It’s The Great Disruption… Not Resignation
If you believe the headlines everyone is resigning or planning to. Accepting that can lead management to jump at obvious “fixes” for what might not be there.? Yet to say that labor markets are disrupted is a massive understatement. Surveys show that almost half of employees would leave their organizations given a better opportunity. Yet one would wonder if that has not always been the case. Why wouldn’t someone change jobs if something better is on offer? The statistics show a lot of people left their jobs recently. But much of the volume was concentrated in industries like hospitality and travel, was due to furloughs initiated by employers and the appeal of having a higher income while not working made possible by large income supplements provided by the federal government.
The best available data suggests more pay and improved career options are pretty much tied for the lead when reasons people might change employers are identified.?
Pay
Uncertainty about how much inflation there really is now and what it might be in the future has alerted people to the possibility that their real income might go down (which would be the case if the current increase in their living costs exceeds the increase in their income).?
Employers too often fail to be clear about what drives pay levels. Sound compensation management mandates that it is the cost of labor and not the cost of living that should drive pay levels. When there is persistent inflation employees want their income to increase at least as fast as the cost of living increases. Yet when competitive pay levels exceed inflation, as has been the case for some time until recently, they want their pay to be adjusted to market levels. Employers who allow employees to expect that they will respond to the higher of the two rates each year will be in danger of pricing themselves out of business.?
A forty-five year analysis I did shows that if the L in COLA is Living pay levels would be about 50% lower than if the L is Labor. Real wages have increased about 1% per year over that period (because labor has exceeded living by 1% on average). This means if employees were forced to choose one measure or the other, they would select Labor. But if they could have the higher of the two each year, they certainly would prefer that option. The lesson to be derived from this is that employers need to counter any uncertainty by using clear communication of philosophy, accompanied by the reasoning. Inflation is a macro-economic measure over which organizations have no control. It is also different for different people, making it unsuitable for a metric that influences decisions about pay.
One approach to administering pay is to give automatic increases each year that are the same percent of current pay. This approach is still widely used by public sector entities, although many have abandoned it since it compounds the increases in payroll, which is a fixed cost, even when revenues decline. Another disadvantage is that giving the same increase irrespective of performance tends to repel high performers and convince everyone performance does not matter. Automatic increases are also common in collective bargaining units in the private sector, although that is only a small percentage of private sector workers. There is no definitive data available to support the assumption that unions will attempt to reopen contracts if inflation is sustained at high level but it seems a likely outcome. It is imperative for employers to point out that no similar request is forthcoming when the negotiated increases exceed inflation.
Career Opportunity
The opportunity to increase one’s capabilities is valued by most employees. People know that a more qualified person will always be better positioned to find employment and to command a high level of income. Although someone late in their career might not value additional skill growth highly most people want to be the best they can be and to be able to utilize their capabilities. “Upskilling” is the new mantra, both for employees and for most employers. A cyber security specialist will want to have all of the latest certifications and possess the skills that enables him or her to cope with the ever-changing challenges. That specialist will also want the employer to utilize the skills and knowledge by ensuring the person is in the right role. If outsiders are brought in to do the most challenging work employees are likely to view that as a breach of a social contract, even if the employer would have to invest in training for them to be able to perform the work.
Research focused on why the vast majority of employees believe they are underpaid has historically found several causes:
1. Perception that the person’s role is undervalued,
2. Perception that the person’s competence in the role is underestimated, and
3. Perception that the person’s performance in the role is lower than it is.
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Yet if further analysis is done it is often the case that employees feel underpaid for what they could do if fully utilized. If the cause is the latter, it is not a pay problem, but one of career management.
When discussing strategies for dealing with today’s disruption with clients they often admit they do not have good information about what employees could do.? When hiring they compare the candidate’s qualifications to the competencies required for the vacant job and look for the best match… they select people for a current job, not for a career with the organization. The first few days of my military service were spent testing. This investment in training by the military began when WW II broke out and the country found it needed to increase military capabilities quickly. The diagnostic testing enabled the services to evaluate how to best utilize the inductees. It also provided the data that enabled people to be moved around to produce the optimal result. The military is therefore more inclined to invest in development, since agility is a workforce characteristic that is valuable.
Not all employers are willing to use that approach because it requires a significant investment (and often because they did not do any workforce planning and are forced to find someone who is fully qualified immediately when a vacancy suddenly occurs). Even when there is a suspicion that an employee could quickly learn and grow into a more demanding role managers often play it safe and want a fully qualified new hire. Overcoming that tendency requires a culture that values development and an executive management that demands investment in the organization’s workforce.
Employees sometimes leave an organization believing there are no growth opportunities even though that perception is incorrect. Although openings may be posted on the company’s website the qualifications required in the posting may rule the employee out, unless someone is willing to take a leap of faith and recognize that an employee is capable of growing into the role. Another obstacle commonly exists: managers dread the prospect of losing a good performer in a critical role and are unlikely to take the initiative to encourage a current incumbent to apply for openings. A high performing Engineering Technician may not have the BS degree the company requires for Engineers, but taking a longer-term view of the person’s capabilities may overcome the obstacle. Someone with a technical Associates degree could work towards completing a BS on a part-time basis, assuming the organization has an educational reimbursement program and is willing to reallocate responsibilities in a manner that makes this option feasible. Demonstrating that the employer believes in its people is a cultural characteristic that is attractive to many and could prevent the loss of that Technician.
More work is being done for organizations by people they do not employ. The “gig economy” that has been heralded as the new normal involves allocating work to whoever is best suited to perform it and whoever can provide an economic advantage. The “Y2K” crisis was a crisis because there was inadequate workforce planning until the late 1990s. When the need for people with the skills to replace traditional mainframe systems with networked software systems was finally recognized it was often too late to retrain current employees. The other option was to have the work done by contractors, but many organizations tried to hire skilled people in labor markets where demand was massively larger than supply. The result was often over-skilled and overpaid employees who were underutilized after the conversion.?
One strategy for better utilizing a workforce is to consider employees as potential “gig-ers” and to use them to fill staffing deficiencies. Even though an employee may be stretched to do the work needing to be done this is another developmental approach that can dispel the feeling that one is trapped in a role involving doing the same things repetitively. As organizations realign their staffing during economic recovery, they can lessen the need to recruit by avoiding turnover. Even an assignment that lasts only a few months it can enable an employee to experience variety and to learn more about the business of the organization. It can also demonstrate that opportunities exist within the organization.
Conclusion
Disruption is rife. Organizations are rethinking their staffing strategies so they can operate effectively in a dynamic environment that will be likely to offer up even more unexpected and highly impactful changes (often termed “Black Swan” events).? People are more agile than many organizations give them credit for and demonstrating they are respected and valued can be accomplished by allowing them to show they can and want to do more. Agile staffing strategies will present challenges for managers who are used to maintaining a stable structure. They may need to be reminded that the employees are the organization’s people, not their people. Rewarding managers who contribute to the talent pool by identifying the potential of their people, rather than just what they have demonstrated they can do, can encourage an optimal allocation of work. Taking the initiative to fully utilize the talent of people can minimize the resignation and deal with the current disruption.
About the Author:?
Robert Greene, PhD, is CEO at Reward $ystems, Inc., a Consulting Principal at Pontifex and a faculty member for DePaul University in their MSHR and MBA programs. Greene?speaks and teaches globally?on human resource management. His consulting practice is focused on helping organizations succeed through people. Greene has written 4 books and hundreds of articles about human resource management throughout his career.
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