Not Enough Workers: Rethink Recruiting In The New Economy
The global recovery from the Pandemic is creating some pretty big changes: people working remotely, new safety and wellbeing programs, and more digital tools than ever. But the biggest of all is now clear: we’re not going to have enough workers to go around.
I discussed this in an article last month, and this month Emsi, a renowned labor market analytics company, published more data to consider. The “Sansdemic,” as they describe, is going to be a long-range “demographic drought” and it is getting worse.
The problem is not that we don’t have enough jobs, it’s that we don’t have enough people.
Before I dive into the topic, let me give you a few examples.
Ashley Furniture Industries, a $7 billion fast-growing manufacturer, told me last week that they simply cannot find enough people to staff their automated manufacturing plants. So they’ve built their own Advanced Manufacturing Institute so they can train people out of high school to join.
Pilot Flying J, a well-respected retailer, energy, and chain of service stations, told me they have jobs open for truck drivers that stay open for months. They, too, are starting to create a school to fill the demand.
A fast-growing software company told me they have jobs open for salespeople and “nobody has applied.” As Rob Sentz from Emsi puts it, “the luxury of posting jobs and seeing people apply might just go away.”
And it’s likely to even get worse. Consider some very simple numbers. The US GDP is around $21 Trillion and we have about 151 million people working. This translates to around $139,000 of economic activity per worker. If the American Jobs Act adds $3 Trillion to the economy, this translates to about 21 million new jobs created. That’s a 14% increase from where we are today. Where are those people going to come from?
We’re already seeing evidence of this issue. Just last week I talked with the CHRO of a German telco and she asked me why their employees in Romania keep asking for higher wages. The answer, I believe, is that the total cost of labor is going up. And whether you think this is good or bad, it’s a big challenge for employers.
Why Labor Shortages? The Workforce Is Not Growing.
If you read the Emsi paper and other articles now published (there are many stories on this topic, even though Conference Board warned of this in 2019), you clearly see the issue. The fertility rate has dropped, baby boomers are retiring at record rates, and the labor participation rate remains about 61%. These are difficult numbers to change, so in a sense GDP growth (and your company’s growth) may be limited by the supply of labor.
We’ve seen this before. In the US, UK, Germany, Japan, and most other developed economies, this has been going on for years (the fertility rate in Germany is 1.6, the UK is 1.6, Japan is 1.4, the US is 1.7). And new US Census data shows the slowest growth since the 1930s. (China just reported its first-ever population decline in 40 years.)
The new growth economies? Most likely Africa, India, and other underdeveloped countries. South Africa has a fertility rate of 2.4, Keyna’s is 3.4, and India’s is 2.2.
So what are employers going to do?
What Are Companies Going To Do?
As I talked about this week’s podcast, it’s time to radically rethink recruiting. You won’t be able to “hire your way to growth” as you have in the past, and this leads to some important new business innovations.
First, companies must diversify recruitment efforts and go beyond the “straight-A college grad” hire.
For decades we’ve known that pedigree is not the secret of success. Companies are now hiring people regardless of degree and investing money in development to bring them along. Bank of America, a company I greatly admire, has grown its consumer banking business by reducing turnover and rethinking its entire process of development. (I’ll be publishing a big case study soon.) They recruit at local community colleges, focus on a strong and enduring brand, and take great care of new hires. They’re growing just fine.
Second, companies must get very serious about internal mobility.
Much of the top talent you need might already be in your company. But where are they and how do you transition them to a new role?
We’re doing research on what we call “Career Pathways” and this opportunity is massive. Marketing people can move into sales; finance people can move into IT; HR people can move into operations. These Career Pathways are essential to company growth, and tools like the internal Talent Marketplace will become common.
A leading Pharma company told me their recruitment team is now filled with internal headhunters, getting to know people all over the company they can recruit to new positions. New research by Eighfold found that 60% of all hires are now coming from internal candidates or people who previously applied.
Third, we’ve developed a massive focus on retention, employee experience, and employee engagement.
These three topics have merged into one, and it’s usually called Employee Experience. Most companies now have an Employee Experience team and they’re looking at everything employees need. I see this as a huge corporate trend, and it brings together HR, IT, Facilities, and even Legal.
Companies are becoming “design centers” for employee experience, making offices more fun and flexible, improving benefits, and creating employee voice programs so we know what employees need. (Watch for our new course Employee Engagement Workshop coming in a few weeks.)
Fourth, companies are tapping into new sources of talent and “creating candidates” through development.
Programs like Ashley Furniture’s advanced manufacturing program will be common. Kaiser Permanente has its own Nursing Academy and now runs a Medical School. Companies like Verizon and Chipotle train people to work in retail and customer service. We can no longer just “find candidates” we have to “create candidates” – and vendors like Guild Education are already here to help.
Fifth, it’s time to create a portfolio model for talent.
As I describe in the podcast, companies should think about their labor pool as a “diversified portfolio.” It’s time to strategically select part-time, gig work, contract, and outsourced workers depending on need. More than 60% of Millennials already have side-hustles, so there are lots of great people out there who may want to work part-time.
Sixth, you’ll have to embrace automation and redesign how your company operates.
When workers are plentiful, employers can get lazy and just “hire more people” to grow. Now, as the labor market gets competitive and wages go up, you have to rethink how things operate and apply technology wherever you can. We’re studying organization design right now, and we’re finding that agile work practices and new operating models are everywhere. Don’t just let managers “hire more people” but help them rethink how their teams operate.
Workers Will Negotiate
Workers will negotiate, so prepare for a change.
I remember in the year 2000 (very similar situation to now), I worked for a fast-growing e-learning company and we had to pay almost $300K per year to hire a Java engineer. Not only did we think seriously about whether or not to hire them (they typically only stayed a few months the job market was so hot), we eventually decided to outsource the work.
This kind of job market forces companies to rethink their talent model, and that means understanding that people are an appreciating asset. If you invest in them over time, the return gets higher every year. Just hiring and churning through people doesn’t work right now.
Bottom Line: Think “Creating Talent” not just “Acquiring Talent”
The bottom line for employers is this: don’t think about hiring as the only way to grow. Yes, it’s still vitally important, but growth will come from upskilling and redeploying people, redesigning the company for automation and scale, and investing in programs that improve productivity, wellbeing, and culture.
In a world where people are more valuable than ever, we can focus our efforts on quality, not quantity. And that’s what leadership has always been about.
Resources On This Topic
A World Without Workers: An in-depth podcast on the topic.
Employee Experience: it’s more complex and important than you think.
Human-Centered Leadership: the new key to growth and productivity.
Excellence in Talent Acquisition Study: This survey will result in a global benchmarking report and an analysis of the results, available to survey participants this fall.