CEOs' top concerns

As expected, economic concerns, especially rising inflation and the potential for a recession, received a high number of responses in both the choice selections and free-form responses. Economic and supply chain issues are creating challenges and opportunities to solve the labor and skills shortage puzzle.

What concerns you the most at this time as a business leader? (Select only your top 2 concerns.)

Source: Chief Executive, Confidence and Workforce survey, 2022.

As we look for ways to solve this puzzle, we should remind ourselves that some of the rules are changing (e.g., employee expectations are shifting) and the number of limitations (e.g., labor force participation is low, especially among women: 58.3 percent compared to 62.1 percent overall in July 2022, according to the U.S. Bureau of Labor Statistics) have increased over the past several years.

A closer focus on the workforce

The many challenges we have experienced the past few years have prompted organizations to focus more closely on the needs of their workforce, while leading with empathy, transparency and a deeper appreciation for core values, beliefs and behaviors. The initial survivor mentality is now shifting to how the lessons learned can be used to enhance an organization’s resiliency and agility.

Many are developing more advanced planning, forecasting and scenario-analysis tools for supply, demand, financial and workforce management. Leadership styles, business practices, enterprise and team cultures, and employee value propositions are evolving to build and maintain a viable workforce and to prepare the organization for rapid change.

The labor force is a seller’s market

There are strong indications we remain in a “seller’s” labor market as employee resignations remain higher than normal and candidates are more closely evaluating why, how and where they work, with many choosing jobs where they have more flexibility.

The survey results on voluntary turnover are illustrated in the pie chart below. Eighty-five percent of CEOs surveyed reported voluntary turnover that was either higher or the same compared to one year ago. Almost 40 percent of survey respondents indicated voluntary turnover was higher or significantly higher compared to last year. There were no significant differences when the survey respondents were grouped by industry segment, annual revenue or number of employees.

These findings are not surprising given the high rates of burnout (with 79 percent of employees experiencing work-related stress according to the American Psychological Association’s 2021 Work and Well-being Survey) and dissatisfaction in many jobs (Gallup’s State of the Global Workplace: 2022 Report found 60 percent of people reported being emotionally detached at work) are causing employees to either exit the workforce (at least temporarily) or seek new opportunities. In part, these elements are fueling the “Great Resignation” that has been underway since last year.

Although there are signs this may be slowing down, organizations should remain focused on the evolving expectations of their employees and ensure they are equipped and empowered to be successful and remain healthy.

How does your current voluntary turnover compare to the prior year?

Examining the connection between well-being and voluntary turnover

The survey asked CEOs about the percentage of voluntary turnover they attribute to well-being. The results, which are shown in the pie chart below, seem to indicate that either well-being is not a major factor in turnover or the correlation is not yet well understood given that nearly one-quarter of CEOs selected “Don’t Know or Not Applicable.”

What percentage of that turnover do you attribute to employee well-being (e.g., physical, emotional, mental and financial) issues?

Nonetheless, well-being is growing concern among board members. According to Chief Executive Group’s recent Corporate Board Member Survey, 89 percent of board members believe the issue of worker safety/welfare (i.e., encompassing both physical and mental wellness) should be discussed at the board level.

Further analysis of the survey responses revealed that the industries most affected by well-being issues leading to turnover are healthcare (50 percent of respondents attribute well-being as a cause for more than 11 percent of their turnover), energy/utility (25 percent of respondents attribute 50 percent or more) and construction/engineering (22 percent of respondents attribute more than 11 percent). These results confirm that industries where the physical and emotional strains may have been the greatest are, in fact, seeing higher turnover related to well-being issues.

Based on a previous Chief Executive survey and summary article, Hindsight 2020 (published in January 2021), it appears the COVID-19 pandemic triggered a renewed focus on employee well-being, with 54 percent of CEOs stating their organization provides tailored options to encourage and address the well-being of all employees. And, as discussed in the next section, about one-third are now using well-being programs to combat labor shortages.

Strategies being used to combat labor shortages

Most of the actions organizations are taking to combat labor shortage strategies are designed to attract and retain employees. As shown in the following table, increasing total compensation and expanding both flexible/remote work opportunities and internal skills development programs topped the list.

What strategies and tactics are you using to combat labor shortages? (Select all that apply.)

Source: Chief Executive, Confidence and Workforce survey, 2022.

In addition, many organizations are in the early stages of developing long-term strategies to create employee well-being programs with measurable outcomes, establish cultural norms in the new hybrid work environment, overhaul career paths and better align pay, benefits and incentive programs with individual needs, contributions and organizational performance.

CEOs and board members seem to be on the same page regarding the significance of combatting labor shortages by increasing total compensation. According to the Chief Executive Corporate Board survey, the majority of board members (81 percent) have included it as a main discussion topic at the board level. Adding further emphasis to this point, organizations across the spectrum of annual revenue size (from less than $5 million to more than $1 billion) are using this tactic. The same is true for the “enhancing or expanding benefits” tactic.

It is also worth noting that respondents across all industry segments selected five or more options from the choices above, indicating labor shortages are being addressed using multiple approaches. For respondents selecting “other” the majority of comments centered around building a strong company culture and creating a positive work environment. Finally, organizations are becoming increasingly interested in participating in public-private partnerships to address gaps in vocational and STEM skills.

It appears remote/hybrid and flexible work arrangements provide benefits beyond pandemic social distancing and may become part of normal business practices moving forward. According to a study conducted by Owl Labs, 2021 State of Remote Work, for those jobs where remote work is possible, 91 percent of U.S. workers polled believe it enables them to have a better work-life balance, 90 percent feel they are just as productive or more productive working remotely (many said it helps them maintain focus), and 78 percent said it lowered their stress (no commute and less office drama were two of the reasons cited).

