Ideas for addressing your labor shortage

Ideas for addressing your labor shortage
As the economists talk about when the next recession will arrive, or when the stock market will really fall, or when the yield curve inversion will really tell us something, one thing remains clear and present as it has been for several years: the labor market is really tight. Unemployment rates are consistently staying at the lowest level in decades, making it challenging or impossible to fill jobs that businesses need to grow. Yet inflation is below where the Fed wants it to be in order to support a robust economy. I won’t try to predict when or how these inconsistent indicators will produce the next recession, but I will remind business owners of some key facts that persist in this country:

• Half of all businesses don’t have enough qualified job applicants. The Bureau of Labor Statistics recently reported over 7 million job openings, a number that is consistently and stubbornly high.
• Layoffs are extremely low, despite still meager increases in average wages.
• New jobs created was reported at a meager 75,000 in May, perhaps influenced by caution caused by the labor disputes with China, but still not a meaningful  issue.
• And finally, the number of people applying for jobless benefits is extremely low, meaning people who want to work are finding work, or at least an employer who will give them a try.

So, if you’re in that 50% of businesses with job openings you can’t fill with the kinds of people you want to attract, take a look at your average starting pay rates and see if they’re keeping up with your industry, your demographic area, and your desired hiring quality. It seems clear that waiting for the right time is going to be a losing strategy for at least the next couple years. Instead look at ways to modify your cost structure or your pricing structure to enable you to get what you need. For example:

• Are your starting pay policies a carryover from the depth of the recession, when workers would take any job offered just to keep bread on the table?
• Are your processes as efficient as they could be, both operations and administrative, or have you become satisfied with the status quo and given up on raising productivity?
• Is hiring underqualified people to fill open positions and letting them grow into the job really in the best interest of your bottom line?
• Are your customers really averse to modest price increases, or would they gladly pay more for an improvement in customer service, product quality, turnaround time, etc.?
• Does your financial and operational reporting system give you the information you need to even answer those questions?

There’s never a good time to spend time and money re-visiting infrastructure modifications. By contrast you never want to be in the position of wishing you had done that 2 years ago, as your growth and profits decline and your customers slowly gravitate to the web or some other competitor who kept their practices relevant for the times. The best time to fix what needs fixing? The day you discover the need.

Learn more in Gene’s Strategic Planning course.

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Gene Siciliano is Your CFO For Rent,® a nationally known consultancy to middle market companies in all industries, both private and public. His strategies, solutions and implementation support create increased financial visibility, profit improvement and enterprise value for his clients during their growth and exit stages. His results enable CEOs to gain control of the money side of their companies, and to experience freedom from financial surprises and deferred retirements.