Last weekend was Father’s Day, so in honor of, my wife and two kids were going to treat me to a brunch – nothing noteworthy (although emerging from pandemic, any visit to a restaurant these days is noteworthy). We tried one of our favorite places in south Minneapolis, but found a sign on the door that it was unexpectedly closed. Finding that a little odd — especially on a quasi-holiday, where I’m sure restaurants are eager for revenue — we tried our second choice. Same outcome, only this time the sign on the door had some more details: “Closed today. Will resume limited hours tomorrow due to staffing shortage.” Neither closing had anything to do with COVID-19, but everything to do with not having enough workers to maintain operations.
And it’s not just restaurants or hospitality. Earlier this week, American Airlines announced they are cancelling hundreds of fights through mid-July due to their labor shortage. It is estimated that 22-25% of US hospitals are chronically short staffed. Daycare centers and schools, many or most retailers, and many in construction or the trades are severely short workers. It’s getting serious.
The US Chamber of Commerce recently declared the labor shortage a “national economic emergency [that’s] getting worse by the day,” and a recent Chamber survey of trade associations nationwide found 88% of US businesses said it was at least somewhat difficult to find workers. There just aren’t enough (qualified) workers to satisfy employer needs in today’s economy, and while some markets (and some industries) are feeling it worse than others, it’s widespread, impacting large and small organizations in all sectors and industries across the country.
The causes of the staffing shortage are multifaceted: it began in the low unemployment years leading up to the pandemic, as more and more Baby Boomers started retiring and fewer American workers are replacing them. Last year for the first time in the county’s history, population growth between the working ages of 20-64 turned negative. And the Congressional Budget Office projects that the US labor force will grow only 0.3-0.4% a year in the 20s, down from an average of 0.8% a year over the last 20 years. Exacerbating the demographic issues are enhanced unemployment benefits from the pandemic, which created incentives for some to remain on the workforce sidelines (but those benefits are set to expire in September, which should motivate some workers to return to the labor force).
The result of the staffing shortage? Workers are demanding more compensation, better benefits, more training and development, and more flexible work arrangements. And US organizations are now scrambling to find ways to find and keep workers just to sustain operations.
From the NY Times a couple of weeks ago:
“The relationship between US businesses [and organizations] and their employees is undergoing a profound shift: for the first time in a generation, workers are gaining the upper hand. The change is broader than pandemic-related signing bonuses at fast-food places. Up and down the wage scale, companies are becoming more willing [to make major adjustments in response to several staffing shortages].”
According to a New York Federal Reserve study reported in the same NY Times article, the “reservation wage” (a term economists use to describe the minimum compensation that workers require) has increased 19% for those without a college degree from November 2019 to March 2021 — that’s the equivalent of $10,000 a year in salary.
Not only are wages (and signing bonuses) increasing, but the work environment itself – where, when, and how employees work – has become a competitive factor for organizations. A Bloomberg study two weeks ago indicated that 39% of American workers (49% of Millennials and Gen Z) would rather quit their current job than have to “go back” to the office (and many are: according to the US Department of Labor, 4 million quit their jobs in April alone, roughly 2.7% of the workforce). Not only are workers enjoying the flexibility and convenience of working from home, but the economic gains are real: Bloomberg reports at least a $5000 benefit (which is after tax, so $7000-8000 pre-tax) of working at home because of not having to commute. I imagine for those with daycare, the number is much higher.
These pressures are felt by employers, as the Conference Board reports that 49% of companies are finding it hard to retain their workers, up from 30% pre-pandemic. So 88% of companies are finding it hard to find employees and 49% are finding it hard to retain them — that’s a recipe for a severe strategic challenge.
Karen Fichuk, CEO of the staffing company Randstad North America in the Times article: “companies are going to have to work harder to attract and retain talent. We think it’s a historic moment for the American labor force.”
So what can American businesses and organizations do to navigate today’s staffing challenges? Clearly, employers need to evaluate their compensation packages, increasing wages if required to be competitive (and that’s clearly happening: the US jobs report two weeks ago showed that wages were up 1.3% in May over March rates — that’s an 8% increase if it sustains a full year, which would be the largest since the early 1980s!). But organizations can’t continue to raise wages indefinitely without also increasing prices, reducing other expenses, or taking drastic other action to stabilize their income statements.
Short of salary increases, here are some thoughts on how leaders can address this complex issue — some ideas focus on recruitment, some focus on retention, and some focus on work redesign:
- Get creative with recruiting – position descriptions have become somewhat bland and mechanical. Given that competition is higher than ever for good talent, consider revising job descriptions to not only capture the position requirements but convey more about the organization itself – its culture, why employees like working there, its history or other unique selling points. In other words, put your best marketing effort into your HR processes: create better recruiting collateral material; use video and social media (go where the employee candidates are), and think differently about where you find employees, which leads to…
- Seek new candidates through creative partnerships & apprenticeships – some organizations may be compelled to think altogether differently about job requirements – about who is actually qualified for certain jobs and/or whether your organization can prepare unskilled or inexperienced candidates for certain positions. If an advanced degree has been required in the past, would a bachelors degree suffice; if a bachelors degree was required in the past, would an associates or a high school diploma with some on-the-job training work instead? It’s now “lowering the bar” so much as it’s rethinking what’s truly required and then training your team on exactly the skills they need to be successful.
On-the-job training has really become important as a way to “upskill” workforce, which opens new recruiting markets. In fact, paid apprenticeships, once only prevalent in the trades, are now being seen in high tech, healthcare, and other specialized industries. This allows organizations to get more creative in seeking job candidates, now focusing on immigrants, retired workers (to lure them back, even part-time), reformed felons, students (for internships), disabled workers, and so forth. Partnerships with colleges and universities are as important as ever as a source of pipeline; joint ventures with other businesses and organizations (to share resource and leverage talent across enterprises) will become more prevalent. Job sharing across organizations is becoming more common.
