Firms Brace For a Worker Shortage

Last spring, when Daimler Chrysler offered early retirement to thousands of older autoworkers, it got more than it bargained for. So many people accepted the deal that the company faced a potential shortage of critical skills at its plants and had to withdraw some offers. With half the auto industry's work force eligible to retire in the next five years, Ford and GM took Chrysler's lead and scaled back their early-retirement programs.

In the wake of the past year's downsizing, and with the economy growing again, it won't be too long before the rest of corporate America follows the automakers in slamming their personnel policies into reverse. The smartest firms are already changing the way they recruit. Instead of filling positions as they open up, companies are developing a "constant pipeline of qualified candidates," says Kathy McGirr, senior vice president of talent acquisition and development at Fidelity Investments. With the help of software start-up Hire.com Fidelity has developed a pool of 17,000 internal candidates for promotion or transfer, plus more than 100,000 outside prospects.

Much as colleges do with alumni, some companies, including Agilent Technologies, are nurturing ties with former employees and hiring them back as needed. Other firms are urging older workers to stay around longer. Ohio cosmetics maker Bonne Bell has created a separate factory floor with its own parking, bathroom and exercise room for 100 employees 55 and older.

IBM Canada and Monsanto have pioneered the use of on-call retirees. More than 600 ex-workers take part in Monsanto's Retiree Resource Corps, which encourages them--former managers, tax lawyers and secretaries--to return to plug temporary staffing gaps for as much as 1,000 hours a year (the maximum allowed without jeopardizing retirement benefits). In the process, they pass on their vast institutional memory.

As the talent wars heat up again, and a growing number of workers opt to be independent contractors or to job hop at will, managers will also have to work harder than ever to retain people and develop all of them--not just standouts--to their fullest potential. Rather than dampening the rush toward free agency, many observers believe the recent ax wielding will only encourage it. "It's not that everybody is dying to be a free agent," says Bruce Tulgan, author of Winning the Talent Wars (W.W. Norton & Co.). "It's that people are realizing they have no choice." And companies will soon have no choice but to accept that their best workers are holding most of the cards.

--By Daniel Eisenberg. With reporting by Joseph R. Szczesny/Detroit