ServiceExperts™ is a series of contributing articles from recognized industry professionals offering their viewpoints and opinions on the latest trends impacting the service industry. Ed Klosterman, Managing Director of ADAPT Service Consulting, is a widely recognized expert across the field service sector. He is a 30+ year veteran of the field service space, having led global service teams (greater than 100), published several articles, and is a regular featured speaker at field service industry conferences.
In the 14th century, scientists discovered that litmus, a mixture of compounds that displayed color based on alkaline or acid solutions, could be used as an acid-base indicator. In the 20th century, the term “litmus test” became popular figuratively, using a single factor to establish a truth, which could be used to judge whether someone or something is acceptable or not (Merriam-webster, 2022). Simply stated, a ‘litmus test’ provides insight to help decide how acceptable something or someone is. When used with intent in today’s business environment, a litmus test can provide valuable information. Then there are business challenges that unexpectedly became a litmus test by providing an insight into organizational capabilities and resilience. As an example, the tight labor market in late 2022 has placed stress on businesses and proven to be a good assessment of an organization’s ability to adapt to disruptions, maintaining business, and securing talent.
Tight Labor Market
Today, the tight labor market, defined as the demand for potential workers exceeding the availability of viable candidates, is a challenge most companies are facing. Essentially, the pool of candidates is not deep enough to meet the needs, hence job creation is outpacing the number of available workers.
Traditional labor market measurements are unemployment, productivity, participation rates, total income, and gross domestic product (GDP). From a micro and macroeconomics perspective, supply and demand, labor laws, and wages are important variables to be considered. Other variables that affect the labor market are technology, desired skillsets, an aging workforce, government policies, and one that we are all familiar with recently, a reduction of workforce associated with a global health crisis.
In a tight labor market, employees and candidates have choices. It is no secret that employees left the labor market for many reasons associated to COVID. A prompt shutdown resulted in lost jobs followed by an expedited return to work, all while many Americans decided to leave the labor pool; often referred to as the Great Resignation. According to the U.S. Bureau of Labor, both men and women have left the workforce in a level never seen before. It is safe to say, the demand for labor experienced something outside of tradition business theories. It is stressors like this that allow a greater perspective on corporate health, capability and ability to adapt.
Many factors are short term, but structural economic changes are also influencing today’s labor-market dynamics and could cause:
- Accelerated retirements: According to Morgan Stanley & Co. Chief U.S. Economist Ellen Zentner, in the 12 months to February 2021, the U.S. retiree population rose from 18.5% to 19.3%, or some two million more people. This higher-than-pre-pandemic trend cannot be explained by aging alone.
- A widening skills gap: According to the Labor Department, a record 9.3 million jobs were available in April 2022. One explanation may be the growing gap between the skills that companies need and the skills workers possess. It also suggests that the labor market is tighter than headline unemployment data would indicate, as companies compete for qualified workers.
- Geographic imbalances in the labor pool: Some towns, cities and states have experienced acute labor shortages, as pandemic-related relocations have become permanent for many people (A Tight Labor Market: Signs and Factors | Morgan Stanley, 2022).
Whatever the reason, the tight labor market has served as the litmus test for company’s functional capabilities. The stress on corporations has exposed organizational vulnerabilities, including people, processes, and business continuity. The unfortunate results include, but are not limited to, employee burnout, disengagement, turnover and an inability to attract new talent. Depending on the organizational health, some will break down from the stress while others will maneuver with grace and agility. How companies respond to such challenges will separate them from one another.
What has changed with knowledge workers? In many cases these employees are working in a different environment, physically and psychologically. Physically, many employees are remote, and some have started returning to the office. At times remote employees have proven to create a lower cost of doing business and employee satisfaction. In other cases, remote employees have experienced a feeling of disconnection and disengagement, thus resulting in a loss of employees and reducing a company’s ability to meet goals. Many companies have adjusted their approach while others have struggled. What differentiates some companies from others is often their management approach and ability to secure talent.
