Adjusting Strategies for Today’s Labor Market

Here’s a true story shared by a member of the Blue Rock team. A couple – I will call them Lori and Doug – both are in their mid-50’s and working in IT. Lori is a project manager. Doug is a coder and tech geek. They live in a sprawling suburban home in a snowbelt state. Over the course of both of their 20-plus year careers, they have been both corporate employees and contractors. As corporate employees, they have been downsized and laid off more than once times. In the contract world, they have been strung along with promises of full-time employment and benefits often enough to make both of them cynical about management promises.

 

In 2020, both Lori and Doug lost their jobs – again. Both signed up for unemployment. For several months, Doug suffered from depression, a classic burn-out case, and wanted to retire. Lori found the situation discouraging too, but she gritted her teeth and reached out to her contacts. One was Kate, a former boss, who now worked for a global company.

 

Kate needed a project manager, and hired Lori as a contractor. She knew Lori was capable, and promised she would push for a permanent position as soon as the pandemic subsided and life returned to normal.

 

Lori started working from home, managing a largescale project and directing a team in multiple countries and time zones. The job was stressful, but the work was challenging and Kate was appreciative. All in all, Lori was happy. She knew Kate was also the type of manager who did not string along employees with empty promises, so she was hopeful a full-time position would eventually materialize.

 

2020 ended and 2021 began. Since being laid off, Doug had cashed his government checks and made no attempt to look for a job. He was no longer depressed, but neither was he motivated to look for a job.

 

The economy improved, Kate made good on her promises, and Lori was hired full-time. All during 2020, Kate had struggled with work-life issues, created by a family member’s major health crisis. She told Lori she was going to retire, and would recommend Lori be promoted to fill her position.

 

In late spring, Kate retired. Management decided to cut costs, eliminate Kate’s job, and split up her team. Lori was assigned to Frank’s team. Frank said he didn’t need Lori, and let her go.

 

There were no women on Frank’s team before Lori, and none after Frank let her go. He did keep the two male programmers who had been working for Lori when Kate was in the picture. Both programmers called Lori after Frank’s move and said, “We love working with you. When you land someplace, call us if you need someone.”

 

Lori was frustrated. “What I really want is stability,” she said, “and to work for a company that doesn’t just pay lip-service to values like diversity and caring about people.” Once more, she reached out to people. In 2020, she had conversations, but few offers. In 2021, offers were abundant, and salaries were 25 to 50 percent higher. Many still required regular appearances in an office. Lori decided to hold out for a virtual position that would allow her to continue to work from home – which she felt saved time and made her more productive.

 

Lori also had a heart-to-heart with Doug. They have a daughter in college and had not reached their retirement saving goals. After the talk, Doug agreed to hunt for a new job.

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When we heard this story, it resonated with everyone at Blue Rock Search because it truly is a tale for our times, illustrating three critical issues that companies are struggling with:

  • Retention issues
  • Labor shortages
  • Labor costs

To avoid stumbles on the road to growth, all leaders must take a hard look at the “what if” factors, because as Ben Franklin said, “Failure to plan is planning to fail.”

 

Retention – A Strategic Business Issue

In January, Blue Rock Search released our crystal ball predictions for 2021. One predicted that large numbers of people were watching for the silver lining in the economic clouds created by the Pandemic – and as soon as they spotted a sparkle of improvement, they were going to look to switch jobs.

 

As predicted, this has happened. Bloomberg interviewed Anthony Klotz, a professor at Texas A&M, in May. Klotz has studied why people decide to quit. He said, “The great resignation is coming. When there’s uncertainty, people tend to stay put, so there are pent-up resignations that didn’t happen over the past year.”

 

Dr. Klotz believes the numbers of resignations will multiply due to a number of pandemic-related epiphanies—about family time, remote work, commuting, passion projects, and even life and death itself.

 

Blue Rock continually engages in passive search activities to find candidates. Often people take our calls because they are not ready to change jobs now, but they are beginning to wonder if they should be thinking about it.

 

According to the Pew Research Center, the number of Baby Boomers retiring accelerated in 2020. By the third quarter of the year, the number was up to a whopping 28.6 million people, which was 3.2 million more people than retired in all of 2019. Another point of interest is that a significantly larger number of retirements occurred among Boomers residing in the snowy Northeast.

