New approaches to solving the labor shortage
Causes of the labor shortage
In November 2021, the Eurozone’s unemployment rate hit a then-historical low of 7%.1 Since that time, the number has dropped each month to new lows,2 taking potential employees out of the market even as European employers grapple with labor shortages.
The picture is much the same in the rest of the world, with many countries struggling to find the people they need to recover from the pandemic downturn. Digital skills are in critically short supply, as is labor for transportation, hospitality and healthcare — and everything related.
Staff shortage is now so detrimental to productivity, profitability and business operations that the issue has evolved from merely “an HR problem” to an organizational-wide challenge.
The labor shortage has been a rumbling menace for a long time
The demographic indicators were clear. Falling birthrates and ageing populations have been trends pointing to eventual employee shortages. According to the World Health Organisation, by 2030, one in six people in the world will be aged 60 years or over3 presenting diverse challenges for governments, businesses, communities and families.
For employers, the aging population retiring from the workforce has been a looming issue. And there have been ongoing efforts to prepare for it. Business advocacy has helped to increase the statutory retirement age in a number of countries, and some employers are incentivizing longer tenures. But not enough has been done, and the pandemic has massively exacerbated and accelerated the problem. Many older people just didn’t want to continue their careers online in lockdown and opted out even earlier than expected.
Opting out by older workers is only one driver of the labor shortage. Companies are now grappling with other factors causing the talent gap:
- A shift away from big employers being seen as the most attractive is underway. The agility and potential of smaller companies and startups are now far more attractive than they have ever been.
- Values are misaligned between employees and their employers. Some employees are saying, “ESG is important to me, but the way my employer operates is unsustainable when viewed through an ESG lens.”
- There are jobs that people no longer want to do — those that are not just menial and repetitive but also lack meaning and obvious purpose.
- The COVID-19 pandemic is a continuing concern.
The pandemic is driving the acute labor shortage
To focus on child and/or elder care
Deep, personal reflections during the pandemic leading to career change
To recover from fatigue/de-stress (an alarming 8 out of 10 people report being close to burnout4)
To look after their mental and physical well-being
A lack of progression opportunities
Lack of control
A new mindset and approach
To bring employees back, some employers need to change their thinking from “We’re a great company; come work for us”’ to an approach of “you and your skills are great; how would you like to work with us?” and “how can we enable you to work?” It’s a huge mental shift but one that will be crucial for some if they are to solve their staffing shortages.
Although organizations can’t meet the unique needs of every individual, a great place to start is by being empathetic to individual circumstances. It really is a tough time for people across the world, so caring about alleviating employees’ stressors and being open to doing things differently can help enormously.
Everyone needs digital, so compete differently
Job advertisements are no longer as effective as they once were. The trend of diminishing returns has online job boards reporting ever-climbing historical ad numbers corresponding with declining response rates.6 Companies now need far more proactive talent attraction processes for skills and roles at all levels. Previously reserved for executive-level roles, targeted sourcing is increasingly utilized. Effective talent acquisition now begins with mapping the market to figure out who is out there with the skills you need — both within and outside the industry. With the help of this data, personalized approaches to individuals are proving to be a much more effective strategy.
Employers also need to manage their own expectations of pay levels in the labor shortage. In a recent case study, a retail client, long accustomed to paying minimum wage for transient retail workers, had a “jaw drop” moment when presented with the latest compensation data for digital skills.
Begin attracting talent early. Hiring processes are taking longer than you think, so plan ahead and begin attraction processes before staff shortages become a business-critical problem.
In the interview process, engage potential employees by explaining what the company has to offer and exhibiting a mindset that says, “How can we work together?” Don’t ask prospective employees to impress you. You were already impressed enough by their resumes to meet them.
And finally, organizations need to relax their requirements. Smart, willing and capable people step up and do better when there are challenges in their roles.
Highly engageable7 employees — the type of talent organizations often wish to attract — want development, career paths and new skills. To be a compelling option, a company needs to offer progression opportunities — vertically and laterally. A great example of innovative upskilling that benefits both employees and employers is the Capgemini and Amazon Web Services (AWS) partnership.
The agreement to train people on cloud skills — free for six weeks— is producing surprising benefits beyond upskilling and talent retention, including the building of an AI tool with 97.5% accuracy in sperm whale identification. To date, well over a third of Capgemini’s 10,000+ employees have at least one AWS certification.8
If you can’t find it, build it. From strategic workforce planning to learning and development, organizations have to be serious about training for new skills. And it’s not just about having ad-hoc modules available. To truly solve labor shortages, companies need to build learning journeys that result in the future skills and capabilities they’re looking for. You need to create a life-long learning culture in which individuals are inspired to make time to learn and train.
