Attracting and retaining talent in 'the great talent gap'
08 September 2022
Meeting the challenge of breaching “the great talent gap” requires new solutions for attracting and retaining talent in an employee-centric market.
An overwhelming 96% of executives say we are in an employee-centric labor market and 70% of HR professionals are predicting higher than normal turnover this year.
We’re currently experiencing a great talent gap. The gap — between having the talent to operate optimally and the actual talent available — is what employers are trying to breach.
According to the U.S. Bureau of Labor Statistics, on the last business day of March 2022, the number of job openings in the country was 11.5 million. To put that number in perspective, Belgium – the 24th most wealthy country in the world by GDP – has a total population of about 11.5 million.1 The gap translates into a lot of missing talent and lost economic activity.
In the same month, there were only 6.7 million hires, and resignations edged up to 4.5 million, and those numbers were in the U.S. alone.2 Across the world, workers are quitting in historical numbers, so much so, ‘The Great Resignation’ got its own Wiki entry on February 2022.
This tightness in the labor market has been exacerbated by a vast array of complex issues that have accelerated in the past two and half years. Although it’s understandable that many people find changing jobs to be liberating during a period of limited freedom, the reduction in available talent is also driven by demographic and economic factors:
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Many women (and some men) have found increased caregiving and unpaid responsibilities to be too stressful to mix with employment at this time.A 2020 Indian study found that domestic duties increased for all during pandemic lockdowns, but the burden was disproportionally borne by women.3
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Older employees who retired earlier than expected, perhaps, among other reasons, due to accumulating savings in lockdown.A 2022 UK study found that roughly 300,000 more workers between ages 50 and 65 are now “economically inactive” than before the pandemic.4
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Many immigrant workers were not able to find new opportunities in other countries due to closed borders or challenging political environments; and many skilled expats are still opting to move home to be closer to family.For a stark example, in the month of February 2022, the cosmopolitan metropolis of Hong Kong experienced a net outflow of 71,000 people.5
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Others may feel confident enough to be less economically active because of gains in the global stock market or with cryptocurrency during 2021.
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There is also a shortage of people with sufficient skills to move into new roles created by emerging technologies or the development of digital industries.
Retaining talent: Essential workers deserve meaningful work, even while trying to make ends meet
One of the most interesting trends of the last couple of years is the emergence of the “essential worker.” This is a person whom society relies upon to show up in a physical place to get something done, no matter what.
These essential workers are in fixed roles, and they are often on the lower end of the compensation spectrum. To put a finer point on it, they must physically show up and deal with inflexible hours, and their work is often highly repetitive.
The nature of lower-skilled work is not new. But the current talent market is fundamentally different from the one in 2019. Every neighborhood cafe is advertising for baristas, and that difference means lower-skilled employees can now choose where they work, how they work (to an extent) and what work they do.
In January 2022, a major hospitality employer in Australia advertised for dishwashers at the hitherto-unimaginable wage-for-role of AU $120,000 (approximately US $85,400) because that was the amount it took to attract interest. But more money only fixes part of the talent retention problem. When people are choosing to leave unsatisfactory roles, there are better and more permanent fixes.
A Tale of Two Baristas: Purpose as a talent retention
Which barista contributes more meaningfully to the café, has more purposeful days and therefore more likely to stay?
Barista A: Works 6 am to 2 pm, making coffee, tea, hot chocolate, and chai and helps out doing odd jobs in the kitchen when not busy.
Barista B: Works 6 am to 2 pm, making coffee, tea, hot chocolate, and chai. In between peak beverage times:
- Researches fair trade suppliers, new trends and more sustainable takeaway containers
- Takes stock and orders supplies
- Talks to roasters about trying out new coffee blends
- Trains others on how to make the different beverages
Retaining talent: Professional employees also want meaning and purpose
As with lower-skilled employees, the flight from employers for professionals is actually a flight away from work without purpose and meaning. It’s also a move away from work that doesn’t match the post-pandemic lifestyle which many people are now striving to maintain.
One of the unintended consequences of digital working is that it has emphatically reminded individuals — day after day — of exactly what their jobs entail. Working in lockdown stripped away everything outside work tasks that might have influenced employees’ perceptions of their roles. What do they truly do in the absence of watercooler chats, lunches with colleagues and brainstorming meetings? And the inevitable questions that follow are:
“Do I actually like my job?”
