few years. A recent Kauffman Foundation study found that:

• The most common professional factor motivating workers to return home is the growing demand for their skills in their home countries.
• Returnees also believe that their home countries provide better career opportunities than they can find in the U.S.

There is another lure for Asian immigrants: both India and China offer skilled workers incentives to return home. In China, for example, a “green passage” project started in 2007 gives returnees guaranteed university educations for their children, along with tax benefits.

Meanwhile, the dynamics of the global war for talent are rapidly changing. The recent unveiling of the EU ‘Blue Card’ program allows high-skilled workers from outside the European Union to work in multiple EU countries. Because they are affected by a more rapidly aging population than the United States, these countries are aggressively working to liberalize their high-skilled immigration laws.

Restrictive U.S. Immigration Policies

Another factor is a provision of the U.S. economic stimulus package that would restrict H-1B hiring at companies that have received funds from the Trouble Assets Relief Program (TARP) and have more than 15 percent of their workers on visas. The political motivation is the suspicion that some U.S. high-tech companies have reduced their workforces, but aren’t necessarily cutting H-1B visa holders or foreign nationals ahead of U.S. citizen employees.

Conclusion

Restricting the immigration of highly skilled workers has a negative impact on innovation. A recent University of Michigan study found that “when the federal government increased the number of people allowed in under the [H-1B] program by 10 percent, total patents increased by around 2 percent in the short run.

In the final analysis the war for talent is a complex workforce issue and there are no easy answers. The United States needs to be aware of the risks with restricting immigration if it hopes to keep up innovation, particularly in technology-related areas. Even if economic conditions force layoffs, companies will need to think ahead to a time when they may badly need extra technical help. Many experts agree that while we may not need all these workers in the U.S. during the recession, we will absolutely need them to help us recover from it.

We may be in the midst of a recession with increasing unemployment and fewer jobs, but it’s very likely to be a short-term phenomenon that will not have much of a long-term effect on talent shortages. Without dramatic action, the gap between demand and supply will very likely continue to widen.

I’ve written in previous posts about the war for talent. The aging of the U.S. population and other demographic factors which will negatively impact the supply of talent, particularly among highly educated and skilled knowledge workers. But these problems are likely to be exacerbated by our immigration policy.

Here’s why:

Competition from Europe

The European Union recently approved the Blue Card program, which was modeled on the United States’ Green Card. The Blue Card (named for the color of the EU’s flag) will allow skilled foreign workers to work and live anywhere in the EU’s 27 member countries.

Currently, 85% of global unskilled labor goes to the European Union and only 5% to the United States. In contrast, 55% of highly skilled immigrants head for the United States and only 5% to Europe. With the Blue Card, the EU hopes to dramatically change this imbalance.

Singapore, Japan, and Hong Kong have implemented similar programs, following the lead of Australia and New Zealand. The goals of all these programs are the same: to attract skilled talent. These countries are also foreseeing a war for talent, and although it has not been publicly stated they are actively trying to divert some of the talent that now flows to the United States.

The EU and other countries may well succeed because their criteria for handing out permanent residency permits and work visas are much more liberal than those in the United States, and the procedures will be simpler and more streamlined. Some even allow employers to hand out residency permits along with employment offer letters.

For jobs where a citizen is not available, an immigrant to the EU would only need to show a degree and three years of experience. Recognizing the need to attract young talent to Europe, immigrants under age 30 will have even easier requirements in qualifying for Blue Card status.

H-1B Visa program

Our system of providing work visas and residency permits leaves much to be desired. It can take 5 to 10 years to get a Green Card and the system heavily favors family ties instead of skills and experience. The process is convoluted, involving multiple government agencies and arcane procedures. The number of annual work visas is still only 85,000 despite clear evidence of a shortage of skilled workers. For example, the unemployment rate in computer- and mathematics-related occupations is about 2.1%, or full employment when allowing for people in transition between jobs. The number of visas was actually lowered from 195,000 in 2004, to the current level which is the same as what existed 15 years ago.

In testimony before Congress, Bill Gates argued for elimination of the cap on H-1B visas. But in pandering to groups like FAIR (Federation for American Immigration Reform) and other isolationists, Congress has chosen to do little about the problem.

The problem is mostly political. Anti-immigrant groups are opposed to any loosening of immigration standards, though they neglect to mention that immigrant workers make up barely 3% of the skilled labor force yet disproportionately contribute to the economy. A quarter of all Nobel prizes won by Americans have gone to immigrants, and a similar proportion of IT firms were started by Indians and Chinese.

A study by the National Foundation for American Policy found that the average S&P 500 company creates five new domestic jobs for each highly skilled H-1B visa employee it hires. By raising the H-1B cap, Congress would create more domestic jobs, allowing companies to fill vital positions and enable them to expand their operations at home instead of moving overseas.

The Future

There are glimmers of hope. Representatives Gabrielle Giffords (D-AZ) and Lamar Smith (R-TX) have introduced bills raising the cap for H-1B visas. These are the Strengthen United States Technology and Innovation Now (SUSTAIN) Act and the Innovation Employment Act.

The SUSTAIN Act would temporarily raise the cap to 195,000 for FY 2008 and FY 2009, while the Innovation Employment Act would initially raise the cap to 130,000 and allow the cap to increase the following year if it is reached.

Raising the cap is necessary, but more should be done to make H-1B visas flexible. Their number should reflect the economy’s need for high-tech workers, not arbitrary limits set by Congress.

But the prospects of satisfying the U.S. need for talent solely from increased immigration are not good. The EU hopes to attract 20 million skilled workers over the next two decades as a result of the Blue Card program. That may be overly optimistic but it will undoubtedly negatively impact the flow of talent to the United States.

Companies clearly cannot count on immigration to satisfy their need for talent. They will have to continue exploring other options, like utilizing the flexible workforce to meet their talent needs.