What’s the deal with this labor shortage?
If stock and inventory shortages weren’t enough, there’s something more important seemingly in short supply. People.
The Covid-19 pandemic has been a double edged sword (in reality, more of a throwing star) in terms of both its long and short-term impacts on the workforce.
The pandemic is a virus
Whilst this sounds painfully obvious, with the furor and emotionally-charged debate around any and all topics surrounding Covid-19, the fact that it is still a virus that impacts health seems overlooked at this point.
There is the immediate issue of people catching Covid-19 and requiring time off work. Those who have been in contact with them then have to follow government guidelines to also isolate themselves. This has meant outbreaks in workplaces have brought supply chains to a standstill.
Millions of people across the globe are also suffering from ‘long covid’, affecting their ability to carry out full-time work for months. There is also the tragic reality that hundreds of thousands of ‘working-age’ people have died from the virus.
There are simply fewer people physically able to carry out work and this has been the case since the start of the pandemic.
The physiological effects of the pandemic on the workforce only tell one part of the shortage story. Being able is one thing, but being willing is something else.
The Great Negotiation
The Great Resignation phenomenon has T-boned the labor market. This is going to be a major problem area for CFOs this year (https://docs.google.com/document/d/1wLYGnQa1w8kfSgaA-1BHjg2FONUALhBhxPpN4X7gkOg/edit?usp=sharing) and potentially further down the line as well.
Goldman Sachs found that 5 million people left the US workforce during the pandemic. They predict that 60% of the ‘missing workers’ retired, many of them taking it early. This isn’t people taking a hiatus from work, this is people going for good.
That being said, there are a large number of people who are taking an extended break from working life. A US Chamber of Commerce poll showed that over 50% of respondents were either ‘somewhat active’ or ‘not very active at all’ in their job search.
8% of respondents said they don’t plan on going back to work at all.
Those who are returning to work are experiencing a wage boom, greater benefits, and are in a position of power that hasn’t been since in generations.
As a CFO, attracting top talent is now a more expensive and generally challenging process. A smaller pool of workers to choose from, all coming with greater demands. Workers want paid maternity leave, the option to work from home, and a salary that reflects their value.
This is going to be a positive thing in the long-term, even though the immediate impact has caused CFOs considerable stress. But better working conditions means greater retention rates, which will lower recruitment costs in the long run.
Not only that, but a company that meets the demands of its employees is set for success as their notoriety as a good employer increases.
The Great Negotiation is underway, those cutting corners and focusing on short-term fixes are shooting themselves in the foot. CFOs who understand that this shift in the dynamic of the labor market is potentially permanent are going to win in securing the most important part of a business’ success, good workers.
The Fermi Paradox
All this being said, if securing top employees is as simple as outlined above, where is all the qualified talent? Put in the terms of a great philosophical conundrum concerning alien life; if there is intelligent life out there, then why haven’t we encountered them yet?
Many CFOs are finding themselves wrestling with this modern-day Fermi Paradox, a survey by CFO Strategic Partners found.
CFOs were asked whether they were encountering challenges in sourcing qualified staff. As the above results show, the vast majority are finding this manifest itself in multiple ways.
Staff are leaving, and there’s major challenges in attracting suitable replacements. When asked about tactics to retain staff other than wage increases, respondents gave the following suggestions:
- More flexibility in schedules and work location
- Remote work opportunities
- Bonuses such as sign-on, referral, award and COVID vaccination bonuses
- PTO for all staff members
- Continually working on company culture with special treats and office socials
- Compensating employees for all work-related meals
Whilst pizza parties (or for our UK folks, any work-related parties) have become the butt of a lot of jokes about insufficient replacements for genuinely good company culture, if done right then paying for people’s food is a nice bonus!
The substantial suggestion amongst those above is the continued emphasis on company culture. The others should be incorporated into the base-level of value placed upon employees. We’ve got a handy ebook (link to ebook) on ways to instill that culture through strong leadership, even in the remote working environment.
Finance leaders are emphasising the importance of culture within the organization and taking a greater role in cultivating it. Incentivizing staff to stay, and attracting new talent, require budgetary considerations and also will contribute to the bottom line of the business.
