Numbers don’t lie, but they don’t always tell the truth you think they are telling.
We saw GDP growth at an unprecedented 4.4% in third quarter – double what it was in April 2018. At the same time, unemployment is at an all-time low – 3.9% nationwide in the month of July. Unemployment has dropped a full percentage point since 2012. Job growth continues to increase at a steady pace.
But don’t let your rose-colored glasses fool you. If the GDP is up and unemployment is down, we might want to look twice. Hang with me and I’ll try and walk the dog on this… it took me more than a minute to see this perspective.
First – why was 2012 important? Among other things, Baby Boomers started to turn 65 in 2011. It’s not a coincidence that with 10,000 baby boomers leaving the workforce daily that unemployment has steadily decreased. Fewer workers (supply) + job growth (demand) = more vacant jobs. Herein lies the problem: there’s not enough workforce availability in the right skill sets to fully pick up the slack of all those who are leaving.
Second – this decrease in unemployment causes wage inflation as fewer people compete for more jobs. It’s the law of supply and demand. If you want quality people, you’ll need to pay more for them. In a recent article by Kurt Knutson, he says, “diminishing ‘labor market slack’ leads to higher wages and higher demand, which leads to higher inflation.” Higher inflation, continuing interest rate increases, lower unemployment combine to make it challenging for companies to maintain access to capital they need for continued growth.
What does all of this mean? The competition to sustain growth will continue to stiffen if all these statistics hold true. How companies deal with talent shortfalls is more important than ever, particularly when it comes to growing talent with the leadership skills necessary to enable growth.
Here are three rules to help win the competition for talent.
Rule #1: Don’t lose what you’ve got
Companies fighting to hire new employees will have un-forecasted expenses that will cripple small- and medium-sized businesses. According to the Tennessee Manufacturers Association, 84% of Tennessee Manufacturers expect hiring qualified workers to be mildly to extremely difficult with an average of 70 days to fill open positions. According to Carolyn Borysanko, in TMLT/Talent Management and HR, it costs 150% of a mid-level employee’s annual salary to replace them. She lays out some great examples:
- Four mid-level employees with an income of $80,000 a year would cost approximately $480,000 to replace.
- Six entry-level employees with salaries of $40,000 would cost $96,000 to replace. Making the cost of replacing entry-level workers 30 to 50% of their salaries.
What’s more, there are hidden costs:
- human resources time and resources spent on searching for new employees
- training expenses
- decreased productivity and efficiency while an experienced employee trains and on boards new employees
- inefficiencies as other employees pick up the slack of a missing or onboarding teammate
- opportunity-cost loss, particularly as you onboard those in business development or sales
Rule #2: Engage your employees
At Solutions 21, we believe people don’t quit companies; they quit people. In 2015, employee disengagement was at 32.4%, according to Gallup. Disengaged employees have behavioral costs both in the motivation drain they cause on others and the time spent by supervisors trying to get them motivated. According to Gallup’s state of the American workforce, 51% of U.S. employees are actively looking for a new job. In another report by Gallup, they found that 50% of employees left their job to get away from a manager. That same Gallup study states that “the majority of actively disengaged workers are likely to bolt for almost any raise, while the majority of engaged workers would require more than a 20% raise to leave their current company.”
What does this mean? Follow rule number two and aggressively engage your employees. Let them know that you care.
Rule #3: Coach and utilize coaches
Business owners and leaders are busy reacting to the dynamic state of change in today’s workforce. They don’t have enough time to anticipate what they will need and work to develop those behaviors in their employees. Many companies spend a tremendous amount of time building programs and models for building leaders instead of actually doing the work of building leaders themselves. It’s easier to “think about doing” than it is to “do it” yourself. 94% of companies do not feel fully ready to address their leadership issues, according to Deloitte’s 2015 Human Capital Trends. What’s more, 64% of CEOs said that the issue that will command most of their attention in the next year will be developing the next generation of leaders, says DDI in their global leadership forecast 2018.
While it’s true our economy is operating at unprecedented levels, we must remain vigilant in keeping it that way. This requires companies to grow and develop their bench.
In the words of my friend, Bo Balcavage of Crestcom International LLC, “Leadership development is a mindset, more than an activity. Particularly if you want it to become a routine activity. Leadership development isn’t something you do if you have time or enough resources. Leadership development is what leaders do because those with a leadership title attached to their name owe it to those they lead. It is the price of being a leader.”