However, it’s important to remember that not everyone wants to stretch and upskill, so appropriate respect, reward and recognition also need to be defined for that valuable section of your workforce.
Employees lived different personal and professional lives during pandemic lockdowns, and some found better work-life balance. They left commercial centers, spent more time with their families, and kept up productivity without the set hours and need to commute. The flexibility suited them. Progressive employers understand that to withdraw that flexibility — without truly valid reasons — will prompt resignations and exacerbate employee shortages.
Some careers opted out to care for their children and/or parents. So, there is an opportunity for organizations to attract careers back into the workforce with flexibility and/or subsidized care solutions.
When talking about EVPs, there is a misguided perception (in some HR circles) that “we are giving in to demands.” Such thinking isn’t a constructive mindset and certainly isn’t conducive to solving employee shortage challenges.
The premise of an effective EVP begins with putting your most valuable assets — your employees — at the center of everything you do.
Values evolve, and for the most part, the world becomes a better place as a result. There is now a definitive expectation for companies to step up and reflect the values of society. Progressively working on your EVP is part of that alignment of the world of work with societal expectations. Rather than “giving in,” the new approach is “how do we reflect the values of our people?” and “how do we help them meet their reasonable needs?”
Start by asking your employees what they want. And while it’s tempting to “keep up with your competitors,” it’s useful to remember that the unique composition of your organization means your EVP offerings should also be unique. Your competitors are composed of entirely different groups of people from those in your organization.
Invest in things that have a longer-term impact. Across all processes, it’s important to ask yourself, “Is this a good employee experience?” Onboarding is a case in point. It’s often an unnecessarily admin-heavy and cumbersome process. There is undoubtedly a lot of information to share with new employees, but most companies are doing the bulk of it digitally. They push information to people (“You can only have a security pass when you have completed these five OH&S and Compliance modules”) instead of taking a step back and being more mindful about what people actually need to know at that point in time. Could companies do this better?
You don’t have to take a year to redesign your EVP. Make an impact today by communicating what you already offer — and how it can benefit individuals — while evolving what you have.
Again, remember that success begins with putting employees at the center of what you do. Be empathetic and be led by unmet needs.
About the author
Raphaele Nicaud has been with Mercer since October 2005 and is based in Paris. She graduated from Science-Po Paris, France in 1997 and holds a Masters degree from Georgetown University in Washington DC, USA. She is fluent in English and French having lived in Australia for 14 years. She is a global expert on Talent issues and has published many articles and is a regular keynote speaker at HR premium events.
Raphaele is currently the Talent Solutions Leader for Mercer Europe and heads the French HR Transformation Practice. With 20+ years international consulting experience she focuses predominantly on executive stakeholder management, translating strategy into plans and drawing insights from advanced analytics.
- Arnold M and Romei V. “Eurozone Jobless Rate Hits Record Low of 7% as Worker Shortages Spread,” Financial Times, February 2022, available at https://www.ft.com/content/fc3d94f1-9c6c-4f5e-8536-9db90ff221cc.
- Eurostat. “Statistics Explained,” July 2022, available at https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Unemployment_statistics.
- World Health Organization. “Ageing and Health,” October 2021, available at https://www.who.int/news-room/fact-sheets/detail/ageing-and-health.
- Mercer. Global Talent Trends 2022 Study, April 2022.
- We know this both intuitively and through an avalanche of evidence. Business as small as Indonesian family wrungs (TechWire Asia, May 2021) have digitalized to survive through the pandemic, and the use of Mercer’s Comptrx tech talent platform has increased exponentially.
- SEEK. “SEEK Employment Report — October Sees Record High Job Ad Numbers,” November 10, 2021, available at https://www.seek.com.au/about/news/seek-employment-report-october-sees-record-high-job-ad-numbers.
- People’s ability to engage in a role, business unit and organization is partly personality driven. To find out more about the role of personality in engagement, see Garrad L. “Employee Engagement: Now It’s Personal,” January 25, 2019, on LinkedIn at https://www.linkedin.com/pulse/employee-engagement-now-its-personal-lewis-garrad.
- AWS. “AWS Partner Capgemini Builds an AI Tool to Identify Sperm Whales with 97.5% Accuracy,” September 2021, available at https://aws.amazon.com/partners/success/capgemini/.