The hottest issue in HR is overcoming the current labor shortage, which exists despite the last month’s hiring boom, and presents troublesome issues for CEOs and CHRO leaders.
Last week’s US Department of Labor (DOL) job report showed a shocking 303,000 hires, unemployment falling slightly to 3.8 percent, and the average hourly earnings rising 4.1 percent over the past 12 months.
The US economy continues to suffer a labor shortage. There are an estimated 10 million job openings in the United States and only about six million unemployed. According to some economists, high immigration is making up the difference in available unskilled labor.
These numbers continue to highlight the importance of recruiting and retention to win the war for talent. The companies that will win this war will be the ones that focus on comprehensive HR strategies, such as employer brand, compensation, employee and career development, hybrid work, and collaborative organizational culture.
Employer brand
An employer brand articulates an employee value proposition that goes beyond the pay for the job. What is your organization’s purpose of improving humanity? The cool work your employees do? If a job candidate joins the firm, how will they benefit in the long term? Is it your health care benefits? Wellness incentives? 401(k) match? Does your organization invest in skill upgrades and developing employee careers? Are you committed to innovation with a transparent, collaborative, and performance-based (meaning not overly political, hierarchical, and stayed) culture?
Compensation: pay compression and transparency
While the 4.1 percent earnings increase is good news for those worried about inflation (the increase in earnings slowed), it keeps the pressure on employers who are dealing with compensation issues to attract workers. Additionally employers need to focus on pay compression for current employees, and the problem of pay transparency.
Many employers are waking up to a vexing pay issue: pay compression, made more troublesome by pay transparency laws. Pay compression occurs when companies give higher-than-normal wages and salaries to new hires, often during times of labor shortage, but do not pass on similar pay increases to their current employees. This sometimes leads to higher pay for new workers than for tenured workers.
Tenured workers can become disgruntled when they learn about equal or higher pay for newcomers, causing the more senior people to consider leaving the organization for higher pay elsewhere. This can lead to a disastrous and costly turnover spiral for companies. It is always the best workers who leave first.
Pay compression is more complex today than a decade ago because we live in an era of more prevalent pay transparency laws, which, at a minimum, require employers to include salary ranges when posting jobs. Ten states have implemented such laws, though degrees of pay transparency vary by state.
Learn more here.
Employee learning and career development
According to Pew Research, only 44 percent of workers are satisfied with the training and development they are offered by their employers for new jobs. When conducting employee surveys, I found that training was a top priority for employees. They want to learn new skills to stay abreast of the demands within new technologies.
Also, the constant change and introduction of new digital technologies further underscores the need for more training.
A good place to start is with the new-hire orientation. Studies have long found that onboarding that includes cultural adaptation skills and job training greatly improves the productivity of new hires and reduces turnover. Employers need to offer coaches to teach the ropes and provide excellent training on unique job skills and using the enterprise system. New-hire orientation that provides such training and coaching allows new employees to reach job mastery much faster.
Employees also want to develop their careers at their companies, much like a decade ago. In a Pew Research survey, 63% of respondents who left jobs in 2021 cited a lack of advancement opportunities as a reason. And a 2022 McKinsey study noted that a lack of career development and advancement was the most common reason given for quitting a job. Too often, executives ask employees to chart their career paths under the guise of empowerment, but this often only leaves the employees aimless without a place to start.
An article in the MIT Sloan Management Review suggests that employees make opportunities and pathways visible for employees. HR should provide alternative career paths and the skills and experiences employees need to develop their chosen careers. Team assignments and formal job rotations can be beneficial, along with thorough coaching and feedback.
Training and career development also provide an excellent return on investment.
Hybrid work
Sadly, hybrid work has become enmeshed in the US’s political divisions. The return-to-work movement has stalled. The New York Times reported on October 16, 2023, that occupancy rates now were 50 percent of the February 2020 levels, and the levels are nearly the same in East and West Coast areas and North and South areas. After a spike at the beginning of the pandemic, Americans still spend about a third of their workdays at home.
Hybrid working is so popular among employees that, according to the NYT, employees equate a mix of working in the office and working from home to an eight percent pay raise. Employees who work some or all their time at home don’t have to deal with the daily hassle —and costs — of a commute. In fact, the process of getting to work is more despised by employees than the need to work.
Research has long shown that employees are 20 percent or more productive at home and when offices are redesigned for meeting places, customer interactions, and training, the cost savings to companies soar. The smart executives are taking the savings from discarding unneeded office space to invest in marketing, R&D or other worthy business investments.
Still hybrid work is not right for every office job. Learn more here:
Collaborative organizational culture
Too much of last year has seen executive versus employee conflict over Quiet Quitting, Quiet Firing, and Returning to the Office. Rather than focus on issues that divide managers from employees, executives should focus on a strategic issue that unites management and employees: a culture that enables employees to align with the organization’s mission to serve customers and achieve a higher good for humanity.
Research on the positive effects of developing culture is overwhelming. Longstanding empirical research demonstrates how agile corporate culture improves organizational innovation, productivity, and profit. Evidence is emerging that healthy organizational cultures are also the best way to beat the Great Resignation. This includes research from Harvard’s John Kotter, James Heskett, and C. Brooke Dobni Ph.D. of InnovationOne. (Full disclosure: I am a Managing Partner of InnovationOne, LLC.).
Earlier this year, MIT researchers discovered that a toxic organizational culture drives employee turnover 10 times more than pay. This is startling news during the Great Resignation when employers have significantly improved pay and benefits to reduce employee turnover.
We know from empirical evidence that in organizations with agile cultures (transparency, collaboration, and trust), not toxic cultures (yelling bosses and destructive competition among employees), workers are more productive and happier.
Research shows that building thriving cultures is a sure way to reduce turnover, subdue quiet quitting, and improve productivity and innovation.
The resilient US economy requires employers to keep their focus on recruiting and retention issues that require a broad-base approach involving employer brand, compensation, employee and career development, hybrid work and collaborative organization cultures.
About Victor
Victor Assad is the CEO of Victor Assad Strategic Human Resources Consulting and Managing Partner of InnovationOne, LLC. He works with organizations to transform HR and recruiting, implement remote work, and develop extraordinary leaders, teams, and innovation cultures. He is the author of the highly acclaimed book, Hack Recruiting: The Best of Empirical Research, Method and Process, and Digitization. He is quoted in business journals such as The Wall Street Journal, Workforce Management, and CEO Magazine. Victor has partnered with The Conference Board and the US Department of Energy on innovation research. Subscribe to his weekly blogs at http://www.VictorHRConsultant.com