While there are many open jobs, organizations are struggling to fill them. Long-term unemployment continues with employers adding a modest 266k jobs in April, not the million or so predicted by forecasters. The unemployment rate actually rose from 6.0% to 6.1%. But, the jobs are there. Turnover is high. And employers are facing an unprecedented challenge to fill, replace, and retain their talent.
We talked with Dave Hilborn, a managing director in our human capital management practice who has three decades of experience helping organizations respond to changes in the talent market. He helps shed light on what’s going on.
Hilborn: In some industries, for example retail and service sectors, companies are struggling to hire people back because they are receiving unemployment compensation that is equal to or better than pay rates employers normally offer. This is causing some companies to consider significant increases to wages to attract people. We expect this situation to resolve itself over time, but for now it’s a real challenge for employers with hourly workforces.
Hilborn: Yes, the labor market is heating up and this started mid-first quarter of 2021. While unemployment is still above pre-pandemic levels, it’s improving overall as COVID-19 restrictions are lifting and vaccination rates improve. While talent cycles typically produce higher levels of attrition in Q1, with workers paid out bonuses or becoming “vested” in certain benefits, the attrition rates are continuing into Q2 this year. Why? There is a lot of pent-up consumer demand that is now fueling a general return to growth—everyone is ramping up their hiring to meet this demand. With this, job openings and postings are increasing as is turnover. Companies are rehiring and adding net new hires to power their growth plans and people now feel more confident in their ability to make job changes as we emerge from the pandemic. It’s becoming a buyer’s market for job hunters.
We are seeing this at our clients’ organizations as they come to us for help on a variety of things, from talent strategy to change management to technology implementations. And our Q2 poll of C-suite executives showed their biggest business threat in Q2 was employee productivity and retention (tied with further pandemic-imposed lockdowns). We also can’t forget the pandemic has created a real sense of burnout—we see people seeking any kind of change in their life, and even if they like their job they change employers because they need to change something.
Hilborn: It is partly related to the debate over return-to-office. But we think it’s part of a broader realignment trend in the talent market where we see workers seeking out employers who share their new preferences for work and everyday life. That includes onsite vs. remote work but also culture and value systems, especially with the increased focus on ESG. People’s priorities have shifted and are choosing to make career moves and employer changes as a result—for instance, someone moved their family to a different state during the pandemic. In fact, one of our clients told us that during their return-to-office discussions, they found out that one-third of their employees in a key business unit just picked up and moved locations. In other instances, a worker might see a company making public statements they agree with, become inspired, and want to work there.
Hilborn: The employer side is experiencing a realignment too. Many businesses have re-evaluated everything during the pandemic from workplace policies to geographic locations to operating models, and now their talent strategies have shifted as a result. The type of talent they need to execute their new organizational strategy may not be the talent they currently have. So, they’re looking for new talent that fits their strategy and parting with those who no longer fit.
Hilborn: The majority our clients are introducing mixed designs where different segments of the workforce may work in-office (e.g., 100%), partially remote (e.g., up 50%), hybrid (e.g., 50%-80%), or fully remote (e.g., 100%). The decision on who works in what model is driven by a range of factors including the customer needs, unique nature of the work performed, employee preferences and constraints such as geography, work process, and technology. Ultimately, the best hybrid models are designed to drive the behavior the company needs to execute on their business strategy and business practices must be aligned to drive the right behaviors in the new hybrid models.
Execs have told us that maintaining culture is their No. 1 challenge when it comes to hybrid model design. But it is possible for employers—and incumbent upon them—to develop a workplace model that drives retention and attraction by reinforcing, sustaining, and building new cultural connections. This all works hand in hand.
Hilborn: Flexibility is key. Companies are introducing more flexibility into their workplace models to retain their current talent who may be looking elsewhere for new opportunities. Research shows that the overwhelming majority of people who have been working remotely want to continue to permanently work remotely or in some hybrid fashion as they highly value the flexibility. This sentiment is also supported by our Q2 executive poll, which showed nearly 3 in 4 executives were handling permanent remote working requests from their employees. Remote and hybrid work models are the new norm as they offer employees more of what they want, enabling retention, while simultaneously opening new sources for remote talent by tapping new markets for talent and skills.
Hilborn: In the simplest sense, you show employees that you’re listening to them by getting their feedback, reflecting that feedback transparently with the data, and then describing what changes you are and aren’t willing to make as an organization in line with it. And then of course, you follow through with actions and results. Nothing screams ‘we’re not listening’ like not following through on promises you’re willing to make. But in day-to-day practice, leaders need to be more proactive and intentional around their listening and communications strategies. There are fewer “natural” interactions in a remote or hybrid setting, so you need to have more one-on-one coaching sessions to create the trust that is needed between managers and employees, especially those who have predominately remote relationships.
Make no mistake, this is not an easy situation. Even companies that are famous for having strong cultures are having to redefine their employee experiences.