WTF is Labor Hoarding?
Nine in 10 small businesses are labor hoarding right now, according to a survey by the business software firm Skynova. In short, they’re holding on for dear life to their people.
Retaining current staff is “the glue to facing potential economic hardships,” said the study, based on the responses of more than 1,000 small business owners. Seventy percent of leaders fear they will have to carry out layoffs because of economic conditions, including a potential recession.
Why now?
With nonstop headlines about inflation, recession and labor shortages, it’s little wonder companies want to keep teams intact. “Since the consensus is the labor market is unpredictable, it is reasonable companies want to retain talent, rather than going to market to fill critical roles,” said Eric Mochnacz, operations director at the HR consultancy Red Clover.
Nearly half of bosses say the top reason they want to keep personnel is because they are very strong in their jobs, Mochnacz pointed out. “It would make sense that companies that are running smoothly, with strong contributors, will do what they can to retain [people],” he said. “Who doesn’t want to work with a great team that’s producing results?”
A slightly lesser number of leaders proposed that layoffs are bad for morale, they’ve struggled to get talent in the past and hiring is difficult right now, while a much lesser number (15%) want to avoid layoffs because their turnover is high.
Who are they hoarding?
Around one-third of business leaders identified jobs like finance manager, marketing manager and business analyst as those they’re most intent on keeping.
As all business leaders know, recruiting talent is costly, and more than 40% say they are holding onto employees to manage their hiring and training costs. It appears to be working. The study reveals that businesses saved an average of some $4,500 per hire by holding onto current staff.
The hoarding trend seems to suggest that leaders understand layoffs are often a short-term fix. “Sourcing, hiring and training new employees is expensive and takes time,” said John DeVille, principal consultant at people insights firm Explorance. “Companies that keep their employees during the tough times — i.e., labor hoarding — are ready to go [in better times] and can have an advantage over their competitors who have to rebuild their talent pools.”
How are they doing it?
Business leaders have put several strategies in place to maintain staff. Most significant have been hiring freezes (60%), followed by a slightly lesser degree by cutting benefits and perks, turning to remote work to curb leasing costs and implementing a four-day workweek.
Meanwhile, nearly 7 in 10 small business owners (67%) said they would be willing to slash their own salaries to avoid firing employees. “This is all about strategic workforce planning,” said Mochnacz, who advised leaders to assess their current workforce, identify immediate and long-term needs, and hire to support current staff while also determining which gaps they need to fill by either hiring from outside or promoting from within.
“If you’re a company trying to find talent and feel like your competitors are hoarding talent, then focus on your go-to-market strategy,” he said. “What makes you different from your competitors that will make you stand out so that people will potentially look to your company to make their next career move?”
Keeping people happy
When asked what they were doing to keep their employees from bolting, leaders cited such strategies as connecting with employees, being more transparent in communications and investing in a “suitable work environment.”
The least popular solution for keeping people happy — perhaps surprisingly, considering the emphasis on work-life balance in the pandemic — is bumping up PTO, which applied to only 15% of the companies surveyed.
Not a surprise? Bumping up employee compensation is the top strategy for keeping people in place, cited by fully half of bosses surveyed.
Aside from standard issue pay raises, Mochnacz noted that employers are getting more creative with compensation by way of incentives like spot bonuses, performance-based bonuses and retention bonuses. The downside is when businesses “throw money” at employees to keep them, he suggested — which not only blows up budgets but potentially exposes companies to pay equity issues.
At the end of the day, if a company is able to maintain its workforce without “going broke just trying to save face by not firing anyone,” he said, “they are in a good position.”