Why the new business paradigm is relevant to your talent acquisition strategy

There is a global talent crisis. This crisis is creating a labor market unlike any other. According to a Talent Transformation Global Impact Report released by Udacity and Ipsos, 59% of enterprises report that not having enough skilled employees has had a major or moderate impact on business. What does this mean? If you are responsible for acquiring talent, you will soon be "under the microscope" if you aren't already. Why? The time and cost of acquiring talent through traditional sourcing methods hurts the business. I'm here to tell you it's going to get much worse. ??

Let's unpack what's driving the global talent crisis to understand better how to solve our recruiting challenge. First, the labor market is tight. It is tight in all sectors, including knowledge workers, retail, and hospitality. But, it is tight in each of those sectors for different reasons. Gallup, McKinsey, Korn Ferry, Manpower, and the Brookings Institute have all released reports analyzing the tight labor market. Second, many employees accessible via traditional sourcing methods don't have the skills organizations need for them to deliver on initiatives. Recruiting and retaining high-caliber talent is more complex than ever.

Executives tasked with meeting talent acquisition numbers in organizations of all sizes will need to find innovative new ways to source talent because of these labor market dynamics.

How did we get here?

The New Business Paradigm

In the mid-1930s, two Stanford engineering students, Dave and Bill, form a fast friendship. After graduating from Stanford, Dave headed to Schenectady, New York to work for General Electric, while Bill completed his graduate work at Stanford and MIT. In 1937, Dave traveled back to visit Bill in Palo Alto. While on the trip, the two decide "to make a run for it" and had their first official business meeting. A flip of a coin decided the name for Bill Hewlett and Dave Packard's new company.

Hewlett Packard and Silicon Valley are born in a garage on Addison Avenue. ??

Some years later, a 12-year-old found Bill Hewlett's phone number in the phone book and called him to request any available parts for a frequency counter he was building. Hewlett was impressed with the young man and offered him a summer job. Steve Jobs worked that summer at HP, building frequency counters.

The partnership and innovation that began in a garage in Palo Alto in 1939 have evolved into a global digital transformation. Pundits call it the Fourth Industrial Revolution. It's unlike anything the world has ever seen. Most importantly, the digital economy is faster and more competitive, with lower barriers to entry. Uncertainty, instability, and complexity are attributes. You don't win by doing what everyone else is doing.

In the digital economy, new value creation occurs quickly and inexpensively. Experimentation, iteration, and refinement are the path to innovation and market differentiation. The best and most experienced talent understands these market dynamics. When evaluating a company, they look to organizations to gain specific experience and move on. Organizations that think and act differently as demonstrated in the market are more attractive. Executives tasked with implementing strategies to acquire talent need to understand this new business paradigm because the traditional monolithic approaches to attracting and sourcing talent are insufficient to meet today's profitability, agility, and innovation demands.

COVID-19 and the Great Reevaluation

The Covid-19 pandemic accelerated this global digital transformation. There are no signs that the pace of automation will slow down due to a recession. In April, Microsoft CEO Satya Nadella, predicted that IT budgets and digital transformation projects would withstand a potential recession. ?

More recently, economists noted that data suggests companies are holding onto employees or "labor hoarding" because of uncertainty and the labor market crisis. Before the Covid 19 pandemic, executives typically laid off employees to cut expenses and improve short-term profitability. Many prognosticators, including Wall Street CEOs, predicted that a slowdown would lead to industry layoffs. As of yet, we're not seeing massive layoffs.

We know the demand for talent is voracious. While many layoff announcements are impacting workers, especially in technology, there appears to be sufficient demand to absorb these workers. But what about the supply side of the labor market?

For workers, the Covid-19 pandemic caused them to reevaluate their work and life. This reevaluation suggests that some values have changed. Values are more resilient than behaviors. Digital technologies, as an example, have changed behaviors. We have changed how we shop, make buying decisions, and communicate with friends, family, and coworkers. The changes that have occurred because of digital technologies require us to adapt.

The pandemic changed behaviors too. For example, we wore masks everywhere for two years. Today, most people have stopped wearing masks. But other behaviors, like remote work, have not been so easy to change. Many organizations adopted hybrid work policies when it became apparent that people wouldn't return to the office five days a week. A few prominent organizations mandated that all workers return to the office. But few, if any, have achieved a full-time return. People would rather quit.

Why?

The Covid-19 pandemic experience has also caused people to reprioritize work, family, and self-care. Their values have changed.

Recently, McKinsey released a report articulating their views and providing recommendations to employers.

