Episode Transcript
Speaker 1 00:00:14 Hello. Today I wanna talk about talent acquisition, which is going to be a very, very interesting and exciting topic over the next couple of years. So first of all, as you probably know, the economy is exploding with growth. Not every country is experiencing this yet, but as the pandemic is brought under control, of course the job market just completely explodes. Again, companies open up positions and start hiring. So we're gonna see the labor market expand at a rapid rate. In fact, in the United States, based on data from mz, there are 27% more jobs open right now than there were one year ago. Given that the labor market is about 160 million people, that's a lot of jobs. Now, they're not always in the right place and they're not always in the right city. But nevertheless, there's a lot of demand at the same time that's going on.
Speaker 1 00:01:05 As I've talked about the last couple of weeks, the labor market is shrinking. The fertility rate has dropped. People are getting married later and less frequently, they're having fewer children. All of the developed economies are experiencing this. China has been trying to get their fertility rate up. It has not succeeded. The census shows that the United States population is growing at the slowest. It's been growing since the forties. China may not be growing at all, and baby boomers are retiring at twice the rate they were a year ago, forced to some degree by the pandemic and just frustrations with the job market and the needs to take care of their families and do other things at home. So we're basically starting to run out of workers, which sounds completely bizarre, but it makes sense. If you look at the data on the United States labor market, the participation rate is in the high fifties to low sixties.
Speaker 1 00:01:59 In other words, about 40% of the people who can work choose not to work for a variety of reasons, family reasons, health reasons, or just economic reasons. And that number is ticked up a little, but it doesn't go up that much. So these are big, big problems and as we've learned from Japan and Germany and other countries that have experienced shrinking labor markets in the past, when the labor market shrinks, the economy shrinks because there's more old people that need social security and healthcare and there aren't as many young people working to create economic activity to support the government. So it's kind of a little bit of a death spiral. Now, I am absolutely not a pessimist and as a more of a microeconomics person than a macroeconomics person because I basically talk to companies all day. I think we're gonna respond in some very interesting ways, and this is symptomatic of every signal I've been picking up from HR people over the last six months.
Speaker 1 00:03:01 First, of course, companies are bending over backwards to take care of the employees they have. This is the focus on employee experience, employee engagement, re-skilling up-skilling wellbeing, health benefits. Tons and tons of monies going into this. New technologies are being invented, HR departments are working with it and facilities. There's chief safety officers, chief health officers, chief diversity officers. All of these jobs and roles were created to improve the retention and productivity of people at work. We're gonna be introducing a course in our academy called the Employee Engagement Workshop in the next couple weeks, and you'll be able to hear all sorts of stories about how companies are doing this. This is not just to reduce the cost of turnover, this is survival and business performance. So it used to be that we would do engagement surveys and we would look at retention and we would do some psychological or statistical analysis to figure out the drivers of retention.
Speaker 1 00:04:01 And maybe we'd nibble at the edges and say, Hey, we do a few of these things better. Maybe our company will perform a little better. Now it's basically survival. So we really can't afford to lose people that we don't wanna lose. So lots and lots of investments gonna go into this. Number two is mobility inside the company. Now I've been talking about talent mobility for a long time. It's a topic that used to be called succession management or career development. It was a very planned and methodical process in most companies because we had a lot of stability in companies. You could plot people's careers over decades. Now it's a scramble to move people around into the best possible position and redeploy them as quickly as possible. In fact, one of the big pieces of research we're working on right now is what we call career pathways.
Speaker 1 00:04:54 If you are a retail worker and you want to work in customer service, or let's suppose you're a customer service employee and you wanna work in marketing, or you're a marketing person or you wanna work in sales or you're an HR person and you wanna work in operations, that's not an easy transition. It's gonna take you some skills and coaching and information and education to make that transition. Well, that's becoming a vitally important thing inside companies now because the traditional thinking in a normal economy is if you want to grow the company, you just hire more people. But if it's really hard to hire people and they're either not available and it takes months and months to find them or really expensive to hire, you might think about the problem a little bit differently. Oh, maybe Joe over there in accounting who's really good at statistics, might be able to work in the analytics group in it.
