Tuesday, November 17, 2009

Have You Been Affected by the Holiday Effect?

Have you ever heard of the Holiday Effect in hiring? Perhaps you’ve heard that companies usually don’t hire during the holidays, from Thanksgiving until after the New Year.

When I originally heard about the Holiday Effect, I pictured that hiring managers were just too busy with holiday parties, cookie exchanges, pot luck lunches, and Secret Santas to spend their time with the more mundane tasks, like hiring staff. It was strange that I never enjoyed the nearly daily brouhaha that the Holiday Effect must bring out. I ruled out it was just accountants being anti-party, as none of my friends had these daily festivities in their offices either – not even the folks in advertising.

So where were all these people dancing on their desks?

Could it be that whole departments, even entire companies take the 6 weeks off between Thanksgiving and New Years? Of course companies couldn’t hire until after New Year’s…everyone was in Cancun or Aspen until January.

After I got involved in recruiting, I learned that the holiday effect has nothing to do with endless holiday parties or December-long vacations. In fact, it’s got nothing to do with the holidays at all, other than coincidentally being at the same time.

The Holiday Effect’s got everything to do with third quarter numbers. Most public companies finalize their third quarter numbers by 11/1 each year, and private companies a few weeks later. So what’s the big deal about third quarter numbers?

It’s not such a big deal when the company is having a good year. For example, during strong hiring years like 2005 recruiters are especially busy with work during the holidays. In good years, hiring managers often press to get all their positions filled before the end of the year, out of concern that an unfilled position may not get approved in next year’s budget. In good years, the end of the year is “use it or lose it” time.

In not so good years, like say 2009 for instance, CFO’s see bad numbers and freak. It’s their job to manage expenses to assure the company is managed profitably. When third quarter numbers are in the red, or even barely profitable, it’s time for the finance department to earn its keep.

In many companies, payroll is the largest expense, and the most controllable. In bad years, CFO’s regularly slow hiring until after the New Year, or even enact fourth quarter hiring freezes so they can keep expenses as low as possible. Managing payroll typically has a much greater impact than a paper clip recycling policy.

So what does this mean for a candidate? Often one of two things:

1) If you’re a candidate for a position with a company that’s not doing so well this year…expect hiring decisions and start dates to be pushed off until the start of next year.


2) If you’re a candidate for a position with a company that’s going gangbusters…you might not want to book that Cancun trip for December.

Realistically, this year most companies fall into category #1. Many job seekers give up their search efforts during the holidays, assuming it’s hopeless since no one’s hiring. It’s a mistake.

Companies may delay pulling the trigger during the holidays but they make decisions about who they want to hire during November and December. Even during bad years, hiring managers prepare for first quarter when finance departments start to approve headcounts again. I advise my clients to keep a high level of activity, as the work they do now builds a pipeline of opportunities for the first and second quarter of next year.

While it’s easier for candidates to think of it as the holiday effect than the 4th Quarter effect, the November and December timeframe can be a great time for candidates to concentrate on their job search. The candidates who use the holidays to work on their search, may well find themselves entering the new year with a strong pipeline of opportunities.

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1 comment:

Phil Rosenberg said...

A reader emailed me this comment...

"Please note that in many companies, the calendar and fiscal year ends do not coincide. This would mean that for those companies your explanation would not reveal the roots for that effect..."

My reply...

Good point. To keep the article on point, I decided not to go into differences between calendar and fiscal years. However, what you'll find is that companies that have a year end much past 12/31 typically don't have hiring slowdowns during the holidays, but rather 60 days before the end of their fiscal year.

I'll publish this explanation as a comment. "