Here's what McKinsey had to say,

"Employers continue to rely on traditional levers to attract and retain people, including compensation, titles, and advancement opportunities. Those factors are important, particularly for a large reservoir of workers we call 'traditionalists.' However, the COVID-19 pandemic has led more and more people to reevaluate what they want from a job—and from life—which is creating a large pool of active and potential workers who are shunning the traditionalist path.

As a result, there is now a structural gap in the labor supply because there simply aren't enough traditional employees to fill all the openings. (emphasis added)."

The Traditionalists and Wage Escalation

When I was a kid, I was often the last person picked for teams in school. I was awkward and lacked hand-eye coordination. In elementary school, I once whiffed so hard trying to kick a ball that I ended up flat on my back.

One year, I had the chance to lead a team of misfit kids in our Countryside West subdivision's annual Thanksgiving Turkey Bowl. Our team won by misdirection. On the last play of the game, I told the only girl playing, "we're going to you. They don't think you can catch the ball so they're not going to cover you. I know you can do it. You're going to be wide open." ?

Talent acquisition professionals will need to think and act differently if they're going to win.

Who are the traditionalists that respond to LinkedIn job postings and recruiter inquiries? They're "career-oriented people who care about work-life balance but are willing to make trade-offs for the sake of their jobs."

According to McKinsey, most people who have not quit their jobs, approximately 35% of the potential talent pool, are traditionalists.

McKinsey notes that a significant cause of wage escalation is that traditional recruiting and hiring methods are reshuffling these traditionalists. These workers are quickly moving from employer to employer each time with an increase in salary.

What's worse is workers are moving across industries. This is a fundamental change in market dynamics that will continue to impact the competition for talent. It is a direct result of the digital revolution. As business model innovation accelerates, the lines between sectors will continue to blur, increasing talent competition. For example, Amazon is an e-commerce company that is also an entertainment company that sells millions of household devices for its security company, Ring. Google is a search engine with productivity software that also sells household devices for its security company, Nest. Apple is a consumer products company that is also an entertainment company distributing exclusive content through Apple TV.

Targeting traditionalists alone at your competitors will only increase costs and fail to solve your talent problem. Notice that McKinsey says the change is structural, meaning employers will need to address attracting talent that is not traditional in a fundamentally different way for the long-term. It's time to start looking for talent in the nontraditional talent pool. These are the purpose-driven people who value flexibility highly and are either pursuing nontraditional work (temporary, gig, or part-time) or starting businesses. Many have left to care for family members or themselves. They are effectively out of the workforce.

Making the Most of Employee Networks

Referrals have always been the easiest way to find and hire talent. Recruiting through employee social networks is the most cost-effective and fastest way to hire.

Earlier this year, I shared the importance of social capital enablement in my article, Why fostering social connections is the next step for employee well-being and competitive advantage. Social capital is the connection between various forms of human capital. Here's what Valdis Krebs, the Chief Network Scientist and Founder of Orgnet LLC, has to say about it. It's insightful.

"The new competitive landscape requires focusing on between-employee factors, the connections that combine to create new processes, products, and services. Social capital encompasses communities of practice, knowledge exchanges, information flows, interest groups, social networks and other emergent connections between employees, suppliers, regulators, partners, and customers."

It's not what you know but who you know and who knows you.

Social networks are easier to access today through social media than ever before.

As Tim Hughes, author of Social Selling: Techniques to Influence Buyers & Changemakers (Second Edition) likes to say, "social media has changed the world." (The second edition of Tim's book is available for pre-sale on Amazon.)

The good news is that building relationships and networking is a skill. It's a skill that organizations can invest in to solve their talent recruitment challenge. We can enable people to connect, build relationships and be authentic.

The talent recruitment and attrition problems are not transient. They are long-term. Therefore, McKinsey recommends four actions to solve the long-term problem.

First, sharpen the traditional employee value proposition. This value proposition focuses on the title, career paths, compensation benefits, having a good boss, and the overall prestige of the company. That sounds traditional.

Second, organizations need to build nontraditional value propositions. These value propositions target a very diverse group with differing priorities. This nontraditional value proposition addresses flexibility, mental and behavioral benefits, a strong company culture, and different forms of career progression. Most important, McKinsey says th

The value proposition itself and the way that companies pursue these prospective employees should be more creative—and more personalized. The sheer volume of churn in the labor market and at organizations means that a massive portion of the workforce will remain new. (emphasis added)

Third, companies can broaden their talent-sourcing approach.

Finally, organizations can improve attrition, making jobs more "sticky" by investing in "more meaning, more belonging, and stronger team and other relational ties.

People being social is central to a competitive advantage in a social economy.

Being social and collaborating, internally and externally, on Teams and Slack, Twitter, and LinkedIn enables people to succeed in human relationships.

That's good for them, and it's good for the organization.