Employer Due Diligence, Part 4—Tracking Employment Trends

This element of employer due diligence will result in a combination of information that is easy to identify with data that is more difficult to uncover. It requires asking both “macro” and “micro” questions:

Are the number of employees increasing or decreasing?

You need to ask this question of the industry in which your prospective employing organization is a part as well as the specific employer in which you are interested.

Getting the answers to the broader industry question is easy. There is a host of such information available from multiple sources, e.g., the Bureau of Labor Statistics, trade and professional associations and private survey groups.

If you want to determine whether a specific practice area is growing, static or declining, looking at the recent growth trends of its practitioner membership organizations is telling. Groups whose member rolls are growing impressively, such as the National Employment Lawyers Association or the American Immigration Lawyers Association provide strong indicators that these are practice areas that are on the upswing. That should give you some comfort in casting your future with an employer for whom you would be doing such work.

In examining the macro part of the picture, however, you need to be careful not to make unwarranted assumptions based on broad tendencies. For example, if the Bureau of Labor Statistics says that attorney employment is growing nationally, that information is likely meaningless for your research into specific employers.

Similarly, if you find that a practice area growth curve is trending upward, that does not mean that every organization with that practice area is doing swimmingly. For example, the hospitality and recreation sector is performing very well right now. However, one company that has a number of both such property types is not doing well: the Trump Organization (with the exception of the Trump International Hotel a few blocks from the White House). This is an example of how you need to delve further into specifics even if broad industry data favors a type of employment.

When you drill down to the micro questions, i.e., those about employment trends vis-à-vis a specific employer, the data is not so readily obtainable. You can look at online commercial and trade publication data about specific firms, but that information generally does not get down to specific practice area levels. Just because a law firm, for example, might have suffered a 10 percent decrease in its attorney population does not mean that your practice group at the firm is also in decline. The answer may be quite the contrary.

There may also be other reasons for a staff decline. Technology substituting for human workers. The “snaking away” of practitioners in your practice group by a rival organization.

Remember, all the information you glean is, absent careful analysis, just raw data.

Is the organization hiring steadily…and if yes, then why (go back at least 18 months)?

Organizations usually hire additional staff because they are growing. There may, however, be other reasons why they are on a hiring binge that are unrelated to long-term growth. During financial crises such as the Savings and Loan collapse of the 1990s and the Great Recession that began in 2008, for example, law and consulting firms actually saw net hiring increases to secure contracts to advise and assist the government’s takeover of failed thrift institutions (S&L collapse) and to help with the massive bailouts resulting from the Great Recession. This was, however, a short-term bonanza that, once “victory” was declared, went away. When that happened, only a short time after the hiring binge, law firm hiring went into net negative territory.

Has the organization laid off employees in the last two years? If so, why? And what are the implications of the layoff?

-Again, you need context in order to accurately interpret the raw data you uncover. It sounds counter-intuitive, but employers that have steadily laid off staff in recent years may actually be more stable and secure than comparable employers that did not. Say, for example, that Big Box Retailer, Inc. cut its employment rolls by 10 percent last year, while Bigger Box Retailer, Inc. kept its staff at the same level or even grew some in the past year. Without a proper analysis of the reasons why Big Box cut staff and what it means both currently and in the near term, you cannot arrive at a conclusion about taking or rejecting a position with the company. Perhaps because Big Box cut staff a year ago, it is now in better shape financially and in a better position to compete in a tough retail economy than its competitors.

In contrast, Bigger Box, although on the surface appearing to be in better shape because it did not downsize, may be in a weaker position by virtue of being overstaffed. Context here could make a huge difference in your employer assessment.

Moreover, the 2000s have been an era of great instability across virtually all industries and professions. It has seen a substantial increase in merger and acquisition activity, in many cases where the takeover target has been a huge company formerly impervious to such phenomena. That means that potential M&A has to be considered in any employer due diligence effort. The reason being that when a target company, law firm or even nonprofit corporation is absorbed, the employment retention consequences for its employees are often adverse.

Next: Employer Due Diligence, Part 5—Treatment of Employees