Since 2021, when record numbers of U.S. workers started quitting their jobs—known as the “Great Resignation”—many have been arguing that “The war for talent is over. And talent won.”
What that meant, among other things, is that leaders needed to start prioritizing and get personally involved in employee “engagement,” rather than pushing it aside for HR staff to handle.
Evidence to support this decisive victory for employees was everywhere. Women and older workers were leaving the workforce. Salaries were rising as employees were jumping to new roles, or new employers, with significant pay increases, the opportunity to work remotely and flexible schedules.
Then the tech sector layoffs came: more than 200,000 globally. This changed the tune of some organizations. Many large employers felt like they had gotten their power back, had the upper hand again and, in fact, had won. In addition, the drumbeat of a “looming” recession (we’re still waiting) encouraged increasing numbers of employers to start undoing the gains employees made—and had come to highly value—during and after the pandemic. Many prominent companies started giving workers marching orders to return to their offices.
Not so fast. The jobs situation was never as clear cut as it seemed. A number of reliable research studies showed that the majority of the tech workers who were laid off landed new jobs within three months (lining up perfectly, in many cases, with the length of their severance package).
Underlying labor market fundamentals also paint a mixed picture. While the unemployment rate remains below 4% and the economy continues to produce an impressive number of net new jobs each month, including 187,000 in August, Philipp Carlsson-Szlezak, BCG’s Chief Economist, reminds me that the number is declining—and is nowhere near the 2021 and 2022 pandemic reopening highs when the monthly ‘jobs added’ numbers were two and three times that.
Carlsson-Szlezak also points out that labor demand has cooled off as well. Job openings have fallen from a peak of 12 million in March 2022 to 8.8 million this July. But there hasn’t been any significant uptick in layoffs (in aggregate) or unemployment. That’s unusual and, in essence, signals the “soft landing” that many people had considered impossible, he says.
He also pointed to the “switching premium” paid to job switchers over those who stay. At the peak, in August 2022, job-switchers received an average wage increase 2.8% greater than the increases being given to those who stayed. Today the premium is just 0.4%.
A generational shift also is taking place, where younger employees are significantly more disloyal, willing to job hop. The stigma of job hopping has completely disappeared. I saw this when my daughter, who was unhappy in her first job out of college, quit, despite my parental counseling that she “hang tough” because it “wouldn’t look good” if she quit after just six months. Well, she quit anyway—and she had a new job (about which she couldn’t be happier) and a 20% pay increase within a week or so.
In short, the fight for talent continues—both among companies competing for talent and between companies looking for workers and workers who are becoming more selective about where and for whom they work.
Eventually, Carlsson-Szlezak reminds us, another recession will roll around, pushing the unemployment rate up, and shifting the balance of power from workers to employers. Even so, he said, the labor market is likely to remain tighter than it was in the 2010s.
Business leaders and those who study such things understand clearly that the value of high performing employees is a multiple of the average performers’ value. Studies generally rank high performers as four-to-ten times more valuable to their employers than the average hire.
That means employers, as weary as they might be, can’t ever afford to slack off. In any scenario, they need to act like they’re still on the front line in the war for talent and recruit, develop, motivate and retain the best people.
How? Here are a few thoughts:
· Approach employees like customers. Deeply explore their needs, using advanced consumer market research tools that force tradeoffs and uncover what drives employee action to develop day-to-day work experiences that employees value. The good news here is that you probably have these capabilities in house for your customer-facing functions and just need to point them inside.
· Help employees see the future—their future—by creating opportunities for them to redesign their jobs, take on new responsibilities, and enhance their skills. Lifelong learning isn’t just for retirees attending programs at their local university. It’s how you develop and keep top performers in your organization.
· Measure your performance as employers. Okay, maybe customer-facing companies overdo it with the feedback surveys after every interaction. But many companies go to the opposite extreme when it comes to taking the pulse of their employees: sending them incredibly long surveys once a year, spending months analyzing the responses, figuring out what to say about it and finally changing too little too late. Employers should be checking regularly to get employee views on how things are going. And they should confirm that what the employees are telling them matches up with what’s being said on employer review sites, such as Glassdoor and Vault. When something is out of whack, fix it asap.
Perhaps we’ll move someday from a state of war for talent to a state of harmony, where employers and employees coexist in a mutually reinforcing system where each makes the other better off.
Until then, the struggle continues.
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