History of Job Search, 20th Century

January 4, 2010 | (3 Comments)

Recruiting in the 20th Century worked well enough for its environment. Job-seekers replied to ads they saw in the local newspaper, which were placed by companies looking to hire, sometimes with the assistance of an RAA (Recruitment Advertising Agency). The hiring manager would receive a reasonable number of resumes that he could personally look through to select candidates for further review. And a specialized profession of executive search consultants was born and evolved into the modern search business. The most commonly identified deficiencies in the system were long cycle times, opacity of market information, the impossibility of conducting truly thorough, truly national searches, and the inordinate power of the most successful executive search firms.

To understand what we’ve lost with the passing of the 20th century model, we’ll need to dig into the details of the system and the behaviors of the participants. From there, a comparison with the newly emerging 21st century model will highlight elements that are working well, and which have become irretrievably broken. With that introduction, let’s define the components of the 20th century model at some length.

Job-seekers applied for a small number of jobs, for which they were reasonably qualified, because of the time, costs and aggravation involved.

Job-seekers in the 20th century faced job searches armed with precious little information and had to bear actual costs, in both time and money, in the application process. Because of this, job-seekers were geographically chaste, applying for jobs in their present location or in cities to which they were seriously considering moving. As the most common ways to learn about job openings was through word-of-mouth or the local newspaper, the amount of time and effort required to send applications far and wide was prohibitive. Consequently, an open position for a marketing manager in Cincinnati wouldn’t receive applications and resumes from a candidate in San Diego (the exception being the case of a job-seeker looking to move there for family, work, or industry reasons.)

Job-seekers had to type or print cover letters for each position, address envelopes, fold them precisely into thirds, and make sure that the right cover letter got into the right envelope (a distraction of some great consequence for OCD people! “Shoot, did I put the Morgan Stanley letter into the Goldman envelope? Let me check again…”) and then lick a stamp in order to apply for jobs. In modern parlance, we’d call this friction in the system. And this friction served as an inherent limit on the number of applications each candidate would be willing to complete.

Job-seekers were slightly less mobile in the 20th century due to costs of travel and relocation, and prevailing cultural norms that celebrated longevity of employment. Lifetime employment was the aspiration of the best and most qualified candidates.

“Work at a place long enough to get your gold watch,” was the advice given to youngsters by parents and wise uncles. This further limited applications for open positions.

Recruitment advertising targeted the local market, was sold at expensive rates, and allowed for abbreviated
announcements of position openings, but not for a broader brand message.

In the 20th century model, recruitment advertising took place in the newspapers, which were local information monopolies. Even though most markets had two or more newspapers, the duopoly or oligopoly would tend to segment the audience into niches so that each paper might target a particular political, demographic, or income level. Radio and TV were never effective means of advertising open job positions as the much smaller amount of advertising space available meant substantially higher prices. Trade magazines and academic journals were effective means of recruitment advertising but at much too small a scale to be considered a dominant force.

Local papers were geographically circumscribed. With distribution, and interest, only extending tens of miles from a city center, the reach of local recruitment advertising was limited. Further, the high prices charged for help-wanted advertising meant ads would appear only once, or for a relatively short amount of time. These temporal and geographic limitations on audience served to limit the number of applications that a help-wanted ad would receive. Subsequently, many employers chose to interpret a received application as an indication that the candidate was highly interested, close-at-hand and available.
In placing help-wanted ads, companies would oftentimes engage the services of an RAA (Recruitment Advertising Agency) to design the ads and purchase the ad space. If, say, Pfizer wanted to hire salespeople in 50 cities across the country, the HR group at Pfizer did not want to have to call up all 50 newspapers in order to negotiate ad sizing, placement, and cost. JWT, Bernard Hodes, TMP and Shaker, among others, provided this service, typically in exchange for a 15% share of the revenue, paid by the newspapers.

In studying the 150 year history of help-wanted ads, I have not been able to identify a single industry innovation that significantly improved response, time, utility, or cost for recruitment advertising clients. The closest I have found is the ‘blind ad’, in which the identity of the advertiser is not revealed for confidentiality, or candidate management, purposes, although this is, strictly speaking, not a recruitment advertising innovation. The applicant would be directed to a confidential and anonymous P.O. Box provided by the newspaper itself. As of yet, I have not been able to identify the time and place of the emergence of this practice, though research continues… I suppose what is most significant about this lack of innovation is the implication that clients were not demanding innovation. Help-wanted ads worked well enough for their monopoly suppliers and the captive customers they served.

The recruitment function was a tactical function for processing candidates through the application process, not a strategic function for securing the highest quality employees.

