Good news on unemployment means bad news for talent acquisition
Despite last month’s government shutdown, the Department of Labor is reporting continued good news on the employment front. With the unemployment rate at 4.1% or less for over a year, employers have now added jobs for 100 consecutive months, extending a record run.
That’s something to cheer about for those eager to leave their current positions for greener pastures. It’s also good news for the economy as a whole as Wall Street pundits see this trend as a leading indicator for the months ahead.
On the flip side, this is bad news for employers and, more specifically, for talent acquisition teams. Recruitment trends point to higher wages, higher turnover among current employees and higher costs. What can you do about it? Here are our thoughts.
Wages trending up
The obvious downside is that the rules of supply and demand dictate that labor costs are inevitably starting to rise. Sure, many will argue (with justification) that wages for some jobs have been stagnant or very slow to increase these past couple of years. Average wages overall increased by only 3.0% last year. However, the situation for jobs in high demand is very different with wages, depending on the job and industry, trending up rather dramatically. In fact, salaries for digital marketing experts, depending on their role and years of experience, have increased from 10%-40%. This is exacerbated, according industry guru Josh Bersin, “by an increasingly wide gap between the jobs being created and the skills and experiences in the workforce to fill them”.
To deal with this, be sure your recruitment strategy includes periodic scans of labor markets (1) within your industry (2) for specific positions within your business units and (3) for the geographic regions in which you operate. Like many of our clients, you may uncover surprises within various niches that impact compensation competitiveness. Subscribe to professional salary reviews; use compensation-related info from exit interviews; check out Glassdoor and other similar sites for insights on your employer branding and use your external recruitment consultants as a sounding board about pay practices. Professionals in my industry – and those running your internal recruitment function – ought to be able to provide an up-to-the-minute snapshot of total compensation for specializations, by geography. If not, you’re probably not working with the right consultants or your internal talent acquisition team doesn’t have the time, resources or skills that you need.
Plug leaks in your talent pool
Another downside of a low-unemployment rate environment is high employee turnover. The lack of supply for certain skills means that your people – your best people, in fact – are being courted by others and the revolving door continues to spin around faster. We’re seeing headlines like “A Hiring and Retention Crisis” and “Winning the War for Talent” supported by data collected by a number of organizations, including Randstad, showing that a hefty 60% of the workforce is looking for another job. Retention is clearly becoming a major concern.
With turnover rates as high as 13% in some industries, the challenges for recruiters range from longer time-to-fill metrics to having to convince hiring managers to up the ante on salary and benefits. Regarding retention, many organizations feeling the pain are now finally seeing that the best way to survive in a candidate-driven market is to give dedicated professional recruiters a say in solving the problem by, for instance, becoming more meticulous in screening future hires through structured interview questions that gauge cultural fit or via comprehensive onboarding programs to make new hires “stick”.
The costs associated with talent acquisition are rising
Aside from this, perhaps the single greatest over-arching impact of the low unemployment rate is what the entire talent acquisition process is costing businesses. That includes everything from the salaries/benefits paid to internal recruiters to the cost of the office space they work in. The AI recruitment tools and social recruiting tools they use. The ads they run. The time hiring managers spend interviewing. These all roll up to a cost-of-hire number that is likely to increase, not decrease, as it takes more effort to get people hired and you need to hire more people to fill the gaps left by departing people. At the same time, you also need to move quickly and decisively to make decisions about viable candidates so they aren’t snapped up by competitors. Efficiency is the name of the game and it follows that the more efficient your recruitment process is, the lower cost-per-hire will be.
Why you need a recruitment process review in a candidate-driven market
To become more efficient, many recruitment functions are conducting process reviews by putting each step of the recruitment process under a microscope to figure out how to, for example, eliminate duplicative or unnecessary steps. The goal? To create maximum value for their organization by making sure they work in the most efficient and cost-effective ways to hire the best talent possible.
Typical steps for a full scale process review look something like this:
A recruitment process review can also be somewhat narrower in focus. For instance, you may want to assess the capabilities and output of your in-house team with an end goal of augmenting skills by training, adding additional team members or contract recruiters, and – increasingly – looking at ways to flexibly outsource projects such as mass hiring. Recruitment process outsourcing (RPO), in particular, can help your organization manage talent demand in times of growth without adding internal headcount while also allowing you to turn the capability on and off as needs ebb and flow.
Don’t wait to review talent acquisition strategies
The time is now. Regardless of whether a process review is wide or narrow in scope, and whether the roadmap for improvement points to a need to laser focus on fine-tuning specific ways in which your internal recruitment team sources candidates or – at the other end of the spectrum – points to partial, flexible or full-scale RPO, the time to re-evaluate your recruitment approach is now.
