The great need for matching individuals to jobs during the recession

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Apr 9, 2020

Most recessions result in mass layoffs.

As the impact of COVID-19 ripples across the economy, the number of layoffs is without precedent, however, in recent American history with a reported 9.9 million Americans filing for unemployment benefits in the past two weeks. Many millions more are likely to be impacted.

But this recession is different in another respect from past ones. Even as most employers lay off large numbers of employees and contractors struggle to find dependable work, there is a group of large employers hiring large numbers of employees.

Companies like Amazon, Walmart, and CVS intend to hire nearly 500,000 Americans in the coming weeks, according to The Wall Street Journal. Research at the Entangled Group, where I’m the head of strategy, suggests there are an additional 20 employers that will hire substantial numbers of employees. And organizations of a variety of stripes are likely to need to add healthcare workers on the front lines to assist with patient screening and care in the weeks ahead.

Although this volume of hiring will not make up for the mass layoffs, it can at least help many individuals and their families in these turbulent times and soften the blow for the American economy writ large.

But a big challenge exists.

There is no natural mechanism today to match the people being laid off to the available job openings. As a result, the time lag between when people with transferable skillsets are laid off and then hired is too long, winding, and unwieldy with an uncertain outcome. The wasted time costs the individual, the nation’s taxpayers, and the national response to this pandemic.

And herein lies the opportunity.

Educational organizations that work with employers are perhaps uniquely situated to understand the skillsets, capability profiles, and “schools of experience” of those being laid off, as well as the profiles that employers who are hiring need. They can see the gaps between the two and help bridge it.

Companies ought to connect the education organizations with which they work into their severance and hiring functions to create a tighter feedback loop and greater visibility between firing and hiring. These education organizations — ideally platforms like Guild Education, Degreed, Coursera, and LinkedIn that have some visibility across a range of education providers — could work with the outplacement organizations that companies employ, for example, and begin to create a matching infrastructure akin to how medical students are matched into residencies. 

Education organizations that work on both sides of the aisle—with those companies who are laying off employees and those who are hiring—can better match laid-off employees to available jobs where the skillsets, capabilities, dispositions, and schools of experience match.

For individuals being laid off who have many but not all of the skills required, these education organizations could identify, train, and match them into available roles and help arrange financing between the firing and hiring employees by leveraging severance packages and training budgets.

Where there are employees who have a demonstrated aptitude to acquire the requisite skillsets but don’t yet have the right skills, they can identify them and train them to match them into the right roles.

By doing so, these organizations have the opportunity to spare individuals and the nation billions of wasted dollars and hours that may result in a negative return.

Granted, this won’t be an overnight solution, as there are lots of logistics to work through. But it would create a much more malleable system that is able to put Americans to work much faster than the infrastructure that exists currently.

It would also create a more durable asset capable of playing that matching function once the economic recovery begins. Such an infrastructure would do better at coordinating the supply and demand of workers and jobs than workforce boards that have traditionally attempted to play this matching role.

That won’t reverse the disturbing trend of bounce backs in hiring from recessions taking progressively longer over the last 30 years, but it would help.

It would also further prove the value of investing in human capital at a time when companies believe increasingly that there is a real return on investment in improved employee retention for employers that invest in the education of their employees.

A matching function would take this a step further, as it would show the value of education in reducing search costs for companies, bad hires that cost companies a significant amount of money, and opportunity cost in lost productivity and output.

That value could, in turn, make the case for investing in human capital not just when times are good, but also when times are bad and there is significant slack in the labor market.

In the knowledge-economy era where companies’ most valuable asset — human capital — still does not appear on their balance sheets, proving the value of investing in developing people would be at least one welcome outcome amidst the current pandemic and torrent of terrible news.

Note: I own equity in Degreed, and the Entangled Group owns equity in Guild Education.

Michael is a co-founder and distinguished fellow at the Clayton Christensen Institute. He currently works as a principal consultant for Entangled Solutions.