Trends in Workforce Planning for 2019
The economy keeps on humming along. So just how much of a candidate’s market is it right now? As of this writing, 250,000 new jobs were created in the U.S. last month (October 2018) with unemployment hitting a 48 year low of 3.7%. Average wages are also up 3.1% from a year earlier with gains expected to be about 3.5% in 2019.
“The labor market is cookin’, and that’s the bottom line,” said Ward McCarthy, chief financial economist at Jefferies LLC. “What’s really impressive is that the unemployment rate would’ve declined if the participation rate hadn’t risen, and that’s a good thing. You still have more people coming back to the labor market. There’s a lot to like.”1
Well – maybe not so much to like for current employers. As job vacancies continue to pull ahead of the skilled labor available to fill them, business leaders should be aware of 4 key trends, or the “4 R’s,” that will impact their decision-making and planning for 2019 that need to be addressed. The 4 R’s are: Retention, Recruiting, Regulations and Rewards.
SHRM estimates the average cost-per-hire to be $4,129, while the average time to fill a given position is 42 days. Even replacing an entry-level position can cost up to 40% of an employee’s salary.2 No question– Turnover is expensive and employee retention has to be among your top priorities for 2019.
To avoid turnover, you may be thinking, “Well – I’ll just increase their compensation and that should do it.” Or – when presented with an employee that is leaving, “I will make them a counter offer they can’t refuse.” Worst case, your budget may not allow for it, now what? The good news is that it is probably not about the compensation. The bad news is that if you’re not addressing employee retention, it is open season on your people.
According to a recent Fortune magazine article, “In almost every field, the two reasons most often cited for flying the coop were boredom and long hours.” As recruiters, we often see candidates willing to take up to a 20-25% cut in base pay for an opportunity that provides more of a challenge, work/life balance and a “runway” to their future goals. Performance-based bonuses and incentives also help fill the gap. Thus, consider other intangible benefits, such as: training programs and learning incentives (61% of U.S. companies have a tuition reimbursement program); flex-scheduling; financial wellness programs; remote office (decreasing your overhead); and mentoring and reverse mentoring programs. Also stop being the over-demanding, micro-managing, mercurial boss (19% gave dislike of a boss as a factor in their decision to leave).
Recruiting: Outsource It
According to TalentLyft, “The current job market is 90% candidate driven. That means you don’t pick talent anymore. Talent picks you. Consequently, finding and hiring ideal job candidates, especially those with in-demand skills, has become extremely hard, expensive and time-consuming.”
If you are looking to hire in 2019 it may seem self-serving that we are a retained executive recruiting and business advisory company advocating for you to hire a professional recruiting firm, but you need to do it. Why? Because the old methods of word-of-mouth and putting it out there (or even employee referrals), and the new methods (think online recruiting sites) are simply not working in the current economy. Push strategies, such as posting online to job boards, tend to draw in low quality candidates whose skills and qualifications are not aligned to the needs of the position. We rely on our networks and talent database acquired through the industries in which we specialize. Yes- sometimes you will get lucky. However, for every 100 resumes we receive, there are maybe 1 or 2 qualified applicants for the position. Quantity is not quality. What about a match to your company culture and behaviors necessary for success? Hard to communicate all of that online and many companies simply do not have the time or resources to do it properly.
The professional recruiter is a strategic lifeline to companies today, so you need to find one that will not just bring you candidates and hope one of them sticks. That is the old way and it isn’t working. You need a firm that is looking out for your best interests, interested in learning your culture, partnering with you on your overall human capital initiatives, marketplace branding and providing you industry intelligence. These are the recruiting firms that will find you the right match— a candidate who will stay because there is alignment with their values and the culture of the company. Worried about the cost? It is a lot less expensive than turnover (see “Retention” above) or the cost of a slow or no-fill for the role.
Regulations: Are You Compliant?
Compliance impacts nearly every area of a company regardless of its size. While Federal employment regulations seem to be pulling back, they are increasing at the State level. Middle market businesses often suffer far more exposure to compliance risk than they realize due to tight budgets, a small staff, and lack of expertise in many business areas outside of operations. It is critical for the long-term growth and success of any business to get a firm handle on their risk exposure and identify the appropriate strategies and treatments for business growth: Safety & Security (i.e. OSHA), Human Resources, Talent Acquisition, Financial, Supply Chain and Logistics, or wherever that risk may exist.
One thing that may help as you enter 2019 is to have a Human Resource Audit conducted that addresses elements of Compliance, Best Practices, Strategic and Function Specific areas targeting Recruitment Processes and Practices, Record Maintenance and Retention, I-9 and Performance Management just to name a few that may impact your organization.
You often don’t know what you don’t know before it is too late. A relatively low-cost Human Resource Audit will pay for itself quickly in limiting these risk areas and also lead to recommendations that not only lower your labor expenses, but also improve your workforce morale and performance.
Rewards: Compensation & Total Rewards
It took a while, but wages are indeed starting to increase and are expected to increase through 2019. This is a demand vs. supply issue— and the wage level could increase even more as the gap between open positions and available skilled candidates continues to grow. If you have not budgeted for this, there are still ways you can get creative.
First, you need to know where you stand and what the low-mid-high wage rate is by position and locality, which should help identify adjustments you may need to make. Sites like salary.com can be helpful in this regard. There are wild swings in cost of living and compensation levels by market and these disparities continue to grow.
In a previous blog post on “Employer Strategies to Succeed in a Candidate’s Market,” we outlined several ways to get around the fixation on base pay. These included: bonus incentives, signing bonuses, retention bonuses, and relocation assistance. In addition to the retention strategies listed above, these are ways you can strategically address compensation without just increasing base pay. For example, increase benefits (60% of employees are likely to accept a lower salary in exchange for better benefits).
Every business leader usually has some type of plan and it often fits into a neat time frame. The plan is never entirely complete, and it will undergo many changes and shifts along the way. As you plan your hiring needs for 2019, let your business plan identify for you the positions and people that will help you achieve your plan and grow. What skills, experience level and behaviors will your employees need in order to be successful? Outline these in your job descriptions and work closely with your recruiters to improve your chances of landing the right candidates in 2019 and beyond.
1Bloomberg: “U.S. Payrolls Rise More Than Forecast as Wage Gains Hit 3.1%” (By Katia Dmitrieva)
2Society of Human Resource Management
If your company is ready to strategically address, improve and invest in the hiring of the most important part of any company – it’s people — contact us today!