There ought to be jobs, send in the jobs

Internet Strategies for Education Markets: The Heller Report, Nov, 2002

According to financial experts, the American economy must create some 120,000 jobs each and every month simply to keep the unemployment rate from rising. In the high-flying years of 1999 and 2000, a staggering 155,000 new workers were hired each month. During the past decade, 15 million people joined the work force, leading to unprecedented economic growth that peaked in March 2000. But in recent months, there have only been a paltry 30,000 new jobs opening up each month, and the nation has lost 1,600,000 jobs since March 2000. You can see why it feels as if we're in a terrible economic downturn.

The good news is that national unemployment rates declined in September to 5.6 percent (about 8 million people), the lowest rate since last February, and analysts are also reporting news of an economic recovery. Though many ed tech companies are holding back on hiring, the experts say there are some rays of hope. So, where the heck are they?

Ralph Protsik, co-founder and managing director of Boston Search Group (BSG), says there aren't very many 'pockets of optimism' right now in the industry. He believes three factors have led us to this state of affairs: the state of the economy; how slow NCLB has been to trickle monies to the for-profit sector coupled with severe cutbacks in education budgets at the state and local levels; and venture capital that is almost nonexistent for early stage companies, particularly those in e-learning. Protsik is concerned about the larger players having a round of very stiff layoffs, and he thinks we're going to see more of this trend going forward.

"The ed tech job market is a difficult one to forecast because changes are taking place rapidly," explains John Weiss, president, Weiss & Associates executive recruiting. "Case in point is Riverdeep's being de-listed from the NASDAQ. That's very significant."

All of this means lots of good people are in the market, Protsik notes, but the demand for these people is simply not there at the moment. Marketing "always takes it on the chin," Protsik says of this environment, and unfortunately, part of the problem is simply that fewer people are being hired overall. Weiss believes companies who are facing economic downturns seem to be playing it smarter these days, targeting certain states for sales and marketing activity and hiring a limited number of people to cover those targeted areas, generating profits and not permitting expenses to get ahead of revenue. "A few years ago, we saw companies hiring reps to cover every state," he notes. He believes the ed-tech 'visionaries' of yesterday often let profits be damned. "The result of that was a meltdown in the ed tech arena," Weiss laments.

Learn from the Past

But let's define what a 'meltdown' really means. It's helpful to understand that there are three different types of unemployment, according to EconEdLink (www.econedlink.org). Frictional unemployment is temporary unemployment arising from the normal job search process, and refers to those people who are seeking better or more convenient jobs and who always exist in any economy. Structural unemployment occurs when changes in the economy caused by technological progress shift the demand for goods and services. Structural changes eliminate some jobs in certain economic sectors, while creating new jobs in faster growing areas. (Think fewer bank tellers, more ATM repair men.) The structurally unemployed often face prolonged periods of unemployment, and need retraining or must relocate to get a job. Cyclical unemployment is caused by a drop in economic activity. This type of unemployment can hit many different industries and is caused by a general downturn in the business cycle.

Is today's ed-tech unemployment frictional, structural or cyclical? The good news is that it doesn't seem to be a structural issue -- despite all that hand-wringing over the looming demise of teaching, schools and the educational publishing industry that we once heard. Education isn't going anywhere, either, and despite dreadful budget problems at schools around the country, there is federal and state money available, though it may be much harder to get a piece of it these days. Far from moving away from educational technology, NCLB and other state and federal mandates have given schools new reasons to use technology in the form of data management and curriculum alignment, for example. The economic downturn appears to be more than just a cyclical downturn, however. Companies and out-of-work industry vets are experiencing the 'shake-out effect' as leaders begin to emerge across the spectrum of education technology, bumping Out other firms. "In earlier stage technology, we see lots of business development," say s Protsik. "There's not quite as much demand anymore."

Job One

There is demand in some areas. Weiss and Protsik point to sales as the first place companies will turn to solve their economic troubles. Protsik predicts more turnover as companies look for fresh blood for their sales forces, and a ratcheting up in the search for quality sales professionals. With fewer 'feet on the street', companies will also need to increase their use of telesales and telemarketing, online demos, video conferencing and the like. The experts think these 'sales support' positions, and anything that will help provide qualified leads will emerge as a good place to look for employment. Weiss notes that even at the top levels, the jobs he's recruiting for fall into the "worker" category rather than administration -- meaning jobs that require proactive relationship building with customers. Candidates who can demonstrate their ability to forge long-term relationships with decision makers in the education arena will have an edge.