Tackling the ‘Turnover Tsunami’

If it seems like the cost of an Uber has gone up, it takes a bit longer to get seated and get food at a restaurant, and there are more “help wanted” signs up at businesses lately, it’s probably because of the unprecedented number of job openings across the country.

According to the Bureau of Labor Statistics (BLS), there were roughly 9.2 million job openings as of the end of May 2021. This represents the highest overall number of openings since the BLS started keeping track in 2000.

The Society for Human Resource Management (SHRM), among others, has referred to this mass exodus as the “turnover tsunami,” and much devastation is predicted.

For employees, the time has never been better to switch jobs, ask for a raise, or demand more flexible working conditions. But for employers, providing the same level of production and/or customer service while reining in labor costs is an increasing challenge.

We reached out to industry experts to get a sense of how the labor shortage is impacting companies across the country and share that input below.

Taking a Targeted and Holistic Approach

Nelson Sherwin, manager of PEO Companies, says his organization has taken a targeted and holistic approach to employee retention. “For reasons out of our control, we have struggled to retain some of our top talent during the last year or two,” Sherwin says. “For this reason, my company has put a lot more attention toward improving employee benefits and compensating those who work hard more than we did previously.”

In addition, he says, the company has “tried our best to make our offices feel a little more like home.” It’s a balancing act and a challenge to meet the needs and preferences of all employees. “Some of our employees became accustomed to the remote environment and were unhappy when they were forced back into the office,” he adds. “Bean bags, couches, and even a couple TVs have been added to the common space so that there’s an extra level of comfort at work.”

Sherwin also recognizes that “some of our employees are still struggling to find motivation at work, which is why we’ve also thought about bringing on a mental health coach who can address employee engagement and productivity levels.”

Considering the Impact of Pay

Increasing pay for open positions is one strategy companies are considering in the current labor shortage. However, pay increases are long-term concessions to address what many employers may see as a temporary challenge. As an alternative short-term solution, signing bonuses have been a popular tactic for some organizations.

“Companies are offering signing bonuses and incentives, which helps protect business money since they can attract new employees with these temporary financial incentives,” says Ben Reynolds, CEO and founder of Sure Dividend. “Once they get enough interest, they can cancel those offers, which means they won’t have to raise wages with current staff. However, these incentives can vary, with some offering $100 to $30,000 signing bonuses.”

Strategies to Do More with Less

Another obvious strategy to compensate for a lack of workers is to ask existing workers to work longer hours. But for hourly workers, this means costly overtime, and for salaried workers, it means asking employees to work longer for the same pay. Alternatively, companies can simply be less productive or reduce their hours of operation.

“One of the key ways to survive an employee shortage is to temporarily reduce your hours of operation,” says Jessica Zhao, Chief Marketing Director at Spacewhite. “This helps to ensure that your workers are not overwhelmed, and your business maintains its level of quality. Unfortunately cutting hours does affect income.”

Keeping an Eye on Morale

Whether companies are asking current employees to take on more responsibilities or existing employees are feeling like they’re undercompensated relative to what they could be making at other companies, employee morale is a significant concern for many organizations.

“Employee morale can be challenged when people feel overburdened over sustained periods,” says Charlie Chung, VP of Business Development and Solutions Consulting at NovoEd. Recent increases in job switching aren’t just about morale, though. As Chung notes, “the pandemic artificially suppressed the normal level of job-switching resulting in pent-up demand.”

That pent-up demand and its impact on the workforce shortage are also amplified by a year of largely remote work, with the isolation also having a negative effect on employees and the organizations they work for.

“We are seeing more clearly the importance of interaction with colleagues and office culture in forming bonds within a company,” adds Chung, who points to what Gallup has identified as one of the biggest predictors of retention: “Do you feel you have a ‘best friend’ at work?” which is part of Gallup’s Q12 employee sentiment assessment.

“Companies are responding to this need for stronger bonds with an emphasis on organizational and employee purpose through a rebuilding of onboarding programs to be more intentional about transmitting the culture of the organization, setting norms and establishing strong relationships,” notes Chung.

A Look at the Impact of Training

“With fewer applicants to choose from, employers have had to hire less qualified candidates,” says Brian Radin, President of Comdata Prepaid. Hiring less skilled workers, of course, raises the need for training.

Training, though, says Radin, has costs associated with it, and in many cases, companies already struggling may be hesitant to make that investment.

“When businesses are understaffed to begin with, they’re more likely to cut corners with training time in their eagerness to get new hires out on the floor,” Radin says. There’s also related risk, especially in this environment, where plenty of job opportunities are out there. “Not every employee gives sufficient notice before they walk out the door to a different company that may have a better offer,” he says. “When this occurs, employers are left holding the bag and must absorb the costs of training and lower productivity without reaping any rewards.”

Reynolds adds that many companies are happy enough to simply find someone who possesses sufficient soft skills that are generally applicable to any industry, understanding they’ll need to train for job-specific skills. “For instance, restaurants will hire some who can merely handle the pressure of the job, which means being more willing to train them when they’re more inexperienced,” he notes.

There are a variety of factors impacting the current, unprecedented labor shortage, including many that originated from the COVID-19 pandemic. While the current shortage may subside to some extent as pressures from the pandemic wane, the pandemic is not the only factor contributing to the difficulty companies are having filling open positions.

Companies need to be prepared for a long-term shortage and develop strategies to attract and retain sufficient talent to support existing operations and to plan for the future. Furthermore, regardless of what may happen in the labor market a few months down the road, many companies are struggling right now and can’t wait for a potential improvement in the future.

Understanding how other organizations are dealing with the shortage can help influence employers’ next strategic moves, given the current state of the labor market. How might some of the staffing shortage strategies discussed above work for your organization?

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