HR challenge: Hiring and retaining talent while lowering labor costs
Large labor-productivity gains over the past few decades have not been matched by comparable wage gains. While both increased technology adoption and globalization contribute to this phenomenon, companies’ increased focus on maximizing shareholders’ value has also been a substantial factor. Furthermore, looser labor laws and decreased union rates have decreased workers’ bargaining power. While this trend has been in existence for a while, pressure across corporations to curb labor costs has only become more acute with the latest global financial crisis.
Retention of talent will prove challenging, as employees feel that stellar performances are not being rewarded appropriately. While their employers continue to have higher work expectations, employees’ efforts are not necessarily translating into compensation they deem to be satisfactory. This is creating a challenge for HR as turnover rates increase. Finding and hiring talent will not prove any easier, as firms continue to decrease their labor investment. On a day-to-day basis, workers may not be as motivated and engaged. HR will have to continue to explore retention strategies and benefits models that focus on factors beyond financial compensation.
Companies may often prefer to have flexible arrangements with employees and avoid costly employee benefits by hiring non-traditional workers. However, developing and engaging the legions of part-time, temporary and freelance workers at all levels of the company is a growing issue for companies. As we have seen, many part-time staff, and most temporary staff, would rather be working on a more long-term footing. To complicate matters, as a recent paper by Cappelli and Keller89 discusses, temporary workers often find themselves in “triangular arrangements,” where it is unclear whether their organizational loyalties lie with temporary agencies or the hiring organization. The costs of less engaged staff with lower organizational loyalty—poor customer service, less attention to quality, little commitment to the company, and higher levels of turnover—threaten to be more substantial than the savings incurred by resorting to flexible employees.
Individual managers will, therefore, need overarching guidance on how to get the most out of non-traditional staff. Making them feel part of the company, getting feedback from past workers on how to improve the nontraditional working arrangement, and ensuring that the recruitment process is equally rigorous for all staff, whatever the nature of their contract, may all form part of any co-ordinated approach.
HR will find it difficult to reward high-performing part-time and flexible workers, and will have to explore methods to offer benefits or incentives to retain them in the pipeline for future work. Given that such contracts often specify work outcome, rather than the process itself, there is less ongoing engagement between a manager and contractor. This makes it more difficult for managers to review work using traditional performance-review systems.