 

When people retired or quit in 2020, many companies did not fill the open positions. Uncertainty combined with lower profits prompted business leaders to say, “Let’s just split up the work among the rest of the team for now,” leaving a significant number of positions open. This strategy preserved profits, but also increased the number of burn-out cases.

 

Now the economy is revving up. Focusing on retention is critical – otherwise you will be playing a whack-a-mole game, trying to fill more positions than anticipated.

 

Take ten minutes and ask these questions.

  • Do I sense any of my top leaders are thinking about jumping ship?
  • Are we at parity with the market when it comes to benefits and pay scales?
  • Is there a formal strategy in place for employee retention?
  • Based on the retention data, do we appear to be doing better or worse than our competitors?

 

Labor Shortage – Fact or Fiction

Peter Cappelli is a professor of management at The Warton School of the University of Pennsylvania, and a fellow of the National Academy of Human Resources. He is a well-respected researcher with a long list of achievements and credentials, so when he writes a column for Human Resources Executive titled, “No, HR, we don’t have a ‘labor shortage’ crisis,” we read it.

 

Dr. Cappelli makes these points:

 

While there is plenty of complaining about people (like Doug) who are sitting back and waiting until their benefits run out to look for work, Dr. Cappelli does not believe this is the case for the majority. A new report by Yale economists also found no evidence that enhanced jobless benefits authorized by Congress have reduced job-hunting efforts.

 

Research conducted by Yale economists also found no evidence that the enhanced jobless benefits reduced employment. 

 

Of course, academic thinking does not bring comfort to HR leaders or managers who are struggling to fill positions.

 

At Blue Rock, our team has daily conversations about hiring across multiple industries, and sees hiring challenges at three levels – top positions, middle management, and getting enough “boots on the ground” to deliver products and services.

 

In 2011, the Harvard Business Review published, “Adaptability: The New Competitive Advantage.” Though this article was written a decade ago, its wisdom is timeless. It points out that adaptive companies have the ability to read and act on signals.

 

“In order to adapt, a company must have its antennae tuned to signals of change from the external environment, decode them, and quickly act to refine or reinvent its business model and even reshape the information landscape of its industry.”

 

2020 changed many things – the way people work, the way companies hire, and the attitudes of people at all levels. As Charles Darwin wrote in The Origin of Species: It is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is able to adapt to and to adjust best to the changing environment in which it finds itself.

 

Get Ready for Talent Cost Sticker Shock

A client called me recently, needing to replace an employee they had hired two years earlier. When I told him to be prepared to pay a salary that was 15 to 20% higher for the same position, he said, “I thought we were recovering from last year’s recession!”

 

The best talent has always commanded a premium in the HR Executive Search world. But today, I cannot help but think about a quote from Thomas Friedman, author of The World is Flat: A Brief History of the Twenty-First Century. He wrote, “In a flat world there is no such thing as an American job. There is just a job, and in more cases than ever before it will go to the best, smartest, most productive, or cheapest worker—wherever he or she resides.”

 

In the work-anywhere world, competition for world-class talent intensifies, pushing salaries up and expanding choices for candidates. And possibly, the pressure for higher wages could be an economic adjustment that has come to a boil after simmering for years. According to an article from CNBC, the ratio of total employee compensation to corporate profit peaked in the early 1980s. Since then, it has fallen, indicating there is room for salary growth at many organizations.   

 

So what should organizations be doing? Consider:

 

Last Thoughts

Staying on top of the latest trends in the labor market is key to attracting and retaining top talent. We are currently in the midst of one of the biggest shake-ups we’ve seen in a very long time. Be flexible, prioritize what makes your company stand out, and be willing to think outside the box – you’ll see the rewards.

 

By Ruben Moreno

 

About the Author

After a 25-year career in Corporate Human Resources and HR Executive Search, Ruben Moreno and his two partners co-founded Blue Rock Search based on a simple but ambitious vision of creating a firm that would “Change Lives and Organizations One Relationship at a Time.”  Ruben leads the Blue Rock HR Executive Search practice specializing in the identification, assessment, recruitment, and onboarding of Chief HR Officers and Chief Diversity Officers and their respective teams — inclusive of leaders in Talent Acquisition, Total Rewards, HRBP’s, Learning & OD, HR Technology, HR Operations, and HR Analytics. Ruben has helped place hundreds of HR Executives and built deep relationships within the CHRO community across multiple industry verticals. His clients consider him a trusted partner who takes the time to understand their business and add value beyond executive search.

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