Why are employees leaving companies? We can start with the common reasons why employees stay with companies: leadership, corporate culture and purpose, compensation, benefits, autonomy, and development or growth opportunities, to name a few. The companies retaining employees and attracting new talent are those that pass the litmus test. These companies have a strong culture, value and nurture employees and manage to a level of awareness. Leadership is present, authentic, knowledgeable, forward-thinking, and well-informed of employee’s needs and desires. They manage to meet those needs.
Knowing your audience is something important for all, especially leaders, and not all employees are motivated in the same way. Today’s workforce includes five unique segments of the population: Traditionalist, Baby Boomers, and Generations X, Y, and Z. Mature leaders manage interpersonal relationships judiciously and empathetically. These leaders understand their team’s characteristics, values and how they prefer to be managed. The five segments have different needs. In addition, the five workforce segments are changing: either shrinking or growing. It is said the Millennials or Generation Y will make up 75% of all workers by 2030 (Rabha, M. 2022). Successful leaders understand their audience for not only managing today, but for planning for the future.
Having insight into today’s workforce will assist leaders in building and maintaining business operations. For example:
- Traditionalists are less than 1% of the current workforce, and they value compensation, benefits relationships, and are leaving the workforce.
- Baby Boomers make up between 15-20% of the current workforce, possess institutional knowledge, are dedicated, have values like the Traditionalist, and are leaving the workforce at the greatest rate.
- Generations X, Y and Z are the growing segments of the current workforce. They place a high value on benefits, workplace flexibility, technology, social responsibility and relationships.
It’s currently estimated that Generation X makes up 30-40% of the current workforce, while Generation Y (Millennials) are the largest segment with 40-50%, and Generation Z at 10-20%. Blending this knowledge with your workplace strategy is key. Managers need to be cognizant of their team’s makeup and be well versed on approaches to motivate and maximize performance within each generation.
Managing to your audience includes leveraging the older segments that possess institutional knowledge as mentors, keeping them connected to younger segments, as the Baby Boomers and Traditionalist value teaching. Harnessing the knowledge of these segments is important. The reality is a functioning mentorship approach drives two-way learning.
Generation X are independent, innovative, and embrace entrepreneurial spirit. They value human interaction, respect autonomy, value choice and connection, and rate compensation greater than that of the millennials. Leaders should listen and learn from this segment. Acknowledge and respect their contributions to the team and engage in conversations such as work-life balance and flexibility at work.
Generation Y (Millennials) embrace and desire technology to make work efficient and effective, and actively seek meaningful work (connection). They enjoy mentoring up regarding technology, as they are the first tech savvy generation. Millennials tend to value a relaxed workplace, quality of work over quantity, and desire routine feedback.
Generation Z are the newest entries to the workplace. Generation Z tends to be tech savvy, adaptive, and sensitive to relationships and social issues. Managers should value their insight and involve them in two-way mentorship to support the spirit of learning and sharing experiences.
We recently spoke with a senior leader at Becton Dickinson, one of the largest global medical technology companies in the world. They have been able to successfully maneuver through the current labor market, both securing current personnel and attracting new talent. Their focus on employee satisfaction has been admirable, as a prominent objective of theirs is improving the employee experience. From their website, they clearly state their business approach toward teammates, “BD is committed to creating an environment in which all associates feel comfortable raising concerns, seeking guidance, or asking questions without fear of retaliation or discipline.” (Becton Dickinson, 2022). This approach is followed through with actions to support their words.
Veterans Employment is an industry-recognized recruiting firm that has enjoyed continuous growth over the last two decades. Their goal is to match the right people with the right companies to create long term, successful careers.
Michael Urcelay, founder of Military4Hire and managing partner of Veterans Employment, shared his perspective of the current labor market with ADAPT Service Consulting.
He started with his team and the reason for their success, building trusted relationships. Michael and his team are passionate about building long term relationships with companies, understanding exactly what they are seeking in a candidate. They value the relationship and confidently attach their reputation to each candidate.
The Veterans Employment Team perform strategic screenings of their candidates. As a team of veterans, they understand the training each of their candidates has received and quickly identify the best candidate for the role. Michael refers to his team as the cog in the wheel analogy, playing a small part, yet involved with producing valuable results between employers and viable candidates. Education is key for his team, starting with the understanding of two vital points:
1) does the employer recognize the value veterans bring to the role?
