Sometime in May, one employer’s single hire likely put an entire country over a critical economic benchmark.
Whether it was a large employer revamping its sales staff, or a family-run restaurant picking up a new server for the coming summer rush, or a midsize ad agency needing an entry-level copywriter, the move pushed the United States over a nearly five-year-long labor market hump.
That single job meant the nation’s employers had finally created enough new jobs to recover the nearly 9 million lost since the beginning of the Great Recession — the worst economic calamity in the United States since the Great Depression.
The development was indeed a positive sign for the U.S. economy, with many economists and job prognosticators pointing to it as a long-delayed reassertion of the fundamental law of supply and demand. As economic activity picked up, so did demand for goods and services — and therefore the need for more workers.
But recovery shouldn’t breed complacency. Even in the depths of the recession with the market flooded by job seekers, employers struggled mightily to fill certain highly skilled and in-demand jobs. That problem persists.
Roughly 40 percent of U.S. employers report difficulty filling much-needed positions, according to ManpowerGroup’s annual Talent Shortage survey, with more than half of them saying that inability is significantly influencing the ability to serve customers. Worse yet, most employers don’t grasp the challenge they’re facing, let alone understand the talent management practices needed to adjust.
Most CEOs grew up in a talent-rich environment where finding a qualified person was often as simple as hanging a “Help Wanted” sign, said Mara Swan, executive vice president of global strategy and talent at ManpowerGroup. “They’re in denial because they think their company brand is strong enough that people will want to work there,” she said. “A lot of people with high demand skills don’t want to work in the environments we’ve created.”
The recovery in the job market has masked a persistent need for employers to rethink and replace stale talent management practices, workplace experts say. Far too many management tools and practices serve the needs of employers at the expense of what workers actually want.
“Some managers think we can do this because there’s this infinite pool of people who want to apply,” said Orly Lobel, a law professor at the University of San Diego. “It gives this false sense that anything that will be required will just be accepted.”
Talent Crying for Freedom
In her book “Talent Wants to Be Free,” Lobel makes the case that employers’ approach to the labor market is stuck in an ownership mentality that is ultimately counterproductive. Managers focus on controlling human capital assets and building walls that restrict employee movement and instill fear.
“Because the talent wars are fierce, because companies know their competitive edge comes from human capital … the impulse is to be very adversarial and controlling,” she said. “There’s a lot of harm in that and a lot of missed opportunity.”
Competition also leads employers into questionable behavior. Tech titans Apple Inc., Adobe Systems Inc., Google Inc. and Intel Corp. agreed in April to a reported $300 million settlement in a high-profile legal case that alleged a conspiracy not to poach each other’s software engineers, thereby suppressing wages and career mobility.
Lobel argues for a more open, dynamic talent management model that promotes the flow of knowledge between organizations and encourages employees to find jobs that fit their skills and interests. Firms should fine-tune their definition of proprietary information and focus on turning the inevitable loss of talent into a gain. A good place to start: not suing former employees.
“The smartest human capital managers think about how they’re building a reputation as being the best, most desirable place to work,” Lobel said. “Being litigious against employees affects not only the relationship between that one individual that’s being accused of breaking a noncompete or misappropriating a trade secret or soliciting customers.” It also affects “what you’re trying to achieve.”
The deep cuts during the recession also led to some unintended — if not surprising — results. Organizations that used to hire new college graduates for entry-level positions opted instead to run lean. This created a distortion in the labor market as college graduates took service jobs, which didn’t allow those workers to develop the specific skills employers need, said Matt Stevenson, principal and North American practice leader for workforce planning at human resources consulting and research firm Mercer. Those cuts to employee development exacerbated hiring problems.
“Because there is this belief that there are so many people out in the market and because companies are so lean, companies are trying to do what they refer to [as] just-in-time hiring,” Stevenson said.
That might work for companies like Starbucks Corp. when it hires baristas, but the practice becomes more difficult the more specialized the role and more competitive the market.
“Ultimately, it may be that we don’t have a good handle on how demand is being reshaped by the changes that are going on in the world and therefore how supply needs to be changed to meet that demand,” Swan said.
Practices, Big and Small
Talent managers need to become experts in that interplay between supply and demand. Swan said far too often HR is passive and waits for tasks or problems to be presented to it. “We need to understand the economic forces, the competitive forces, what our client demands are and how that’s impacting demand for skills within our own company,” she said.
That understanding comes from spending time with managers steeped in the daily demands of running a business. That level of interaction will help managers take more responsibility for developing employee capability.
“These raw materials don’t just pop up,” Swan said. “You have to go out and work with high schools and trade schools ahead of time to make sure these people are ready and that they’re interested in your company.”