In the 20th century, the recruiting function dealt with standardized inputs and outputs — job requisition forms, ads in the paper, reviewing with the hiring manager the small number of applications, standardized offers and benefits packages, form-based offer letters. There was little diversity in approach, process, or marketing among firms, and few innovations attempted by HR departments. A function that trades in standardization in this way is a tactical, not a strategic, function. As a result, recruitment had much more in common with the purchasing department than it did with strategic areas such as R&D or Marketing.

Practiced tactically in this way, recruiting was attached to the functions which most closely followed it in the employment processes — personnel — the department responsible for entering, maintaining, and exiting from employee relationships. Being warehoused in this manner (in the same group that handled compliance, benefits, and administrative work) will lead to the recruiting functions largely missing the turn towards the importance of employment branding in the first decade of the 21st century. Stylized ads in a standardized process did not allow for it. (Again, I think it bears noting that had recruiting been viewed as a strategic function in the 20th century, it would have inhabited a different place in the organization structure.)
As the application process itself involved significant effort on the candidate’s part, 20th century custom dictated that, in turn, the candidates would be treated with some deference, civility, and politeness in the process. It was the expectation that each candidate sending in a resume or application would get a personally addressed letter thanking them for their credentials and, if a position were not immediately available, their information would be held on file for use in filling future open positions. (New, college-graduate employees at TheLadders find this particularly unbelievable.)

The hiring manager, possessing greater domain expertise, was often the first-line screener of resumes for an open position.

With a relatively small number of applications and resumes to review, the hiring manager himself could often do the first (and last) round of screening of the candidates received. With his position as an operator in the field, the manager would have extensive insight into the different types of experience available in the market, and, importantly, was able to judge first-hand the resumes against that standard. (Indeed, at times, there would not even be a first screen as candidates, having read Sunday’s help-wanted pages, simply showed up at the place of business on Monday morning.)

Without needing to put down on paper the qualities and characteristics of the ideal person for the job, the manager was therefore frequently able to avoid the lengthy process of interpretation and explanation of job requirements to the internal recruiting or HR function. External, or third-party, recruiters, were often experts in their specific niche and would be able to craft appropriate position descriptions themselves without the assistance of the hiring manager. As we proceed into the 21st century, this absence of discipline in memorializing hiring managers’ desires will become a critical flaw for the emerging new model.

Because of the small number of applications, reviewing the submitted resumes was not only not a chore, but an important source of market intelligence for the hiring manager, as he could ascertain the quality of talent at the competition and get a direct sense of the supply available in the market to fill his position.

The workplace bargain in the 20th century traded lifetime employment for lifetime development.
Throughout the 20th century, a steadily increasing percentage of the American workforce has been engaged in “white collar” jobs — the managerial, clerical, design, marketing, engineering and professional work associated with managing business. Automated and routinized processes on the factory floor led to increasing productivity, the decrease in commodity prices as expressed in earnings power, and the subsequent rise in the importance of creating products and services that appealed beyond the merely functional. The innovations in design, culture, production, marketing, and distribution were driven by the managerial class (what former Secretary of Labor Robert Reich has termed “symbolic analysts”) and replaced high-volume production and low-cost provision as the driver of corporate value. As the emphasis on work performed by the brains of employees increased (and decreased on work produced by muscle power alone), the need for an employment bargain that appealed to this increasing share of employees engaged in white collar work also grew.

Lifetime employment for managers, underscored by a broad “no-layoffs” policy among the nation’s most prestigious employers, went hand-in-hand with an assumption of corporate loyalty on the part of employees and the expectation that their career development would be cared for assiduously by the company. In preparation for writing this series, I’ve gone back and read “The Organization Man” and “The Man in the Grey Flannel Suit”, and their popular depictions of the expectations of middle managers clearly reveal the assumption of, and preference for, lifetime employment, along with the low cultural desirability of changing employers. At the managerial level, then, companies would try to hire once and hire best, and develop their managerial class by rotating them through a series of positions of increasing, and diverse, responsibility.
In this sense, companies and managers engaged in a mutual selling and buying. The professional purchased (and the company offered) career development, employment security, and the avoidance of job search costs throughout his career. He sold (and the company bought) loyalty, steady work performance, and a reduced need for companies to constantly monitor job satisfaction, job tenure, and compensation.

To take two examples, at some length, consider Rick Wagoner, until last year CEO of GM, and Bob McDonald, the present CEO of Procter & Gamble.