2) is the role the candidate is seeking to enter correct for them and their skillset?
Having a productive relationship with human resources is of the utmost importance, specifically values associated with trust, effective communication and a feedback mechanism for continued improvement.
Military training builds core traits such as leadership, agility, dedication, integrity and being goal oriented. When interviewing candidates, Michael and his team developed an interview approach referred to as “3 deep,” allowing them greater success with benchmarking skills such as communication, attention to detail, organization, and ability to operate in an autonomous environment.
Michael acknowledges the current labor market as being tight, thus providing candidates choices of employers. He shared that there is a shift in candidate desires, many seeking IT roles and less interested in the trades such as technicians, electricians, and mechanics. He also shared how he and his team acknowledge the different generations exiting the military, as well as their preferences. The younger generations are tech savvy, more expressive, more in tune with feelings, desire feedback and will lose interest quicker if they feel an employer does not value them.
Michael explained the tight labor market has placed a spotlight on organizations and their cultures. With choices, candidates are less tolerant of concerns associated with workplace cultures and leadership. Veterans Employment maintains relationships with previously placed candidates, and they also understand they have choices. Michael went on to say today’s candidates possess two prominent needs: feeling valued and autonomy. There is a heightened sensitivity, and people leaving companies today is seldom for money and more often due to corporate politics, culture, and loyalty to employees.
Regarding compensation, Michael stated pre-COVID packages were stale. They now include increased base pay and sign-on/retention bonuses. He also explained how compensation needs to be fair, yet not the driving factor with candidates as it has been in the past. Our conversation included steps companies can take to improve employee retention and attracting new talent, all aligned with ADAPT’s perspective.
I particularly enjoyed Michael’s closing comments, “The employee experience starts at the interview process, including quality and timely responses between candidate and company. As a third party representing the company, these variables are the most important for a company to understand. The most successful companies are responsive.”
Michael’s team continues to evolve and adapt to the dynamic business environment. He and his team are routinely acknowledged by their customers for their contributions toward building world-class teams.
Listen, learn and ADAPT. Knowing your audience will enable you to strategically manage each segment today and in the future. This becomes important when you look ahead at who will make up much of your employee pool in the coming years.
Understand who is on your team and look at the available pool. How will you manage the intersection of skills required, corporate position and the personnel required to meet challenges? As stated before, Millennials will make up 75% of the workforce by 2030. While many say Millennials will take benefits over a pay raise, it is important to clarify fair compensation is important. Compensation is a baseline expectation to meet financial needs tied to basic human needs, food and shelter.
Know the marketplace for trends and fair compensation – don’t allow money to be a conversation and a driver for employee retention, it is short-run strategy. Focus on both existing and attracting the best candidates. For existing employees, be sensitive to workload especially as related to turnover. Turnover is painful for all and if it finds its way to runaway mode, can crush morale and start a vicious cycle that is hard to break. Consider leveraging the gig economy to supplement workforce demands if needed to relieve pressure.
When on board, Gen X, Y and Z are more likely to take the desired benefits over a pay raise. Do yourself a favor and avoid micromanagement. Allow them to make their own decisions when possible and focus more on quality than quantity of work. Invest in their competencies, training, schooling. Don’t just look at work-related needs, and include items such as financial education for retirement, health, wellness and work/life balance (or what we at ADAPT refer to as “dynamic equilibrium”). Enable career growth and provide feedback, which is important to this segment. Use mentoring programs in a two-way manor, and not the traditional older employees mentoring the younger. Set expectations of all parties to walk away from the mentoring process with new knowledge.
Use technology in the proper manner. Don’t fall into the micromanagement trap of using by misusing technology to monitor employees’ daily activities; they will see you coming and not like it. Instead, utilize technology to improve the role, productivity and workplace. Nothing can be more dissatisfying than using old or no technology when available. Celebrate time away, minimizing distractions and avoid the dreaded return to work after a vacation by strategically taking or performing tasks and items while they are gone.
Partner with HR. Respect diversity and inclusion. Understand the profile of the most successful teammates and be strategic with your approach and interviewing process; don’t wing it and let it be a lost opportunity. Be sensitive to work life balance – dynamic equilibrium – flexible and creative work approaches and invest in wellness programs. Invest in a mentor program to build your team and the business relationships, celebrate successes, and allow creative time.
