At the end of each year, we stop and take account of what we learned. Last year, 2016 was a year that offered a lot of lessons. Here are the top five.
1. Labor Is No Longer Abundant
Since the end of 2008, labor had been abundant. The Great Recession resulted in millions of people losing work and being added to the unemployment rolls. Since that time, the unemployment rate has marched steadily downwards, reaching levels that have not been seen in decades.
Millions of people have dropped out of the workforce, at the same time that the baby boomers, the largest generation alive, are retiring. Over the short term, this trend will continue.
2. Labor Is No Longer Cheap
Wages have been stagnant in many categories or grown only by a modest amount over the last decade. As the labor market has tightened, attracting and retaining the talent companies need to grow their businesses has become increasingly more expensive.
In our experience, the pent-up wage pressure finally broke in 2016. We saw more companies raise their pay rates or negotiate higher salaries than at any time in our company’s history. But our experience conflicts with the general wage growth, which still lags.
3. The Digital Age Shift Schedules Are Disruptive to Employees
This is especially true in the light industrial segment, where the shifts that serve the Digital Age are in direct conflict with the traditional shifts established during the Industrial Age. Many employees expect to work 7AM to 3 PM, 3PM to 11PM, or 11PM to 7AM. In the non-industrial segments, people still prefer 8AM to 5PM, even though the hours required in these segments are also starting to change.
Because we are all operating leaner than ever before, and because we have service-level agreements with our clients and customers, the shifts no longer match the business reality and are creating a conflict when it comes to hiring and recruiting candidates.
This conflict is exacerbated by millennials who expect a work-life balance, that leans more heavily towards life than it does work. Remarkably, these millennial’s are the first generation to make less money at this age than the prior two generations. We don’t believe that the millennials will end up being different from prior generations and will eventually find their way into a more traditional conception of work. Because we are on the front end of the Information Age, this transition will take time.
4. A Lack of Engagement
Gallup’s State of the American Workplace suggests only 33% of employees are engaged, while the world’s best-performing organizations show engagement levels at 70% on average. That means some of these organizations have engagement levels even higher than the average.
Gallup’s survey suggests that engagement is increased by “meaning” and “purpose” in the work, something most of us aren’t good enough—or consistent enough—about communicating.
51% of employees are actively looking for new work or are watching for openings. Already high turnover could become even worse without a radical shift.
5. The Effect of Culture on Retention is a Competitive Advantage.
Our internal data points to one little recognized insight. That insight is that our clients with the most welcoming, most employee- friendly, psychologically safe cultures have far lower turnover than clients who score low on our internal surveys.
What’s most interesting about this finding, is that companies with a more positive culture and a lower pay rate over index and outperform companies with a higher pay rate into less positive culture.
There is much work to be done in each of these areas, and to that end, we have put together an Executive Briefing. If you’d like us to share it with you, please reach out using the contact page, and we’ll make arrangements to provide you with our insights.
