Articles | January 11, 2022

Confronting Challenges Created by the Labor Shortage

Restaurants are limiting hours. Manufacturing operations are reducing shifts. Service providers are scheduling appointments out farther than ever before. With a historic 10.6 million job vacancies in the United States, the national labor shortage is challenging employers in many industries to keep their doors open and meet the demand for their products and services.

Employers have responded to the tight labor market by using a variety of creative strategies to attract new employees and keep current team members from being lured away. Common strategies include sign-on and retention bonuses, pay increases, remote work options and more time off. However, organizations have reported variable success with these strategies. Why? Because in some cases, they fail to address the real reasons employees are forgoing certain work opportunities.

 

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In addition to understanding the factors contributing to the national labor shortage, this article discusses three key questions that employers impacted by the labor shortage should answer now:

  1. What would it take to get our best employees to stay?
  2. What makes our organization appealing?
  3. Do our job requirements make sense?

Causes of the labor shortage

There are many theories about why the current U.S. labor shortage exists:

  • COVID-19-related exposure fears
  • Childcare issues
  • A post-pandemic wave of baby boomers choosing to retire
  • Millennials, who are now the largest demographic in the labor force, are at the most marketable stage in their careers (mid-level) and are highly mobile
  • Immigration restrictions
  • Temporarily generous unemployment benefits
  • Expanded remote work options that give people more opportunities to work for organizations without changing their geographic location

Another theory is that the pandemic offered people the opportunity to reflect on their financial and personal priorities and reevaluate their careers and employer expectations. For instance, employee surveys indicate that workers want to feel trusted at work and be evaluated on outcomes rather than activity. They’re interested in work that is personally meaningful and offers them career-advancement opportunities. Employees are also seeking inclusive workplaces where they have a deep sense of belonging and the opportunity to work with managers and coworkers who respect and appreciate their contributions. They prefer flexible work schedules and want to work for organizations that have positive reputations.

Given current labor market dynamics and evolving employee expectations, what should you be doing to keep the people they have and recruit great talent? Rather than acting rashly, we think you should pause and ask several questions, including the three noted below, which are especially important at this time.  

What would it take to get our best employees to stay?

When faced with a large number of vacancies, employers tend to focus on how to fill their open roles. That makes sense, but retaining your current employees is also critical. To do that, make sure that the people who have served you well in the past feel valued.

Here are some strategies to consider:

  • Pulse/Stay interviews — Meet with current staff to express appreciation for their contributions and ask what you can do to ensure they stay. Are they interested in more responsibility? Do they need a second computer monitor to do their work? Are there parts of their job they would like to change? Would an executive coach be useful? The responses you receive might surprise you.
  • Removal of barriers that cause frustration — Are certain work processes unnecessarily complicated? Does it take too long to secure approvals? Is there a manager or coworker who makes life at work miserable? Are your employees lacking the tools or resources they need to do their best work? Find out what makes your employees unhappy or frustrated, then make a plan to address the issues you uncover.
  • Retention bonuses — Long-time employees may feel resentful that new employees are receiving sign-on bonuses. Consider offering “thank-you awards” to retain your best employees.
  • More flexibility — You trust your long-service employees, so recognize them to demonstrate that. When practical, offer scheduling flexibility and work-from-home options. “I trust you and I know I can count on you” are powerful words to share when you announce these options.
  • Competitive compensation and benefits — Know how your offerings compare to what your competition in the same industry and/or geographical area can provide and think about how to address any shortcomings.
  • Clearly defined employee value proposition — Articulating the reasons why a candidate would want to join your organization as well as reminding current employees of the reasons why they should stay can also be helpful in reducing attrition. Well-crafted employee value propositions could serve as a good reminder to current employees about the value you provide as an employer along with the full range of rewards and benefits that are available to members of your team.

What makes your organization appealing?

When employees have options, as they certainly do now, they are comparing employers and employment offers. While increasing pay might seem like an essential strategy, there is plenty of evidence to suggest that employees will sacrifice pay for better working conditions and a better culture. One of the leading causes of employee resignation today is the refusal by many to work in a toxic work environment. Organizations who have been identified as employers of choice or great places to work will fare much better in the war for talent than those who are not.

What makes your organization a desirable place to work? Is your mission important? Do you have a reputation as a diverse and inclusive employer? Have bullies been allowed to remain despite their disruption to the main culture? Do you regularly seek and consider your employees’ opinions? Do you offer free snacks? Are there showers on site that make it possible for employees to exercise during their lunch hour? Do you let people leave early on Fridays or provide pet insurance?

Regardless of what you offer, have you packaged your differentiators in a way that is easy for prospective employees to understand?

Do our job requirements make sense?

When the job market was full of qualified talent, to make application reviews easier and more manageable, many employers used requirements like having a degree and certain minimum years of experience. Rigid requirements don’t work when the labor market is tight. While you shouldn’t lower your expectations for quality, be open to the possibility that traditional education and experience requirements may limit your success in finding excellent people.

When posting job announcement or screening candidates, focus more on skills, attitude and transferable qualifications and less on bringing a perfect resume to the role. Also, be sure to check yourself on the natural tendency to hire people who look and act like your other employees. Fresh perspectives can improve group thinking and make your organization stronger and more responsive to your customers.

A great start to confronting challenges created by the labor shortage

Answering these key questions will go a long way to help your organization confront today’s labor challenges — but that’s just the starting point for creating a solid strategy for how to win the intense competition for talent. To refine your strategy, there are many other questions to consider.

Wondering about the other questions you should be asking yourself to address the national labor shortage?

We would be happy to share them.

Get in Touch

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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.

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