There is an unprecedented convergence of labor dynamics that are driving our hiring and recruiting challenges. Strong economic growth is driving labor demand in all sectors of the economy. Labor participation rates are the lowest since 1976 and have not improved over the past 12 months. And we are at 4.8% unemployment for September.
In addition, Q4 will see volatility in terms of unemployment. Employers will struggle to balance the immediate staffing needs with the mismatch between demand and supply. As of September 1, 2021, there were over 10 million open jobs, for the third consecutive month. Unfortunately, there will be continued labor shortages for the short term.
Additional wage pressure and fluctuation in labor supply are driving much of the rise in wages. Low-skilled labor demands the most significant wage increases. After averaging just 5% over the past ten years, we have seen a considerable wage spike in the last several months. The “great resignation” is real, with over 40%-58% of employees considering leaving their company for a new organization in the next six months. According to our 2021 Job Seekers Mindset report, 100% surveyed said they would entertain learning about a new opportunity.
Selective searching and job shopping is a real thing. It is increasing time to fill times as candidates evaluate and compare shop your pay, schedule, benefits, company culture, WFH options and working conditions. Over the past 12-18 months, the savings rate, which for the past 25 years has averaged 5%, jumped between 12-13%, even as high as 27% this past March. Pandemic relief delayed spending and lack of available housing created a financial safety net like never before. Yes, there are those in hospitality and leisure that were laid off who may have struggled financially, but the fact remains, savings accounts are fatter than they once were.
Is a potential lift coming? With Federal Pandemic Unemployment Compensation (FPUC) discontinuing, schools re-opened with in-person classes and hopefully a waning Delta variant, it will be critical to providing individuals the ability and confidence to go back to work. We need to get more people back into the labor market, but the demographics are against us.
As candidates are using this time to reflect, the recruitment process has gotten greater scrutiny. Covid helped with the adoption of video interviewing for both the candidates and hiring managers. Meeting that hiring manager and getting to know them remains the most important relationship to cultivate with candidates. Staying in contact with a candidate post-offer has also increased in importance from 44% to 57% since 2019. The most important stat for KEEPING your team is that 58% of passive and active candidates believe that they will be working for a new employer in the next six months.
When you consider all the current labor market factors and all the demographic factors, we know we have to be smart about how we go about finding and engaging the top talent.
So, let’s break it down into three simple concepts to make sure you are focused on the levers that will make the most significant impact. We call it the Hiring Trifecta: Money, Managers and Recognition. Based on our research from both the most recent Trendicators research and Dr. Jack Wiley’s new book The Employee-Centric Manager, we know what is most important to candidates and employees.
We have witnessed a 16% increase in overall wages in the last 36 months, and it will not be subsiding anytime soon. When you think about salaries and compensation, know that it is a deeply personal conversation and that there are a variety of emotions at play when discussing compensation.
There are two things we know about pay:
1. It must be market and role competitive; the right money for the right role. Being at the mid-range is table stakes, so if you are going to compete with a compelling offer, you may need to make the strategic decision within your organization.
2. The right pay for the right impact. People want to know how they can impact their pay. Whether it is a bonus, overtime, tips, production bonus’, our motivation to exert discretionary effort is directly tied to several things but pay and how actions can impact pay are critically important.
We have seen significant wage inflation at the entry-level wage roles for 4-8 months now. It started last fall when the labor force was at its lowest participation rate and has not gotten any better as everyone competes for a limited supply of candidates to attract them to their roles vs. the one across the street.
Managers are the driving force behind business success. They have daily interactions with your front-line employees and, many times, customers. There are over 24 million managers in the US today, and over 70% of managers have either received no people management training or their training capped at four hours. Research from The Employee-Centric Manager gives us the insight we need to build effective managers who can drive engagement, team chemistry and productivity.
When you begin to compare top-rated Employee-Centric Managers, we find that they perform higher in all three categories: employee engagement, team chemistry and team productivity. Compared to those at the bottom, you can see significant differences in employee engagement which increases from 20% to 97%. Team chemistry then becomes the glue that keeps teams together and productivity soars.
When we think of what it means to be an employee-centric manager, Dr. Jack’s research tells us that there 5 behaviors, 1 skill and 2 values that when managers develop and deliver on these attributes, they create high-performing teams and retention rates are increased by 75%.
Not only is recognition a critical behavior for an Employee Centric Manager, but it is also a highly valued attribute by candidates who are going through the interview process. When looking at the results of our Trendicators survey, 29% (almost 1/3) of candidates indicated that the top reason they would accept a role with an organization is the recognition, appreciation and respect demonstrated during the recruiting process from both the recruiters and the hiring managers alike.
So, you may ask, how exactly do you deliver recognition during the hiring process?
1. There are many ways to give recognition during the hiring process, and it begins with respect. Today, it is mind-boggling that many hiring managers either show up late or reschedule interviews at the last minute. In this employee/candidate-centric market, when there are 10 million open jobs, the risk of losing a top candidate is exceptionally high. Do not give them a reason to walk away and not talk to you.
2. Make it real for your candidates by introducing other organization leaders, providing a tour when possible, or even trying a virtual tour to let them see the workspace if you are in offices or manufacturing facilities. Showing the good, bad and ugly represents a transparent view into the day in the life they will experience.
3. Surprise and delight. We believe the ultimate recognition of the act or behavior of accepting an offer is the welcome gift sent to candidate’s homes. Remember, 58% of candidates could receive competing offers after they accepted your offer. A branded welcome gift with a personal note from senior leadership reconfirms that they made the right decision to accept the offer and join your organization.
So, let’s review and break it down into 3 simple concepts to make sure you are focused on the levers that will make the biggest impact. We call it the hiring trifecta: it is about money, managers and recognition.
1. The right money at the right time for the right role or the right incentives
2. The Employee-Centric Manager demonstrates the 5 behaviors, 2 values and 1 skill that drives employee engagement, team chemistry and performance.
3. Recognition during the hiring process will create candidates who are drawn into your hiring process not pushed away and will validate that candidates are making the right choice to accept your offer.
Authors Note: This content originally appeared in our The Hiring Trifecta: How Money, Managers and Recognition Make the Difference Webinar, and some of the data has been updated since recording.