Boards and the economics of workforce management trends
A company’s reputation can be affected by how it treats its workforce.
INSIGHT ARTICLE |
An increasingly tight labor market in the United States is creating unique workforce challenges for businesses across the country. How are workforce trends affecting growth strategies, and what can board members do to help ensure the longevity of their organizations?
Labor trends and outlook
Given an unemployment rate under 4 percent, one would expect to see wages growing higher. Nine years into the recovery, the robust jobs growth the United States is experiencing is unusual. The country averaged about 207,000 jobs per month in 2017; that average declined to about 150,000 per month in 2018. Keep in mind that 80,000 to 100,000 new jobs on a monthly basis are enough to maintain a stable unemployment rate.
People are returning to the labor force after some structural issues kept them out. There has been some substitution of technology for labor, although it has not been as dramatic as some are making it out to be. This substitution is nothing new: Since the creation of the first farming and agricultural implements, there has always been some substitution of technology for labor. It should be noted, however, that currently there is less than one person, statistically speaking, available per job opening. Among those who are available, many may not have the skills necessary for the job.
So why is wage growth not keeping pace with the very low unemployment rate? One reason may be that as baby boomers retire, younger workers are replacing them at lower wage rates. On the other hand, some may leave the full-time workforce only to move to a part-time, lower-paying job to supplement their income from Social Security or savings.
Short- and long-term strategies
Rather than eliminate jobs, innovative technology will bring with it an emergence of new jobs, starting with roles responsible for implementing, deploying and maintaining the technology. Companies need short- and long-term solutions to be prepared for this workforce evolution.
- Talent mobility: Companies can create their own supply of talent by re-skilling the workforce. Management needs to move people around in the organization and leverage the captive talent differently if they are unable to hire people from the outside. Cross-training is also a way to keep young workers engaged and enhance overall employee satisfaction and retention.
- The gig approach: This is a two-fold strategy that can cover a wide range of skills. One approach engages an outside service that acts as an independent contractor for freelancers in any role you need. Alternatively, under a certain set of policies, management can set up an internal environment that allows employees to move around the organization. Like talent mobility, these rotational assignments could be especially attractive for younger employees who are still establishing their careers.
- Training and development: The overwhelming majority of workforce training occurs up until about age 25, then tends to dissipate after that. Since getting additional training at a college while working full time can be difficult, many companies are offering internal learning solutions. Whether it’s working with a local educational institution to offer vocational training, or developing apprenticeships in a specific industry, these programs allow employees to work on the job while still training and employers to develop a more qualified workforce.
- Talent sharing: Noncompeting companies are experimenting with talent mobility within a broad ecosystem. This “rising tide” strategy offers employees a chance to gain a better understanding of process, products and customers at other companies and apply that knowledge to their own organizations.
- Tie specialists and apprentices together: The scarcity of qualified employees with the skills companies need is a driving force behind the idea of building skills within the company.
Advise, remind, question, measure
So how can the board help?
While most businesses put labor and workforce issues among the responsibilities for executive management and human resources, it is the obligation of the board to make certain these issues are priorities for the organization.
The issues surrounding labor and workforce are governance issues. Boards need to get into strategic conversations with management about short-term, urgent capability needs, but also about longer-term needs that should have the attention of the CEO. Boards should make sure management has the talent to reach goals, or the resources to acquire that talent. The board also needs to make clear that it expects measurable assurances that progress is being made and problems are being effectively addressed. At the same time, board members should share relevant techniques that have been successful at the various corporations with which they are associated.
For the workforce, this means oversight of the activities beyond just those of senior management. It means talking about employee engagement and development, and reviewing the outcome of employee satisfaction surveys on a scheduled basis.
The board’s role
Organizations are increasingly being judged on the basis of their relationships with their workers. There are any number of examples where a company’s reputation and stock market value are affected by how management treats its workforce. It is the duty of board members to look out for the value of their organizations. It’s a complex role, but boards need to ensure they stay on top of these issues.
This article is based on a webcast that included Erroll B.Davis, Jr., a senior advisor at TalentQuest, and Kelley Steven-Waiss, chief human resources officer at HERE Technologies. For details on labor trends and the economics of workforce management, listen to the recorded webcast.