How the Tight Labor Market Affects Profitability
07 01 2021
By Mark Sinatra, CEO, AspenHR
We know that the key to creating a successful company is to hire and develop a skilled and highly-engaged workforce. As the labor market continues to tighten up, it has become even more challenging to hire top talent across all industries. Is the best solution simply to increase wages which can cut into your operating margins? And what are the best practices to retain talent in a tight labor market?
Thankfully, companies still have a multitude of options to attract and retain the talent they need to outperform their peers. The following are three key strategies for consideration.
Create an employer brand
We all invest in sales and marketing and as a result we generate brand awareness with our prospective and current clients. However, I challenge you to consider how does your brand appeal to potential new hires? How much of your website is devoted to illustrating your company’s culture, vision, career opportunities and core values? How are your reviews on websites such as Glassdoor?
In sales, prospective clients can easily research and form a strong opinion about a company prior to even speaking with a sales rep. The same is true for prospective employees which is why it is so critical to have a meaningful, employee-focused brand. Your best brand ambassadors are your employees so reward them well for referrals to new hires. A-players know other A-players and want to be surrounded by other A-players, so the quality of an employee referral is often unmatched. One of my best years of hiring was when we filled 75% of our job vacancies from an employee referral.
Measure and track metrics such as employee engagement, employee net promoter score, voluntary turnover and overtime to ensure your workforce is trending in the right direction.
Develop career pathing
Now to create those raving fans internally, you have to consistently invest in your staff and provide them with the resources, tools and guidance that they need to be successful in their role. Leaders need to have a clear understanding of the goals and development plan of each team members and implement an actionable plan to reinvest in that employee. The cost of employee turnover dwarfs the manageable cost of reinvesting in your team.
Another benefit of charting career paths for employees is that when a job opening pops up it creates a great opportunity to promote an internal employee versus hiring from the outside. This sends the right message to the staff and engenders the level of employee loyalty that all organizations strive to attain.
Lastly, promoting within can spark a chain reaction of subsequent promotions ultimately resulting in an open position at a staff level that is easier to fill than the manager role. For example, if you promote a senior benefits administrator to benefits manager, you may be able to promote a benefits administrator to the senior benefits administrator role. The benefits administrator role is typically easier and faster to fill from an external hire than the benefits manager role.
Take it personal
One of the most impactful business books that I have read is called Who by Geoff Smart, which outlines the Top grading methodology for assessing talent. However, my primary take away from that book is that as CEO, I need to spend a significant part of my time recruiting, cultivating and assessing talent. Who better to market the company to a prospective new hire, than the business owner/CEO. Recruiting is often thought of as a function that can be easily delegated internally or outsourced and I agree with that. My point is that the more involved a CEO is in the candidate sourcing and recruiting process, the more effective that company will be in attracting talent.
One practical tip is that when a partner of mine asks how they can help, I ask them if they know of any exceptional team members who I should hire. If you actively tap your network, you never know when you will be introduced to your next A-player. I even recall hiring a Starbucks barista once due to that employee’s white-glove service that I saw in action on a daily basis. The employee turned out to be great and eventually went on to work for one of our clients.
Regarding employee engagement and retention, this is another area where company leadership needs to play a hands-on, active role. The culture of an organization is largely driven from the top-down, so the leadership team sets the culture and is accountable for employee engagement and retention. Schedule 1-1 discussions with team members to better understand their career goals and challenges – and most importantly, how you can help them be more successful. Ask provoking questions and actively listen to what your team is feeling. Digest the feedback and based on that, create an action plan that will position your organization to improve. There are too many examples of surveys where the feedback was not acted upon, so please be wary of making that mistake.
Hiring, developing and retaining talent is the formula of success and presents a continual challenge for all companies. If a company is intentional and thoughtful about it, they will be well on the path towards creating that winning team.