Today’s shortage of talented people presents both a challenge and an opportunity. Many smart, very well-run companies are leaning hard into the hiring and retention opportunity, while other companies are getting hit hard by turnover. Which one are you?
Some recent experiences
I was in a meeting this week where a CEO espoused the virtues of getting everyone back together while his much younger team members rolled their eyes. I also spent three days last month with more than 100 CEOs at a Tugboat Institute event, where almost everyone I asked shared that working remotely was going to end soon, despite admitting that many of their team members who had been forced to work from home since last Spring had:
- demonstrated tremendous productivity
- indicated that they would like to maintain the flexibility they have enjoyed the last 19 months
The CEO of a consulting firm with this mindset shared with me that he had 30% turnover in the last year (we have had less than 5%).
While there were plenty of good reasons cited for requiring people to commute into the office more regularly, what was most obvious to me is that the CEOs I spoke with enjoy going into the office every day and want to see their teammates in the office every day too. They are imposing their own preferences on others, hoping that everyone agrees. Not everyone does. If they lose even 5%–10% of their most valuable people due to this policy, they are going to suffer. I believe many will lose more than that.
Lastly, a few of our very smart private equity clients and building product manufacturer CEOs have implied to me that they believe the number of workers in the housing industry might actually decline this year. That is right. Decline. Companies like Amazon and UPS are aggressively recruiting the truck drivers who deliver building materials, as well as the workers who perform the most physically challenging jobs.
Most companies will lose 2%–3% of their work force to retirement this year. How much more can they afford to lose?
The balance of power has shifted
There is a massive labor shortage and the housing industry is about to lose a significant percentage of their team members unless we do everything in our power to keep them. Everything.
The unemployment rate has plunged to 2.4% for college graduates and 5.4% for high school graduates. Two Federal Reserve studies estimate that between 1.5 million and 3.0 million more people than anticipated have retired in the last 2 years. The expiration of enhanced unemployment benefits on Labor Day has not resulted in a surge of applicants. It is not easy for laborers to enter the country and gain unemployment. This is a competitive market for talent—the most competitive market I have seen in years.
Here is what companies competing for our labor are doing:
- Amazon is hiring 40,000 high-paid corporate and tech workers in addition to 125,000 fulfillment and transportation jobs, and this ad will tell you how far they are going to convince people to switch industries.
- PWC, the Big Four accounting firm, announced that 40,000 high-paid employees can now work remotely. I suspect that PWC realized that they had no choice. A PWC employee shared with me that a number of their partners are not happy about it and are discouraging it, which will probably lead to more turnover too.
- Costco raised their minimum wage to $18/hour.
- Many Silicon Valley and other tech employers who learned their team can work remotely are now recruiting all over the country, offering huge compensation increases to talented individuals. We have lost some talented people to these firms, and the CEO of a tech recruiting firm told me that talented workers all over the country are receiving huge pay raises.
At our annual client conference last week, several of the most successful CEOs shared what they are doing.
- Pay increases: A manufacturer competing with Amazon for talent gave 20% raises this year, and expects to do the same next year. At the roundtable discussions at our conference, stories abounded of huge raises being offered to lure away land acquisition experts, construction superintendents, and almost every skilled position. These stories also coincided with record-level profitability for almost everyone, which means they can afford to give the raises today. They are just afraid that the good times won’t continue.
- Cultural enhancements: A home builder CEO rattled off (from memory) a litany of amazing initiatives his firm had implemented over the last 2 years that clearly is part of the reason they have vaulted into the top 100 lists of best large companies to work for in America, best companies for women, and best companies for millennials. This company also has one of the highest margins in the industry, and I believe their turnover is quite low.
- Changing trade partner relationships: The CEO of one of the largest rental housing companies in the country noted how he had shifted from asking subcontractors to bid projects to treating subcontractors like valued employees who need to be treated well in every way.
- Passing along cost increases: Expect both higher costs passed along to customers and continued material shortages. A CEO overseeing more than 11,000 truckloads of building materials distribution every day shared that he is investing in growth but left me with little confidence that he could find more truckers without raising wages significantly.
This is an opportunity for all of us to show our best people how much we care, and to spread the word about being a great place to work. It isn’t just a decision between money or culture. It needs to be both. Let’s work together to make the housing industry one of the most desirable industries for employees. What could be more noble than being part of the wonderful homes people live in?
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