Speaker 1 00:05:48 And maybe Sue, who's a really good marketing and analyst who studied math in college, maybe should go work in the cybersecurity group and on and on and on. And we have lots of data in the skills taxonomies and in the research that we're doing on career pathways to help companies figure out who's more likely to succeed in these other jobs. And internal mobility is even more powerful than that. When people move around in a directed and intelligent way inside the company, they have better careers, they produce better results for the business, collaboration increases. The company has a much stronger and more integrated culture. And generally the company's more responsive to change. And I don't think there's a C H R O I've talked to that doesn't have talent marketplace or internal talent mobility very high on their list. And I think one of the reasons is because of the job market.
Speaker 1 00:06:45 The third thing that's really gonna change is talent acquisition itself. And I interview a lot of talent acquisition people and we are starting a big program on this. Janet Mertons is running this, so if you'd like to talk to us about it, please let me know and we'll connect you up. Traditionally, hiring, recruiting, talent acquisition is a sales job. Go out, find these people, make 'em an offer, sell 'em on the company, get 'em in here. We'll onboard 'em and get 'em to work. Kind of like the old Army recruiter, they used to go out and meet kids in college and wear their uniform and shine up their shoes and get everybody all excited and bring them down to the recruiting office and get, get 'em into the military <laugh>. Well, that's still going on, but it doesn't quite work as easily as that anymore.
Speaker 1 00:07:33 Uh, let me give you a couple of examples. Ashley Furniture, a seven and a half billion dollar furniture manufacturer. This is a fast growing company, expecting to be 10 billion within the next five years. Highly automated manufacturing plants, vertically integrated manufacturing and obviously the furniture business is a massive business. They have distribution and warehousing and trucks and stores to go with that. Their head of HR told me that it is so hard to find manufacturing people that they've almost given up. They've created an institute for technical manufacturing on their own. They go to community colleges and cities in the plants where they do business and they recruit people and they train them for the job. And they even have mobile training groups that can go out into towns to find people that are interested in this work to train them locally and bring them into the Ash Ashley family.
Speaker 1 00:08:29 Second example, which I think is a wonderful example of dealing with this labor market is Bank of America. Bank of America is one of the most well run financial services companies I've ever experienced. I used to do business with them directly. And John Jordan, who runs the academy at Bank of America, has spent the last five or six years improving and optimizing the entire onboarding, talent development, talent acquisition, career management, and skills development for the 70,000 plus employees in the consumer bank in recruiting, they used to go out and let individual hiring managers search for candidates. And of course what would happen is there was a lot of inconsistencies, the process and some did it well and some didn't do it well. And then there was always an onboarding process for each one of them, and it was inconsistent and difficult. He said, wait a minute.
Speaker 1 00:09:22 We're gonna put a strategic focus on this. We're gonna recruit people from very strategic locations, schools, disadvantaged communities, places where we do business, where we want to do business. We're gonna recruit based on capabilities and ambition and potential, not just on experience. We're gonna bring people into the company in cohorts. So instead of having one person join at a time, we'll have 20 or 30 people join at a time. We'll hold them up and wait until we have a group. That group will then join the company together and learn together and get to know each other. Those are things that work that allow you to compete in a much more constrained labor market. And there's more. Back in the yearly two thousands, I was remembering when I worked for a tech company, by the way, around 2000, we had an economy very much like this one.
Speaker 1 00:10:11 The stock market was in an all time high. Every company was going public at exorbitant multiples and it was really hard to hire people. I had just sold our little company to a bigger company. I was working at this publicly traded technology company and it was so hard to hire engineers, a Java engineer. Java is now sort of a commodity skill, was costing us with benefits 300 to $350,000 in the year 2000, which means it's probably 50% higher if that number was today. And we couldn't get 'em to stay. So we ended up having to hire contractors from contract recruiting firms to join us. And that's what's gonna happen. Now, there's going to be, and I know this is happening cause I've talked to entrepreneurs doing this, there are going to be talent networks of people who are employed by agencies or talent groups and you'll be hiring from them because they can collect or essentially pull together critical talent and offer them to you as an employer in a much more effective way than you can to go out there and find them yourself.
