Responding to a Talent Shortage
Executives nationwide weighed in for our Business Leaders Outlook survey, and many named a limited supply of talent and rising labor costs as two of their top challenges this year—but there are ways to navigate this changing landscape.
As the current recovery nears a decade long, it’s no longer employees who are having trouble finding work—businesses are now struggling to fill open roles with qualified employees. According to data from our 2018 Business Leaders Outlook survey, many business leaders say a limited supply of talent is one of the top challenges they face. In fact, of the nearly 1,700 executives surveyed, more than half listed staffing concerns as a top business challenge—second only to revenue and sales growth.
Although these issues have appeared on past surveys, the latest results show the talent shortage is more prevalent than in years prior. This year, 54 percent of respondents cited a limited supply of talent as a major challenge—up 10 percentage points over last year—and 50 percent cited managing the rising costs of labor, up 4 percentage points.
While certain industries and regions of the country have been hit harder than others, trends in data suggest this is a growing concern for business leaders nationwide.
What’s Causing the Talent Shortage?
In the years during and following the recession, business leaders had their pick of candidates. Today, the talent pool is shrinking—and business leaders say applicants are lacking in unique skills and work ethic. From a demographic perspective, the workforce is simply smaller than it was several years ago—as baby boomers retire, there aren’t as many new entrants to the workforce to replace them. This adds to the labor market’s imbalance. As job creation continues at a healthy pace with short-term unemployment sitting at the lowest rate ever recorded, there are fewer workers to spread across more jobs—so companies with open positions are seeing fewer applicants than in past years. For the remaining pool of available workers who are applying, many lack the skills needed to succeed in these roles; still others lack the work ethic to be productive and effective.
Competition Makes It Harder to Hire
Within an already tight labor market, there are certain segments of workers that are more difficult to place than others. Respondents to the Business Leaders Outlook survey said technical and trade workers were hardest to find, especially in the construction industry; retailers are struggling to find management team employees; wholesalers are more challenged with filling sales positions; and those in the services industry are finding it difficult to find highly educated professionals.
For other businesses—including JPMorgan Chase—the most challenging areas to fill are those related to data science and technology. Not only is there a lack of employees trained in these fields, there’s also competition between many companies to attract those qualified workers. For these roles, businesses aren’t just competing within their own industry—they’re competing with companies in every industry who need to fill a tech role, from established corporations to Silicon Valley startups. Attracting the right talent becomes a matter of preference for the applicant: Are they looking for a work-from-home opportunity or highly flexible work schedule? Are they more invested in a specific industry or eager to work on certain types of projects? These secondary drivers—outside of salary and benefits—are becoming harder for employers to quantify and compete with.
One way businesses can address challenges from competition is through investing in their external brand. By showcasing technological innovation, community involvement, philanthropic efforts or unique culture, businesses can stand out as a competitive choice for strong talent—regardless of what type of talent they need.
According to the Business Leaders Outlook survey, the most common changes businesses are making to attract a younger or more skilled workforce are providing flexible working hours, improving benefits, providing more training, offering the ability to work from home, increasing paid time off and increasing compensation.
Start With Recruiting
Too often, businesses don’t align how they’re going to measure employee success with how they find and place new talent. Especially in a tight labor market, it’s important to look at expectations for each employee from beginning to end—what constitutes success in their role? Identifying this objective provides a blueprint for hiring. Mapping a two-year goal of success to the beginning of the interview process, and arming hiring managers and interviewers with that information, will help determine which candidates have the potential to be a good fit for the organization.
Some businesses are starting to incorporate artificial intelligence and machine learning into their recruiting processes. Although this strategy could help streamline the review process and guide HR professionals to the truly promising candidates, there are also plenty of concerns—an incorrect model could unintentionally weed out strong candidates or open the door to discrimination complaints. As technology in this area continues to evolve, AI and machine learning are likely to be key to improving recruitment strategies in the future.
Rethinking the Interview Process
Another area that often has room for improvement is the interview process. Hiring managers who are skilled in their own field aren’t always adept at effective interviewing. It’s important to assemble a diverse panel of interviewers, each with a specific aspect of the job in mind—and train them on how to interview correctly.
Although it’s standard to have managers interviewing candidates for open roles on their own teams, another approach is to establish a focused interview panel of people who aren’t necessarily tied to the position that is being hired for. By training the interviewers on behavioral and technical interviewing skills, and getting them certified to that end, businesses can streamline the way they identify and hire talent.
Retaining Talent When You Have It
Of course, the simplest way to avoid hiring setbacks is for organizations to retain talent they already have. Not only does maintaining good employees cut down on logistical and hiring headaches, the cost of replacing a worker can be as much as 60 percent of an employee’s annual salary.
Keeping key players around starts as early as the onboarding process and into the first 90 days on the job. New employees have just made a major life decision and want to feel empowered and productive right off the bat; this isn’t possible when there are roadblocks like faulty technology or nonoperational systems.
It’s also important to keep employees engaged through regular review processes. Performance management should be tied to key events or projects rather than relying on a formal annual or biannual review. The goal should be to eliminate surprises when it comes time for the big reviews, because there’s a constant flow of communication and feedback throughout the year.
But employee engagement goes deeper than performance reviews. With younger workers especially, it’s critical to make them feel empowered in their role, connected to the larger strategy and invested in the company’s growth story. Asking for opinions and taking their perspectives into account will help engage younger workers and potentially retain them.
Taking Advantage of the Time You Have
It’s no secret that today’s employees don’t always stick around for decades—many only stay at a job for two or three years.
Viewing new hires as a shorter-term contract can help businesses hit the ground running during the onboarding process. If employees stay with the company because they felt engaged during their tenure, this can be considered a bonus. But if they eventually move on, it’s important that both parties get something out of their time together. Understanding that a hire may be short-term should help businesses start moving quicker and engaging employees faster.
The talent shortage poses problems for organizations across the country, but businesses can make proactive changes to their recruiting, hiring, onboarding and training processes to help navigate these evolving challenges.