Invest in managers. They need to understand how to adapt and manage in a changing environment (people, process and technology). Invest in employees to improve mastery of function, pay fairly, and focus on intrinsic motivators for long-run success. Know your employee’s needs, motivation values and “why” they do what they do.
Train your managers in management styles, mitigating older approaches, such as the carrot and stick, to more strategic motivational aspects that include autonomy, competency in role and tying purpose into the role. In a recent report, McKinsey & Company found the top reason for recent quitters is career development and growth (Forbes, 2022). Understand there are technical and managerial career tracks, don’t limit or force people into roles, as it should be their decision. Build all business relationships, including those that are cross-departmental. Create a leadership program focused on not only formal leaders, but also informal leaders. The informal leaders are the best change agents when utilized appropriately. Make hiring and training programs part of the culture building efforts starting at day one.
Don’t accept the current climate as a negative. Learn and understand how you can differentiate yourself in a time of need. If you find yourself in this position, you have two choices:
- Do nothing and risk losing
- Be active and strategically respond to better your current and future position. Manage your teams differently, be creative and truly understand what you need and what those potential employees need in this time of transition.
The labor market is an economic term for the availability and price employment. Like other markets, the price for labor is largely determined by supply and demand, although the labor market is also heavily regulated in many countries. In a time of a tight labor markets, the importance of employee needs is of greater importance. What makes the company and leadership attractive? Lean in, embrace managing employees in today’s environment, and adapt. Strategically manage the team with intent, do not let them manage you.
Make employees a priority – listen, learn and share. Understand that not all employees are the same. If you have employees leaving, understand why and change appropriately. Find the connection to business needs and employee desires. Invest in your employees’ needs and focus on career progression.
Training for all employees, including leaders, is key to understanding the needs and desires of each generation. Embrace employee autonomy, purpose and mastery; empowerment is strong medicine. Manage in the now and always look forward, you too will reap the benefits.
Bottom line, a tight labor market will test your organization’s resilience. Organizational resilience includes people, processes, operations, cyber, supply chain, risk management…the list goes on.
Today it is COVID, tomorrow it could be a merger, competition or a new disruptive technology. Build your culture and your corporate resilience to preserve organizational integrity and increase agility and adaptability to survive the unexpected. Lean in, as it is not “if” a challenge is coming, it is “when”.
Written by the ADAPT Service Consulting Staff
Link: ADAPT Service Consulting
- COVID-19 and the Labor Market. COVID-19 and the Labor Market | AIER
- Article: This chart shows how COVID-19 has affected the US labor force. This is how COVID-19 has affected the US labor force | World Economic Forum (weforum.org)
- How tight is the US Labor Market? A Tight Labor Market: Signs and Factors | Morgan Stanley
- The Daily Dish, February 22, 2022, How Tight Is the Labor Market?, Douglas Holtz-Eakin, How Tight Is the Labor Market? – AAF (americanactionforum.org)
- Labor market – What is it? characteristics, elements, and more, Labor market – What is it? characteristics, elements, and more (govtvacancy.net)
- Forbes, September 28, 2022. The secret weapon in a tight labor market? Investing in career development. The Secret Weapon In A Tight Labor Market? Investing In Career Development (forbes.com)
- Merriam-Webster, 2022. Litmus test Definition & Meaning – Merriam-Webster
- What you need to know about the labor market in 2022
- Rabha, Mrinmoy. “What millennials want in the workplace, 2022?
- Interview with Michael Urcelay December 7, 2022.
Who is ADAPT:
ADAPT Service Consulting is a firm that provides expertise and professional advice to “Service Organizations”. The ADAPT staff are industry recognized professionals embedded in the service community. They have successfully developed award winning service organizations to be best-in-class, exceeded corporate objectives and function as a competitive advantage. With decades of experience in the service business, ADAPT takes an exclusive approach leveraging their experience, knowledge of service fundamentals and creativity to enable service organizations to succeed in today’s dynamic business environment and reach the pinnacle, The Elite Service Culture™.