Astron Solutions will be closed December 26th, 27th, 28th, and January 2nd for some much needed rest time.  We'll be in the office Thursday and Friday (12/29 and 12/30) to respond to your urgent requests, and kicking off the new year on January 3, 2006.  Happy New Year!!

2006 Economic Projections Update

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In the August 16, 2005 issue of Astronology we provided the preliminary Total Compensation projections for 2006.  As 2005 comes to a close, it’s important to revisit these projections, along with others for 2006 that could impact human resource planning decisions.

First, let’s explore some general workforce predictions from “Small Business Trends” that will have an impact on human resource planning and budgeting.  These forecasts were prepared by Roger Herman and Joyce Gioia, Principals of The Herman Group.

1. Intensifying competition for qualified workers.

As the economy continues to grow, more jobs will be created. Employers will become increasingly aggressive in their efforts to recruit people who are qualified to do the necessary work.

2. Gradually increasing attention to employee retention.

The rising heat of the employment market will motivate an increasing number of employees to change jobs, often in response to attractive incentives. Employers will realize, many times too late, that attrition rates have skyrocketed and it has become more difficult to hire replacements.

3. Increasing investment in older workers.

In need of a stable workforce comprised of people with wisdom, experience, and reliability, employers will emphasize retention and hiring of older workers. Seniors seeking income (full or supplemental), social relationships, and a desire to stay active and productive will continue working into their eighties and nineties.

4. Shift in retirement plans to lifetime lifestyle funding.

With the evaporation of traditional retirement, long-term wealth accumulation plans will modify pay-out options to offer greater flexibility.

5. Continued off-shoring of some work, coupled with the return of other work.

Employers in developed countries will continue to send work to less-developed regions for cost savings. Concurrently, work that is sensitive to customer satisfaction, involves cross-cultural communication, or is technical with a need for quality or creativity will return to points of origin –if indigenous workers are available to do the jobs.

6. Larger investment in corporate training.

The need for better trained skilled workers and managers will drive increased investment in corporate training. Emphasis will be placed on the development of future leaders, providing fast-tracking in those organizations that already lack competent leadership.

7. Growth in telecommuting.

Workers desiring more control over their time and better life-work balance will persuade employers to facilitate telecommuting options. Utilizing available and emerging technology, remote employees will be highly connected to co-workers, customers, and company leaders.

8. Expansion of the staffing industry.

The difficulty in finding qualified talent will drive more employers to rely on staffing firms to source applicants for them. Recruiters will be in high demand as firms rush to grow to meet immediate needs.

9. Heightened flexibility in work arrangements.

Employers competing for qualified workers will support a wide range of work arrangements, including shorter workweeks, flexible hours, and job-role modification. Increasing emphasis will be placed on results, with managers and subordinates becoming more equal — like partners — in accomplishing work.

10. Employer dissatisfaction with product of schools.

Managers will become increasingly frustrated with the low level of preparation of the workforce, particularly entry-level applicants.  Their complaints will be heard by senior corporate executives, who will demand greater performance from public schools and technical, community, and four-year colleges.

CFO Look at 2006

The Bank of America Business Capital 2006 CFO Outlook, conducted by telephone from mid-August through mid-September 2005, surveys CFOs from 600 U.S. mid-size and large manufacturers with revenues ranging from $25 million to $2 billion.

Thirty-eight percent of respondents plan to fuel their revenue growth through increased capital expenditures. Thirty percent expect to participate in a merger or acquisition in 2006, up sharply from 23% last year.  2006’s prediction is the highest percentage since the survey was first conducted in 1998..

Bullish as most respondents were about their own company’s fortunes, they were less optimistic about overall economic growth prospects. A slight majority – 58% – believe the U.S. economy will grow next year.  This is down from 77% in last year’s survey.  One-third expects U.S. manufacturing to expand, down from 44% last year.

Fifty-seven percent are most concerned about the impact of oil prices on the economy.  When asked how the U.S. economy will perform in 2006 compared to the world economy, 34% see the U.S. economy underperforming the world economy, double last year’s 17%.

The majority of manufacturing CFOs see the current state of the U.S. economy in a positive light, giving it an average score of “66” on an economic scale ranging from 0 (extremely weak) to 100 (extremely strong). This is consistent with last year’s score.  While 60% believe the actions taken by the Federal Reserve Board over the past year have helped the U.S. economy, this appraisal is down from 72% last year and 83% the year before.

Astron Solutions’ Projections

In light of these findings, it appears that 2006 will be a year of uncertainty.  A re-focusing of continually shrinking resources will be key.  Do not be surprised if initial salary budget increase projections for all industries and positions reduce from 3.5%- 4.0% to 2.5% - 3.0%.  This change will be driven by the need to

• fund specific market pay needs,
• expand retention programs such as career progression and competency enhancement opportunities, and
• make required technology enhancements for effective HR administration and employee communication.