The Employment Edge #3: Strategic workforce planning in The Big Stay

Welcome to the third edition of The Employment Edge, where we share insights, best practices, and observations to help you maximise your investment in talent, develop inclusive & high performing workplaces, and enhance employee engagement.

This month, we’re looking at how companies can retain competitive edge while successfully navigating the economic slowdown and the tightening of the labour market:

1?? The Big Stay

2?? Buyer’s Market

3?? Bridging skills deficit in the workplace

4?? Strategic workforce planning

5?? Closing the skills gap?

Enjoy!

The Big Stay?

The Great Resignation which followed in the immediate aftermath of the Covid-19 pandemic saw employees quitting en masse and/or moving jobs citing reasons of low pay, low opportunities for internal progression, not feeling valued by their employer and the desire for more hybrid working arrangements. The number of resignations in Q2 2022 (442,000 ) was the highest number of resignations taking place in a single quarter in the UK.?

Those who quit and made external moves during this period received significant wage increases with the majority of the market receiving higher than inflation pay raises over the last 3 years. Now, faced with a sluggish labour market, declining employment rates and lower levels of employee turnover, we are entering a new era, which the CIPD has coined ‘The Big Stay’ in their Latest Labour Market Outlook Report.

The Big Stay is categorised by a cooling labour market with employees deciding to stay in their current roles and employers looking to retain current staffing levels, all against the background of large scale organisational restructurings and wider geo-political and economic uncertainties.?

What has become clear is that, for employees, job security has become the most important factor. For employers, it presents an opportunity to tap into talent retention strategies that go beyond merely financial compensation to a renewed focus on the importance of mission, culture and progression. Organisations, particularly within the financial and professional services sector have since focused on pay gap reviews, to redress the imbalances of the wages hike.?

Buyer's Market

The current labour market is skewed in favour of employers, which is in stark contrast to the candidate-driven market over the last couple of years. Employers have been driven by a renewed focus on talent pipeline management amidst a contracting economy, reduced turnover rates, and hiring pauses. More than half (55%) of employers are looking to maintain their current staffing levels, according to the CIPD’s latest Labour Market Outlook. This is the highest level it’s seen since 2016-17.?

It has never been harder to find top talent. Employers and in-house talent acquisition teams (TA) are engaging in skills based candidate sourcing, not only for current vacancies but with a view to aligning talent needs with future business priorities. TA teams will be a central conduit to matching high performing and highly skilled candidates with organisations looking to gain competitive advantage.

Whilst some companies use moderate wage increases to help retain their key staff, the market has signalled a big shift away from the above inflation level pay increases of the post Covid era. This in turn has slowed down pay pressure in the external hiring market and has led to less employee turnover as professionals become more resistant to trading out in a tight market. ?

The best talent usually has multiple offers to choose from and can demand higher level salaries. Employers need to be able to move quickly and be able to articulate a clear alignment with the organisations’ values, culture and business priorities with the candidate’s individual goals. If your organisational culture, mission, and vision resonates among the company’s employees, they are less likely to leave the company if a better financial opportunity presents itself. ?

Zooming in on the UK labour market, the recent trend of employers requesting employees return to the office has had major consequences for certain workforce demographics and demonstrates a shift in power in the employer’s favour. For further insights on the current state of the UK labour market, listen to Michael’s conversation with Jeremy Vine on BBC Radio from May 15th (minute 30:00 to 35:00).

Bridging skills deficit in the workforce

With burgeoning skills gaps in the workforce, mandates for talent searches for skilled external talent have increased YoY. Leadership teams have had to go to market in some cases to bring in talent that can create and develop new strategies to not only keep pace, but get ahead of these trends, and to provide new perspectives to help the organisation meet the changing needs of the market. The most common workplace skills gap we currently see is the adoption of new technology such as Generative AI to facilitate process automation and digitisation, to support organisational productivity and innovation goals.?