Ensuring agility

As mentioned earlier, leaders are adapting and becoming more sensitive to the changing nature of work, the workforce and the workplace, as well as evolving employee needs. The largest number of respondents (63 percent) confirmed it is critical to have authentic, visible and transparent leadership, as shown in the following table. These characteristics of leadership are important to building trust and fostering innovative thinking, both highly important components of resiliency and agility. Further analysis of the survey responses revealed 80 percent of companies with 5,000 or more employees selected authentic, visible and transparent leadership.

What are you doing to ensure your organization remains resilient and agile in the current environment? (Select all that apply.)

Source: Chief Executive, Confidence and Workforce survey, 2022.

The second most selected option was “maintaining or improving our employee retention rate” (62 percent). With this in mind, many organizations are ramping up their use of “stay interviews” to help identify practical ways to retain their employees. A wide range of questions are being asked including “what do you love about your job, and do you get a chance to do it every day?”

Nearly 50 percent of organizations with 100 to 1,000 employees selected implementing new technologies to remain resilient and agile. Many organizations are accelerating their use of analytics, artificial intelligence and robotic process automation to enhance decision-making, reduce repetitive manual labor where possible and enable more scalable business processes. The industries where this is most prevalent are telecommunication (67 percent), travel and leisure (67 percent), pharmaceuticals and medical products (63 percent), and transportation (57 percent). The percentages of respondents for these industries that answered driving a culture of innovation and creativity are also notably high at 67 percent, 100 percent, 63 percent and 57 percent, respectively.

Drawing conclusions

Increasing total compensation, expanding flexible and remote/hybrid work arrangements, enhancing benefits and internal skills development are important steps to solving the labor shortage puzzle. They are producing positive short-term results for many organizations.

To sustain or improve these results, organizations are designing and implementing longer-term solutions. These solutions include holistic well-being initiatives (i.e., physical, mental, emotional/social, and financial health), public/private partnerships for skills development and apprenticeships and implementing new technologies to increase collaboration, streamline or eliminate manual work, enhance decision-making and foster creative thinking. They are also looking carefully at the leadership styles and cultural norms needed to remain resilient and agile.

Tangible forward-looking steps and questions CEOs and other leaders may consider include:

• Total compensation and pay equity — While leaders are implementing signing bonuses and pay increases to attract job candidates and soften inflationary impacts for current employees, they should also consider longer-term compensation plans to adjust the merit increase process and incentive-based pay with individual contributions and performance to be more equitable and results oriented. Broadening opportunities to provide equity ownership in the business is another option worth considering.
• Employee benefits — The rising cost of healthcare premiums and larger deductibles are putting more financial pressures on our employees at a time when they may be recovering from a financially challenging period caused by the pandemic. Business leaders should work closely with their benefits administrator to find creative ways to lower the overall cost of benefits while creating benefit plans that are aligned with the needs of the workforce. They should also consider opportunities to provide low-cost loans and/or crisis funds for employees.
• Skills development — Traditional internal training programs are generally not designed for the multi-year investment needed to develop the skills and experience required. As already mentioned, public/private initiatives are gaining traction to help prepare our workforces for the future. Vocational and STEM-related programs are leveraging federal and state grants to provide apprenticeship and skill-certification opportunities.
• Flexible and remote/hybrid work arrangement — Beyond providing the technology to enable knowledge workers to work remotely and/or take advantage of a flexible work schedule, business leaders should consider creative ways to connect people and create an internal social network. Although working remotely may be more productive for some, others do not fare as well. The isolation can create engagement and loyalty challenges, especially for new hires. In addition, not all managers are equipped to lead a geographically dispersed team and may need training and tools to help them be efficient and effective. In the spirit of fairness, consider how to ensure the portions of your workforce that cannot work remotely are given something as compensation for being on site (e.g., balancing workload, more flexible hours, longer break times, additional days off, rewards and recognition)
• Employee well-being — Employee wellness and well-being are not the same. Wellness focuses primarily on physical aspects, whereas well-being also includes mental, emotional/social and financial wellness. All four dimensions are interdependent. As highlighted earlier, more than one-third of organizations are now recognizing the importance of well-being to the overall health of their employees. They are launching holistic well-being programs to enhance the fitness, smoking cessation and mindfulness programs many were already offering. Some are also training managers to help reduce the stigmas employees may experience when seeking mental health assistance. In some cases, the name of the benefit plan is being changed (currently EAP, in most cases). CEOs may consider assessing their organization’s approach to employee well-being and specific benefits offered, including the metrics used to measure outcomes and the return on investment.
• Stay interviews — During regular check-in conversations with direct reports, managers may not learn all the reasons an employee would stay with the organization or leave for that matter. Stay interviews are growing in popularity to not only increase retention rates, but they are also being used to help employees de-stress, increase their sense of belonging by linking what they do to the vision and mission of the organization, and to learn how workforce-related investments are viewed. Some organizations are requiring all leaders to learn how to conduct stay interviews and are requiring them to be performed at least two times per year; more often for new hires.

Moving forward

Labor and skills shortages will continue to be a challenge for many organizations, possibly for several more years. The ways in which we attract, retain, develop, equip, support and engage the workforce are evolving to address business operating model changes and the expectations of our current and future employees.

Solving the labor shortage puzzle does feel in many ways like a catch-22. That is, for the many open positions that remain unfilled, there are more than enough job seekers. However, they may not necessarily possess the desired knowledge, skills and experience.

Organizations seek a diverse slate of candidates but often lack visibility to diverse candidate sources. As inflation rises, organizations are looking for ways to reduce operating expenses at a time when compensation and benefit increases are being used to attract job candidates and retain employees.

To solve this puzzle, business leaders will need a balanced approach, starting with empathy for their employees and an authentic, visible and transparent leadership style.