As we approach the labor market in Q2 2023 we are in uncharted waters regarding unemployment, workforce participation and inflation – creating a talent tsunami. In most of urban America and Canada the most visible impact of this is in the service sector where restaurants and smaller business are curtailing hours or even days open given lack of available staffing.
So let’s look at the numbers: In the US ending Q4 2022 we continued to sustain job openings in excess of 10 million and a minor shrink in imbalance that at current rates would take more than 5 years to “work off” reach equilibrium. The work force participation rate remains below 63% and unemployment less than 4% (Source: US Bureau of Labor Statistics).
Given this you have got to change your mind-set about attracting talent from “Selecting” to “Selling”. What is it you offer the prospective employee that is unique, valuable, or differential? Why would they want to work for you. Let’s break down this down into economic and non- economic components and start with the non-economic factors first.
Not every company has a compelling mission or product that leaps off the page at potential employees. That said, marketing your company’s “employer brand” is critical in today’s economy. A great example of this is Subaru. Subaru makes and sells cars just like a dozen other global automotive manufacturers. Their vehicles are safe, well positioned in the lower to middle end of the automotive price range, and they have a great vehicle service program and network. I share this only to set the stage that the product and service they provide being of high quality and well received by the customer is integral to their business BUT not their differentiator. If you watch their social media platforms, their print and television ad campaigns, and local market media what you will see is a company that is differentiated itself by how it gives back to the community, and this attracts employees and customers. Internal satisfaction scores and retention are amongst the highest in the industry as Subaru not only invests locally in charities but also hold workday events and campaigns with team members and customers focused on charities that the local customer and employee team support. Its ingrained in their culture and their business and the economics are not the driver – it’s the time and focus.
This is one benchmark idea when you recruit – explain not only the company, and what it does, but also where you give back and why – it may resonate far more than you realize. It has to be authentic and if it is, it can really help shape your future culture as well.
Going back to basics make sure you outline to candidates the company brand, the product or service “showcase” and how they will contribute to this, and importantly what really differentiates your business. Branded company apparel, and merchandise that you can provide the candidate you are considering for offer can be an inexpensive talent acquisition tool and get your brand out locally as well.
A couple of other non-economic factors include a clear articulation of work schedules and flexibility, employee training and onboarding programs, and assigning a peer coach or mentor to onboard the new team member who is involved in the initial interview process. Knowing that they have someone by their side on day one has a huge impact on perceived switching cost or risk of moving to a new job which is the number one concern for candidates in today’s market, even more than change in compensation.
With inflation, and low availability of new talent wage pressure is extraordinary in today’s market. You can either recognize that and develop a plan around it or get left further behind in in market competition for talent.
So how do you and your talent acquisition deal with this without breaking the budget? It may take a radical transformation in your compensation systems or some practical and tactical tweaks depending on where you are in your journey. Let’s start with some practical tips or ideas:
- A tiered retention bonus system for the first 2-3 years of employment. Once you get beyond 24 months on board the churn level drops by more than 50% in newer hires. The common refrain I here from senior executives is that the” same 20%” of the workforce churns 100% of the time, or more clearly the employees that stay more than 2-3 years tend to stay on board for several years. So think about recruitment and replacement cost vs some tiered retention programs – not transformative pay but interesting pay – it might be a $400 bonus at the end of six months for a full time operating employee at $20 an hour (equivalent to ½ day pay); or $800 at the end of year one (one week pay) and do the same at 18 and 24 months. That’s equivalent to roughly 4.5% of their base cash comp over the two-year period and you can also consider timing it on employee birthdays or big holidays closest to those milestones.
- Skill qualifier bonuses at hire paid after 90 days, six months, and one year. Think about this as a one-time investment to acquire critical skills – clear demonstration of capabilities such as welding, or electrical trade craft, to critical nursing skills in a specific care discipline such as cardiac care, to CDL truck drivers.
- Referral network “buddy bonus”: the referring employee and the new employee share in a recruitment bonus at the anniversary date of the 1st year of employment, or on “DRIP” a smaller amount each month growing progressively across the 1st year; $25 at end of 1st month, $50 at the end of the 2nd month, etc. for more instant gratification.
For more transformative compensations systems issues I just want to point you to some areas to consider:
- Implementing or retooling a profit-sharing incentive scheme or bonus program: It only pays when the company “is in the money”. Establish a hard target % for distribution and an equitable distribution system, or you could do more harm than good.
- Creating or improving a tiered service and skills-based pay system: This is a journey that requires significant strategic and practical thought. Get a team involved with expertise across the spectrum to work on this and make sure you have the right executive and HR sponsorship and oversight.
- Benefits cost sharing schemes and total rewards review: The market-place changes almost daily. Keep your finger on the pulse and look for innovations and offers in the market on everything from educational reimbursement and support to employee wellness and fitness program subsidies.
This is a lot to take in and I encourage you to explore updating your talent attraction and recruitment efforts in depth across the business. It’s a war for talent and there will be clear winners and losers, with the losers likely to cease operation as we move deeper into the 21st century.
About the Author:
Jay Millen is the managing partner of Caldwell’s CEO & Board Practice and leads our Charleston office team. Working with publicly-traded and privately-held companies, Jay assists clients in senior-level recruitment and in the development of board and CEO succession plans as well as industry specific leaders at all levels in the natural resources and manufacturing sectors. www.caldwell.com
The post The Winners and Losers in Retaining Talent appeared first on Industry Today.