It also means looking at untapped pools of talent, both external and internal. Current employees may have what Swan called “skill adjacencies” to areas of need, and with a little development may fit the bill. This point is echoed by Mark Schmit, executive director of the SHRM Foundation and former head of research at the Society for Human Resource Management, the HR industry’s largest trade association.
Schmit said it’s time to break the one-size-fits-all model for recruitment, retention and development. Older workers in particular represent an already skilled and often willing population that can step in quickly.
According to two SHRM studies conducted in 2003 and 2014, many older workers are increasingly looking to either stay or return to the workforce out of economic need. The number who cited money as their primary motivation went up from 64 percent to 73 percent in the year-over-year period of the two studies.
By and large, employers are missing out on this potential talent pool. SHRM research shows that 54 percent of employers don’t actively recruit older workers.
Schmit said flex-work opportunities like limited hours and job sharing are particularly attractive to older workers. Mixed-age work groups are also effective retention tools, giving older workers the opportunity to learn new things and share their knowledge.
“The thing that demotivates them the most is when they’ve gotten bored with their job and there’s no new challenges,” Schmit said. “That’s when they start to look at second career opportunities or to retire and find a hobby.”
Even something as simple as including age demographics in employee satisfaction and engagement surveys can go a long way to help employers better understand how to attract and retain older workers, Schmit said.
Whether an older worker ultimately decides to retire or a younger one exits for a better job elsewhere, most employers can also do better at managing departures for gain. “Very few firms really think about their former employees as your alumni that are out there in the market and increase your corporate footprint,” Lobel said.
Instead of shutting the door on them, she recommended looking for ways to continue the connection and turn them into ambassadors, even going so far as using them to recruit others or rehire them for “boomerang careers.”
“The second start becomes seamless because you know the person’s strengths, you know the person’s weaknesses, you know who they get along with and it becomes so much easier than somebody who is completely new,” Lobel said.
In addition to serving as a positive signal to employees considering their own departure, it also brings in fresh perspectives and ideas from the outside that creates a more open, dynamic flow of talent.
Those signals tell current and potential employees that they’re seen as valuable assets and that the company is interested in their development. Lobel points to electric automaker Tesla Motors Inc.’s recent announcement that it is opening up its patents and intellectual property as another example of a company thinking strategically about talent.
“There’s a lot of business reasons why that’s actually a really smart thing that [Tesla CEO] Elon Musk has announced,” she said. “One of those things is as a recruitment signal, that this is a company that has a green mission that is about being creative and being the best that it can and not just caring about patents.”
Breaking the just-in-time hiring cycle and taking the long view is essential to shift labor-market factors in your favor, Mercer’s Stevenson said. Companies with longtime horizons such as airplane manufacturers who sell planes 10 years before delivery have an easier job of it, but that doesn’t mean others can’t be successful as well.
“The ones that do it best are the ones that are best able to adapt to the context of their organization,” Stevenson said. “They didn’t just buy a book and do what the book said.”
The goal is to get an idea of what the critical job or jobs are for your company and build a workforce plan around filling those roles. Stevenson said to start by segmenting your workforce between those roles that will be scarce and in high demand in the future vs. those that won’t.
“It’s not the wheel that squeaks the most that is potentially the biggest issue,” he said. “It’s the wheel that doesn’t squeak but you don’t know is going to fall off.”
Detailed data are critical as well. Effective workforce planning starts broad and ends up narrow. “To get narrow you need data; otherwise you’re just talking in generalities,” Stevenson said.
Finally, it’s important to broaden workforce planning beyond HR. “You can do all the planning you want, but if the business doesn’t actually own the outcomes and have a stake in the outcomes, it’s not often that those things work out well,” Stevenson said.
Therein lies part of the reason why talent management practices lag. Executives are good at capital allocation but not human capital allocation, ManpowerGroup’s Swan said. “Our CEOs and C-suites have not awakened themselves to the fact that this is an issue that needs to be resolved,” she said.
The organization of HR departments around vertical segments like recruiting, benefits and employee development hasn’t helped either. Swan said HR professionals too often focus on executing programs rather than paying attention to the larger economic factors at play. “We’ve made ourselves technicians,” she said. “This isn’t a technician problem. This is a business strategy problem.”
Despite the challenges presented by the external labor market and the internal barriers to tackling them, Swan remains positive about HR’s contribution.
“This is a superexciting time to be an HR person because there’s nothing more important right now than making sure organizations are agile and have the kind of skills that are needed,” she said. “That’s a great way to contribute to the bottom line.”