Authors: John Grose, Vice President of Corporate Banking & Wanda Harris, HR Business Partnering
With unemployment rates coming in at 3.5 percent, it’s becoming increasingly difficult for American businesses to fill vacant positions, and it’s a challenge that is impacting more than the bottom line.
Labor Shortages Impact Business and Community
While unemployment in the U.S. has hit a 50-year low, it isn’t the only factor to consider when it comes to understanding the job market right now. The Civilian Labor Force participation rate is an important measure because it indicates the number of individual resources that are available for hire. In November of 2019, the participation rate climbed to over 80 percent for those aged 25 to 54.
A high participation rate should ideally result in a high number of individuals ready to be hired, but in the current reality, businesses are leaving vacant positions unfilled due to a hiring shortage. When this happens, companies are often forced to increase wages to lure candidates away from other employers. In fact, 30 percent of small businesses have raised wages in 2019, and 26 percent plan to do so within the next six months in order to attract more qualified prospects.
According to NFIB, labor shortages have hindered growth for many small businesses, particularly in the construction industry, where 67 percent of owners reported finding few or no applicants for open positions. An additional 22 percent of SMBs have lowered their hiring standards to find candidates to fill empty roles.
While a tight labor market can impact business growth and profitability, quite often, the pain also extends into the community at large.
In the Midwest, for example, lower costs related to labor, utilities and land have lured technology giants such as Google, Facebook and Apple into constructing multibillion-dollar data center campuses. As a result, nearly anyone who is skilled in the construction trade, particularly electricians, steamfitters and plumbers, is actively working, driving up the cost of construction-related services across the board.
In scenarios such as this, the talent shortage easily extends beyond the business boundaries into the community. Homeowners looking to remodel, for example, must extend their timelines as contractors prioritize commercial projects. Beyond building, the talent crunch leaves customer-facing positions unfilled, significantly impacting consumers who wait longer for service when interacting with companies such as restaurants and stores.
Making the Best of a Tight Labor Market
While a tight labor market can be challenging to businesses, there are strategies that can facilitate staffing, while maintaining a highly functioning company environment:
- Focus on retention: According to the Society for Human Resource Management’s Human Capital Benchmarking Report, the average cost per hire is $4,129, not factoring in intangibles such as the productivity drag associated with training new employees. While cost alone can spell a potent case for retention, in a tight labor market maintaining quality workers becomes the number one priority, as workers who leave cannot be easily replaced. One of the best ways to maintain employees is to take a look at your benefits package and consider offering incentives, such as pay raises, added vacation time or flexible working situations.
- Nurture the whole person: When it comes to retaining talented individuals, managers play a prominent role by providing employees with opportunities to meet career goals. To do so, leaders need to consider both the personal and work aspects of each individual and provide them with the necessary situation to encourage growth. Flexible working arrangements and offering on-site or nearby personal services, such as dry cleaning, childcare or meals and snacks, make it easier for employees to focus on work without worrying about home or personal needs. Managers should also let employees take the lead in goal setting, offering support and encouragement in the form of “stretch assignments,” for example, as individuals make progress toward the end outcome. And most importantly, don’t forget to recognize employee contributions and reward high performing individuals for their work and efforts.
- Consider automation: Artificial intelligence and machine learning have made it possible for robots and computers to take over a variety of tasks that once required a living, breathing human being to complete. The rising trend toward automation has some experts predicting the elimination of 40 percent of all jobs in 15 years. For some companies, automation can be a healthy way to deal with labor shortages and fill empty positions. Consider how fast food restaurants, such as McDonalds, have reduced the number of counter-service employees needed per shift with self-service kiosks.
- Start earlier: Because existing talent is scarce, many companies are starting to think about attracting talent much earlier in the hiring process. Internship and apprenticeship programs provide employers with the opportunity to engage talent, test skills and capabilities, and even nurture workers in the ways of the company long before actual hiring needs to occur. Trade and manufacturing companies can also look to local vocational and community colleges, partnering to train necessary skills, forming a highly trained recruiting pool for future hiring needs.
Overall, it’s important to nurture talent at all ends of the spectrum from your newest employee to your oldest and most trusted associate. A good rule of thumb is to consider "The Five Dysfunctions of a Team," as indentified in Patrick Lencioni's book. The five dysfunctions include the absence of trust, fear of conflict, lack of communication, accountability avoidance and inattention to results. By separately addressing each of these common issues, businesses have been able to lower employee turnover and improve overall business performance and employee satisfaction.
About the Authors
John Grose is Vice President of Corporate Banking for FNBO. In this role, John and his team support large corporate clients with comprehensive banking services. John began his career at the bank as a mergers and acquisitions analyst where he assisted in providing buy- and sell-side advisory services to small and middle market enterprises.
John received a BSBA from the University of Nebraska Lincoln and an MBA from Creighton University. In addition to his contributions as Treasurer for the Business Ethics Alliance, he sits on the board of Angels Among Us, the First National Community Development Corporation and the Association for Corporate Growth. John and his wife, Marla, have three children, Kennedy, John, and Tatum.
Wanda Harris - As VP of Business Partnering, Wanda works with the Wholesale Banking Group, Credit Risk Administration team, Community Banking business units (including Insurance and Equipment Finance,) and sits on the HR Leadership team. Her work includes organizational development, change management, leadership coaching, and business strategy development.