Speaker 1 00:11:18 Uh, another innovation which started back in that period of time was this idea of building a candidate talent network. And that's always been around, but it really works. If you're a good marketing company and you're well known in your domain, you can go out and start doing employment brand marketing and attract people to your company to read about what you're doing, learn about what you're doing, and essentially sell them over time to join you. And that's what happens in a tight labor market is we have to use all these new tools to find, recruit, attract, and get hold of people who want to come join us. Now there's more yet to come back in 2019, I did a very big study on contingent work. And what we found at the time this was done with SHRM is that roughly two thirds of companies had no idea who their contingent workers were.
Speaker 1 00:12:13 They were in the payroll system or they were in the procurement system, or they were a vendor or they were a contractor. There was a whole variety of way to treat people who do work for your company. And the HR people didn't really know. They weren't in the core HR system and that was just the way the world worked in most companies. Well now we have thanks to the pandemic, what I would call the pixelated workforce. Pixelated means workforce is a bunch of small little groups because people can work from home, they can work remotely where, where most companies are okay with remote work for many jobs, not for all jobs. Part-time work, piece work, hourly work is very common. We have lots of systems for that. And if you're an in-demand worker or an employee, you're pretty likely to have more than one employer.
Speaker 1 00:13:02 In fact, some research we did at Deloitte right before I left showed that almost two thirds of millennials and younger were doing side hustles or some kind of work on the side. And now that it's become even easier to do, that's gonna become more common. So more and more of your, what we used to call recruiting is going to be tapping into this pixelated labor pool. You know, one of the companies we interviewed very recently is a large agricultural and consumer pharmaceutical company headquartered in Germany. And the head of recruiting there has a very extensive group of recruiters who are both internal and external head hunters. By the way. She has head hunters searching for candidates inside the company who need new roles and are looking for opportunities as well as outside the company. And then she said when she searches for candidates outside the company, they don't even look for people to fill jobs.
Speaker 1 00:13:56 They look for people who have the scientific domain expertise, the experience or perhaps are well known in a particular field. And they talk to them and tell them about all the great things going on in the company. And if they're interested, they find jobs for them. So this is more of a talent scout type of a mentality, looking for talent in any form anywhere you can find them inside, outside part-time gig, and maybe even people that are doing gig work for other companies are now able to work for you. The final thing that I think is going to be very interesting on the microeconomics side is companies will adapt. What happens in a tight labor market is of course first wages go up, you start paying more money. And then after a while you realize, well if we're gonna pay people a lot more money, maybe we should reorganize the work so that the value that they provide is higher and we can afford to pay them more money.
Speaker 1 00:14:57 And so a re-engineering takes place when there's lots of cheap labor available. It's more common for a company to be lazy and just hire a bunch of heads and do the work manually. But once the labor gets expensive and it gets a little bit harder to find people, you basically survive by being ingenious and reinventing what you do. So automation, teamwork, agile operating models, cross-functional collaboration, OKRs, all these things we've been talking about as interesting HR practices and transformational ideas are now becoming actually performance tools to help your company grow. One of the pieces of research that Kathy and Darris is working on for us right now is organizational design. You know, organizational design used to mean spans and layers. What's the span of control for each manager? Do we have enough people reporting to one leader so we don't have too many middle level people?
Speaker 1 00:15:56 It's much more complex than that now. Now it's an issue of applying technology and new work data systems to scale and span control over larger people using data to create much more intelligent allocation of resources and designing the company to operate in a world where maybe we can't hire as many people as we wanted to before so we can find a new way to go to market. And we're gonna be producing maybe one of the most exciting programs that we're working on here is the program on talent acquisition and the program and organizational design that'll come out later this summer or early this fall. I guess the final thing I'll talk about in this more constrained labor market is the idea of human capital as an asset. And I've mentioned this many times before, but I think it's maybe even more important now. The pandemic awoken CEOs to the idea and the realization that if we don't take care of the people, we don't even have a company.