Wagoner joined GM as an analyst in the treasurer’s office after graduating from Dartmouth and Harvard Business School in 1977. He became treasurer and then executive director of GM Brazil in the 80s. He was promoted to vice president, finance manager, and then director of strategic business planning in Canada. This was followed by a stint as VP, Finance for GM Europe, and then president and managing director of GM Brazil, before ascending to the executive suite as EVP and CFO in 1992, president and COO in 1998, and finally CEO in 2003. In all, 14 positions in 3 functions across 4 geographies in the 26 years leading up to his becoming CEO.

McDonald, meanwhile, joined P&G in 1980 after West Point and earning an MBA at the University of Utah. In the 1980s he rotated through a variety of cleaning products divisions — Solo, Dawn, Cascade, and Tide — before becoming Associate Advertising Manger for Laundry Products USA. In 1989 he became Manager for Laundry Products of Canada, and in 1991, GM of the Philippines. In 1996, he was named the Regional Vice President for Japan, and in 1999, President of Northeast Asia. In 2001, he was promoted to President, Global Fabric & Home Care; in 2007, COO; and in 2009, President & CEO. In all, 19 positions across 5 geographies in the 29 years leading up to his being named CEO.

What each of these brief biographies demonstrates (and many, many more examples like them) is the role the 20th century company plays in the development of the executive. Rotations through geographies, functions, staff vs. line positions are all directed towards the end of making a well-rounded executive suitable for the C-suite. The company rewarded loyalty with development and opportunity.

Or consider this 1964 Time magazine description of AT&T’s then-CEO Fred Kappel, which shows the culture thereby fostered by lifetime employment practices in the context of the post-War period:

“Kappel is the prototype of the A.T.&T. executive, that particular type of U.S. manager whose training and abilities make the telephone company about the best-managed firm anywhere. One former A.T.&T. vice president wrote that the company’s management system “is much the same as the Army’s.” A.T.&T. is a pure meritocracy, run by men who started at the bottom and worked up, step by step, winning the nod of many bosses along the way. The executives at A.T.&T. combine in themselves dedication, sense of service, awareness of public responsibility, invocation of old-fashioned virtues, puritan earnestness, Rotary Club friendliness, and a touch of self-righteousness They consider themselves a breed apart –and they are. They value continuity and gradualism in management more than most, and, though at ease in handling vast sums, run their company with a peasant’s fear of debt and the thrifty conviction that every piece of installed equipment ought to be good for 40 years. Most of all, they view their job–helping the people to speak –as an almost priestly calling.”

Again, the promise of lifetime employment, in this case based on a conscious emulation of the armed services, creates a culture of loyalty, separateness, duty and obligation. By contrast, the 21st century will see the rise, in some sectors, of a prejudice against employees who have stayed at a particular job or company for more than 10 years. Meg Whitman, CEO of eBay, has famously commented that 10 years was the right amount of time for any CEO to stay at the helm. And the realities of the modern business cycle eventually caught up with the concept of corporate loyalty. Lifetime employment will die in the United States on February 15, 1993, when IBM announced the end of its no-layoffs policy, a business and cultural milestone that changed the employment bargain forever.

(Significantly, as we move further towards a white collar workforce, the number of blue collar production jobs decrease. Nonetheless, we as a country are getting richer. As one economist pointed out, considering the success of Manhattan, the fear of manufacturing jobs moving to China is misplaced. How much meat do we produce in Manhattan’s Meatpacking District? How many garments in the Garment District? Well, if you contemplate Manhattan as its own country, did the “offshoring” of our manufacturing jobs to the rest of America across the Hudson over the past 100 years leave us in penury? The departure of production jobs mo more leads to a decrease in wealth than the physical separation of the factory from company headquarters leads to declining incomes for its executives.)

Increasingly, then, the American workplace has moved towards white collar work, which, in some senses, is brain work (as opposed to muscle work). As the 21st century dawns, and the availability of information explodes, this characteristic of the American labor marketplace will have far-reaching implications for the new model.

Executive search arose in the 20th century to provide high-touch services which the low-touch, high-volume recruitment ad could not.

While employment agencies were a common feature of American life in the 19th and 20th centuries, the history of executive search firms begins in 1926 with the establishment of Thorndike Deland Associates, the first retained executive search firm. Thorndike charged $200 plus 5% of first year’s compensation to find expert buyers for department stores. McKinsey and Booz, the predecessors of today’s management consulting firms, also established executive search practices at this time (indeed, it appears that executive search firms were more commonly called management consulting firms until well into the post-World-War-II period.)

Executive search satisfied employers’ demands for recruiting candidates for which the standardized processes of the 20th century model didn’t work. Specialized skill sets, national search requirements, and top executive leadership required a more diligent scouting of available talent and more expert management of the courting process. As no product existed which could satisfy these requirements, a professional service was born. Applying customized human effort to the problem of finding, assessing, and recruiting top-level or specialized employees grew steadily throughout the 20th century.