“Why do I do my job?”
Employers that successfully retain talent are the ones that can help their employees answer these questions well or, if not, find inspiring solutions.
Solutions:
In most companies, job design is something that managers do, and they do it badly. Managers are not to blame, because job design isn’t in their sphere of expertise, and when they think about designing a role, their focus is on delivery efficiency, not talent retention. An additional hurdle is that managers are rarely given guidance on how to actually design great jobs, especially compared to the immense amount of training they receive for things like performance management.
But job design has the potential to be vastly more consequential than many other things in people management practice, and currently, it’s a huge, missed opportunity in talent attraction and retention.
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Other than talent scarcity, one crucial reason for organizations to focus on job design right now is the influence of technology on workflows.As AI becomes cheaper, more organizations will outsource their transactional work to it, creating substantial opportunities to rethink how work gets done. It’s an opportunity for us to use technology to help us redesign work, to make it more interesting and engaging. If AI is not part of your digitization plan, then it should be.
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The second opportunity in this area is in adopting more evidence-based management.The science of good job design is well established. For example, autonomy, mastery, feedback and role clarity are key engagement levers, and building these into the way managers design jobs is something many organizations should strive to do.
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Another opportunity is employee job crafting.This is important because research has shown that people who craft their own roles are more engaged and productive and see more meaning in what they do. The challenge, then, is twofold: first, helping employees understand what gets them most engaged and, second, providing them with the tools to craft that experience in the workplace. This is the true meaning of employee empowerment — giving employees the freedom to own what they do.
It’s critical for organizations to create as much clarity as possible about what they will do, when, and why and how individuals contribute to that goal. That individualized understanding is crucial for two reasons: because any certainty is stabilizing in volatile times and also because employees who have a sense of a shared future with the organization are generally the most highly engaged.
There are other key talent attraction and retention levers.
Four more essentials in attracting and retaining talent
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Understand your employee experience
It’s hard to retain talent if you don’t understand why they are unhappy and/or resigning. Exit interviews are too late. By designing a mechanism to really listen to the voice of your employees while they are with you, you will be much better placed to begin addressing the causes of attrition.
Powerful insights can come from asking open-ended questions in online questionnaires and allowing employees to share their thoughts. Advanced qualitative methods like natural language processing should be used to develop rich descriptions of employee experiences.
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Money is great (and not so great)
Money is important. It’s the basic extrinsic motivator when it comes to work. And there is no denying its criticality in talent attraction, so companies like Costco and the Bank of America are raising the minimum wage they are paying.
But money’s powers are not superpowers. Almost every employer has the capacity to pay more. The catch is that you have to match your pay strategies with the labor market, and unfortunately, paying more doesn’t mean you get more.
To be sure you are paying the right employee compensation for the right talent, you need to begin with a robust employee reward strategy and comprehensive market data.
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Manage employee stress and create an employee value proposition (EVP) that addresses unmet needs
From fertility treatments to scholarships, employers are building EVPs with enticing benefits to attract and retain talent. When building EVPs, however, it’s easy to feel the pressure to follow trends, but trends might not work for your particular employee population. It’s crucial that you begin by understanding your people’s needs.
Employees continue to face multiple unpredictable reverberations from the pandemic and other major world events, resulting in a range of new or aggravated sources of stress impacting their mental and physical health. Work should not be adding to that negative impact.
The more companies understand people’s stress and critical unmet needs, the better they can judge the programs, rewards or experiences that would differentiate their EVPs or better communicate what current programs exist to help alleviate those stressors.
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Upskilling is a critical investment in talent retention
Personal development and employee training are at the epicenter of the new work deal. You can retain talent by building a compelling career with your organization.
Even before the pandemic, 78% of employees said they were ready to learn new skills. Ensuring people sustainability through future employability is now a critical part of the employment contract. Organizations can empower individual employees to upskill by building strategic training opportunities within a robust career framework, one that has clear and transparent pathways for employees to follow.
To maintain and inspire productivity, you have to tap into extrinsic and intrinsic motivators.
Mercer can help you do both so you can retain your people and inspire them to be their best.