Speaker 1 00:17:00 It's not a sideline, it's not something you delegate to hr. It's central to the success of every organization. And I won't beat that one to death cuz everybody kind of heard that. But now we've moved beyond that. If it's hard to hire, hire people and maybe you can't meet your recruiting targets as easily as you wanted, it might take longer or cost more money to do that. You start to ask yourself, well if we're gonna be investing more and more money in human capital, how do we get an ever increasing return on wages? And that's the kind of conversation you need to be having because people are the most appreciating asset you could ever attract into your company. If you think about everything else, you buy a machine, a piece of software, a cloud service, even capital or an outsourced service provider, you spend money on that, you get service from it, you get an roi, but it doesn't become more valuable over time.
Speaker 1 00:18:00 It's more or less an expense. People, even though we treat wages and expense are the opposite. The longer somebody works for you, the more productive they become. Sure their wages go up and they start to earn more bonuses and they become a little more expensive. But the return on investment compounds more and more and more over time. So this idea of treating the wages and human capital part of the company as an investment suddenly becomes a really interesting topic in a tightened labor market. And that means we're gonna start to build better financial models for workforce planning, for leadership development, for succession management, for career development, to make more intelligent decisions about where people go, what resources we provide, what development we invest in, what career pathways we create and so forth. Because I think a lot of those kinds of programs in the past were often done as benefits or employee engagement tools or perhaps workforce productivity tools.
Speaker 1 00:19:02 And we never really thought about this as building a talent system. And in fact, if I go back to much of the research I've done most of my career in hr, when we used to talk about talent management, we used to think about talent management as an integrated set of business processes and systems and competency models and various HR practices that stitch together the talent experience and the talent system. Now I think you need to sort of think about the company as a talent magnet and that the entire talent itself, all of the workforce is almost like a massive asset. And what can we do to allocate that asset? So it's the most appreciating it can possibly be. And I if you, if you're a financial person and you think about what goes on in your financial life with asset allocation, you know that the way you make money is you're constantly changing the asset allocation to optimize it for the economy and your personal level of risk.
Speaker 1 00:20:03 Well that's the kind of thing we need to do in companies. We need to create talent intelligence systems are often called and look at the jobs we have and the people that are in them and what can we do to continuously add value to that part of the company. And that doesn't mean replacing them with new people. As soon as somebody's not working out, having forced ranking where 10% of the company get thrown out every year, it means looking at this asset and making it better and better and better over time. And that is really to me, a fundamental change in philosophy that I think we're gonna see over the next couple years. The final thing I wanna touch on in terms of the tighter labor market is diversity. Many, many of you come to us constantly struggling with the diversity equation. It's a complex area of work and takes ever increasing effort.
Speaker 1 00:20:54 And the dimensions of diversity keep changing racial diversity, gender diversity, age diversity, cultural nationality and so forth. Even cognitive diversity, well that's another lever that you have in a constrained labor market because the workforce is diverse and the more diverse your talent acquisition footprint is, the easier it's gonna be to hire and grow your company and they won't come work for you unless your company is a diverse place and they feel included and like they belong after they join. So I think this issue of Black Lives Matter, gender fluidity, women versus men, all of the different intersectionalities of diversity are now going to become even more important and even more interesting from a company growth standpoint. In a world where you want to optimize your talent, you need a strategy for diversity. Go back to my analogy of your personal financial portfolio. If you have a financial advisor like I do, they're always trying to diversify your portfolio.
Speaker 1 00:21:58 Why? Because you basically make more money, it reduces risk. The same thing's true here, we have to diversify our talent pool so that it can grow, so that it can thrive, so that we can represent our customers and represent our community, be good citizens, but it's also just good business. And I think the new labor market and the growth of unions and raises and wages and some of the other things that we're gonna experience over the next year or two are going to turn into really positive social pressures on making companies more inclusive and diverse as well. So it's a very interesting time. I would love to talk to you about any of these issues. We have a series of, uh, working groups now for our research members called The Big Reset. If you'd like to be a part of one of those groups, please reach out to us and I'm always interested in your feedback. Thank you very much.