- Develop your team – employees are demanding more training and development, not so they can do their current jobs but so that they have more skills and future career opportunities. So in this way, training and development has become (or maybe it always was) a competitive advantage for those employers who are providing it. It also benefits the organization itself: you have a more highly skilled, more talented, more capable workforce! And — when a team has broader, more interchangeable skills — the organization has more flexibility to create more opportunities for internal career advancement, more job rotation or position flexibility. By the way, “training and development” should be broadly defined: it’s not just traditional classroom training, but online live and asynchronous workshops and webinars, on-the-job practice (see apprenticeships above), job rotation and job shadowing, mentoring and buddy/coaching arrangements. It’s an age-old mantra, but training and development doesn’t cost as much as it pays — a true win-win, when you’re trying to attract, retain, and engage your workforce.
- Design creative staffing models – the standard punch-the-clock 8-to-5 of 9-to-5 day shifts may be a thing of the past, as employers are now considering more split shifts, job sharing arrangements (where multiple workers split or “share” a job, which has the added benefit of redundancy/capacity in your staff), job rotations (which has the added benefit of creating a more talented, more flexible employee pool), and even changing hours of operation (including continuing work-at-home days or even “closing” the organization a day or two a week). Organizations should explore exactly what they need to maintain service and productivity levels, but also involve their employees directly in creating innovative new staffing models that meet their unique needs and preferences.
- Redesign the work environment – there were exceptions, of course, but the pandemic showed most US organizations that workers don’t have to be at work to do work — that organizations can sustain operations with a fully (or partially) remote workforce. And given the Bloomberg data above, many US workers don’t want to “go back” to the office as we emerge from the pandemic. So organizations should reexamine their work environments, allowing flexibility of where and when employees get their work done. This will likely mean creative physical space (more “hoteling” with shared workspace options), flexible schedules (see above), and other innovative models. The key is to maintain productivity and culture when many/most of teams don’t physically work in the same space, which requires new methods of communication, team and relationship building, and leadership.
- Change processes – it’s not just where and when work gets done, but how it gets done. Organizations should work to eliminate waste and redundancy — which will reduce expense and improve margin, but will also create a better work experience for your team (by the way: let your team do the eliminating of waste and redundancy; don’t do it to them!). Eliminate process steps; re-sequence activities into a more logical flow; rearrange workspace to optimize productivity and effectiveness. And automate where you can. Even small businesses and nonprofits are now exploring the ROI of automating parts of their processes to perform tasks that humans used to — think of restaurants now using technology to fill containers with fries or wrap burgers, or using online reservation systems, for example). I predict a major shift in not only where, but how work gets done. It’ll lead to better outcomes for your customers (and owners if you have them), but also your workers who prefer to work in better run, more efficient organizations anyway, where they don’t spend so much time on low value-added tasks.
- Create a culture that promotes full engagement and retention – if you’re short staffed, the last thing you want is to lose good talent! Many of the suggestions above apply to employee retention — like focusing on your training and development, staffing models and work structure, work environment, and processes. But there are many other things that contribute to employee satisfaction that also need your attention, like: improving organizational communication, enhancing your benefits package, involving employees in key decisions, empowering your team to solve problems and improve the work, and helping to shape work that has a purpose. On that last point, don’t minimize the value of purpose-driven work, but help create a culture that focuses on the greater mission of your organization. It’s easy in some sectors and industries (in healthcare, you save lives; in certain nonprofits you reduce poverty or cure diseases or decrease homelessness). But it works in nearly all businesses and organizations: it’s not just selling burgers but feeding the world; it’s not just teaching kids but educating future American workers; it’s not just manufacturing roof shingles but helping to create shelter and safety for your neighbors. The upshot: people simply work harder when they feel valued and find meaning in their work.
Bottom line: leaders have to get creative in finding a number of strategies that help them navigate today’s staffing challenges. But it won’t be easy. A final thought from the NY Times piece: “…an entire generation of managers came of age in an era of abundant workers is being forced to learn how to operate amid labor scarcity. That means different things for different companies and workers – and often involves strategies more elaborate than simply paying a signing bonus or a higher hourly wage.”
Indeed — because increasing wages or bonuses only solves the problem in the short-term. Leaders today need to get creative in where they find employee candidates, how they reimagine work environments and staffing models that provide more flexibility and innovation, and how they engage and equip their teams to maximize satisfaction and retention. After all, part of the solution is in finding and hiring good new talent, but the majority of the solution is in keeping and engaging the talent you already have.
PEN is hosting an online discussion July 8 (8-9AM CT) on navigating today’s staffing challenges, featuring three speakers that represent different workforce expertise: a higher ed institution, a workforce development agency, and the Minnesota Chamber. Free for PEN members (and even if you’re not a PEN member, email me for a guest pass and participation at no charge). Information is here. And one of the many powerful breakout discussions at the PENworks 2021 conference will also feature strategies and ideas to address today’s staffing shortage with a different set of presenters; information is here.
What other insights/tips do you have regarding how organizations can navigate today’s staffing shortages? Participate in a discussion on this topic: visit our LinkedIn group to post a comment. And follow me on Twitter @LassiterBrian!
Stay healthy and never stop improving!
Brian S. Lassiter
President, Performance Excellence Network
Catalyst for Success Since 1987! Photo credit AP Photo, Andreas Klinke Johannsen in WINF Ft. Meyers, WSYX Ohio