The recurring problem of executive search, as a business, was that the means of producing revenue were based on the capabilities of the executive search consultant himself. Despite various efforts to build proprietary databases, executive search in the 20th century was unable to develop a capital asset that would see the firm itself, rather than its employees, delivering a substantial portion of the value created in an executive search. As a result, recruiters would frequently leave a firm to “hang up their own shingle.” For example, Booz Allen Hamilton alumni launched firms such as Boyden (1946), Heidrick & Struggles (1953), and Spencer Stuart (1956). And when McKinsey & Co. decided to exit the business for perceived conflict of interest reasons at the end of World War II, John Handy (1944) and Ward Howell (1951) left to start their eponymous firms. The Big 8 accounting firms entered the field in the 60s, but were forced, under political pressure, to divest their operations in the late 70s due to the belief that these additional ties threatened the independence of their audit opinions (seems like this story recurs once a decade, doesn’t it?)

For much of this time period, there was a popular perception of something unseemly to executive search (hence the great umbrage some recruiters take at being “insulted” as headhunters — in fact one 1974 New York Times article lists additional epithets such as “bodysnatchers” and “flesh peddlers”! A surprisingly negative assessment, in my view, of an industry engaged in finding people new jobs they like more than their old jobs.)

Hypothesis: smaller labor pools, lower labor mobility, and less effective means of categorizing workplace attributes lead to more genericized searches in the 20th century than presently.

A hypothesis that I will be working on proving or disproving this year speaks to the nature of job fit given the available pools of labor talent. Given the smaller audience exposed to a particular job, and the lower likelihood of an employee moving to another company, the requirements for filling a job may have been more broad than is customary today. Did “Get me an ad man” or “I need a sales star” inherently devalue industry expertise?

In Japan, where lifetime employment is still the strongly favored cultural norm, executives are transferred within conglomerates to wholly different industries and functions. During my time in the import-export business, my customers were primarily Home Centers (Japan’s version of Home Depot or Lowe’s); one of my retail clients was entirely populated with executives from the group’s declining steel production business. This preference for company-loyalty over domain expertise in staffing would seem to be more prevalent in lifetime employment systems, and I’ll be studying further.

Conversely, when recruiting for TheLadders.com today, we frequently heavily prefer Online, Online Subscriptions, or Human Capital experience in our candidates. With increasing specialization of the work required, and the lower ramp-up times experienced by industry-knowledgeable executives, do contemporary recruitment practices inherently create smaller, specialized labor pools?

Summary
Markets seek clearing prices: the price at which the supply of a product of certain usefulness will match the demand of customers for it. As we consider recruiting models in the 20th and 21st centuries, it is wise to bear in mind that changes in the utility of a particular solution impact its price and volume in the marketplace.
In this sense, the 20th century model — the particular combination of customer behaviors and product utility made possible by technological, cultural, societal, and business processes — found its market clearing price. Help-wanted ads serviced the high-volume, low-functionality end of the marketplace. Literally billions of help-wanted ads were created, purchased, and read over the course of the century. And executive search firms serviced the low-volume, high-touch end of the marketplace; and despite the low volume, search firm revenues may have equaled those of the help-wanted advertising industry for at least the latter part of the century.

In preparing to analyze the 21st century model, it perhaps make sense to try and formalize the elements of the model as a useful tool for comparison. The factors of that model can be summarized along five dimensions: geographical range, cost in dollars, time available for the process, amount of time required, and the presence of domain specific knowledge. For each of our players — job-seekers, recruitment advertising, the HR or recruiting function, hiring managers, and executive search firms, the model is expressed as follows:
Job-seekers
Geo: Limited
$ cost: Reasonable (the cost of applications, stamps, transportation to and from interviews, etc.)
Time available for process: Large
Amount of time required: Significant
Domain specific knowledge: High

Ads
Geo: Limited
$: Significant
Time avail.: Small (amount of time ads would appear)
Time required: Small (it did not take a lot of time to place an ad)
Domain knowledge:Low

HR
Geo: Limited
$: Reasonable
Time avail.: Reasonable
Time required: Significant (for the management of the recruitment process itself)
Domain knowledge: Low

Hiring managers
Geo: N/A
$: Insignificant
Time avail.: Sufficient
Time required: Small
Domain knowledge: High

Executive Search
Geo: National
$: Very high
Time avail.: Large
Time required: Large
Domain knowledge: High

As we take our journey through the History of Job Search into the 21st century, a useful exercise is to ask yourself: “How has the internet changed these dimensions for job-seekers, recruitment ads, the recruiting function, hiring managers, and executive search firms?” The answers, as we will find, are illuminating.