In other cases, the internal talent and expertise is there, but they may lack the seniority to step into the C-suite or other leadership positions. We’ve seen large-scale shortages of qualified candidates both in established leadership roles such as CEO or CFO positions, and new opportunities focused on Sustainability and AI/Machine Learning.?

This becomes more apparent when the previous incumbent departs a firm unexpectedly and there is no immediate internal replacement. In this scenario, organisations look for a leader who has demonstrated and proven leadership at a competitor, or from an aligned business who can steady the ship and provide a clear strategic roadmap through the transitional period. For example, the recent appointment of Chris Weston , a former British Gas Executive as CEO by Thames Water in December 2023. Weston was brought in to restructure and turnaround the heavily indebted utility company and replaced the former CEO Sarah Bentley,?who resigned with immediate effect in June 2023 after three years in post amid a backlash over the company’s dumping of sewage in British waterways.

Strategic workforce planning

It is becoming increasingly challenging for organisations to achieve their business goals within this current economic environment with issues such as sustainability and climate change, socio-economic disparities, inflation surge, and tightening monetary policy.?

Investors have responded by holding their investments for longer periods. For leadership teams of these organisations, it means providing a longer term strategic outlook (5-7 years) which includes stress testing corporate strategies, risk management and business continuity in an environment where senior leaders move around more frequently and there is more external scrutiny on non-quantifiable metrics such as conduct and ethics. For example, see the resignation of BP CEO, Bernard Looney.

Succession planning often reflects the lifecycle of the business and the stability of the leadership team. Do they need a leader who can immediately step into a vacant seat following a departure? Do they need to maintain the status quo and operate on a business as usual basis, or someone who can drive growth and innovation? Or do they need someone who has the skills to restructure the organisation? Organisations need to be ready for these eventualities and prepare multiple plans for succession for differing scenarios.?

This would involve twin tracking and preparing multiple candidates with different profiles, by providing:

?? Leadership opportunities and experience across various functions,?

?? Executive coaching;

?? Sponsorship from senior leaders?

Building an internal talent pipeline is necessary to minimise the disruption and costs that come with change management. Strong and strategic leadership is needed at the centre to effectively steer organisations through this transition, which could mean the difference between falling short of business expectations and driving future growth.?

Closing the skills gap with employee development?

The current lull experienced in hiring has allowed firms to strategise their workforce planning and focus on talent retention and development programmes. In a challenging economic climate, the strength of its people in an organisation is seen as the key differentiating factor to drive innovation for growth. There is an increased recognition of the fact that much of the value creation is driven by Senior Management, two layers below the C-Suite level.

Analytical thinking and creative thinking remain the most important skills for senior leaders going forward. New leaders who can bring fresh ideas and a diversity of approaches and perspectives are required to drive change across new roles and competencies in AI, Sustainability and more. Employees need to be developed in roles that give them the breadth and depth of experience across various parts of the business to stimulate collaboration and innovation.

Additionally, organisations need to up-skill existing workforce through training, mentoring, sponsorship, executive coaching and increasing the duties of existing staff is currently the most common employer response with hard-to-fill-vacancies. Targeted training can close the skills gaps, but top talent will also need a clear plan with vertical and lateral opportunities, which can lead to improved job satisfaction and employee engagement.?

Looking forward

The fastest-growing roles today are driven by technology, digitalization and sustainability. Investing in employee learning and development programmes, and new technologies are the most common workforce strategies that need to be adopted by organisations to deliver their strategic business goals over the next five years.?

Organisations should take proactive steps to address its talent and development shortcomings. Through a combination of forward-thinking recruitment, professional development and strategic re-skilling and up-skilling of employees, organisations can reduce the workplace skills gap and improve their future readiness.?

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BARRINGTON HIBBERT ASSOCIATES is a London and New York-based Specialist Executive Search, Leadership Development and Diversity and Culture Advisory firm. We support leaders across multiple areas of their talent strategy, from leadership assessment and diversity pipelining to board succession planning.