Recruiting and Retention Strategies During the Great Resignation and Beyond
By Julia Senior, Partner
According to the U.S. Bureau of Labor Statistics, nearly 8.8 million people (equal to 5.9% of the total workforce) quit their jobs in August and September, continuing on the “great resignation” trend that has dominated headlines since April of 2021. This is not just something happening in the abstract or to other companies, this is a challenge that is impacting M/C Partners’ portfolio companies as well.
Most of our portfolio companies are experiencing challenges with retention (75%) and recruiting (almost 50%) and have seen elevated levels of employee attrition in 2021. Almost all of our companies identified higher salaries at other companies as a hurdle to recruiting, and more than half have responded by raising salaries and adding perks to support retention.
There are a variety of economic factors, both macro and micro, that are driving labor shortages and wage inflation across the labor market and within M/C’s portfolio companies. Some of these are inherently short-term, such as lack of childcare, health concerns and generous fiscal stimulus. Others may have a longer-term impact, such as early retirement for older workers that have seen the value of their savings increase significantly and, perhaps the most sticky change, a psychological shift in people’s desire to work.1
This palpable cultural shift, combined with declining birth rates and declining net immigration, suggest that we are unlikely to see the labor supply return to pre-pandemic levels. While the forecast for 2022 includes an increase in labor supply, the overall labor-force participation rate will still fall short of the demand and simply may never return to levels pre-2020. To combat this, companies may need to make systemic changes to recruiting and retention practices now to remain competitive in the future.
Four Strategies that Work
We recently held a roundtable discussion with the HR leaders of M/C’s portfolio companies to discuss strategies for recruiting and retention in the Great Resignation. Increasing compensation is important and unavoidable in some cases, but it is not the only lever in the recruiting and retention toolbox. Here is a closer look at some of the strategies our portfolio companies have been using successfully.
Expand the eligible candidate pool. Almost half of our portfolio companies reported that they are struggling to identify qualified candidates and have expanded the candidate pool to consider non-traditional candidates in response. For example, some companies are reevaluating blanket requirements for certain degrees or prior work experience and are replacing them with qualification tests to determine competency.
Some of our portfolio companies are also having success re-training existing employees with transferable skills and looking for candidates using new channels such as boot camps and partnerships/relationships with feeder organizations. In general, HR leaders are starting to look outside of traditional recruiting processes and career progressions and are finding creative ways to source and evaluate candidates.
2. Prioritize the candidate experience. More than half of our portfolio companies report having added recruiting muscle (in-house or 3rd party) and are prioritizing the candidate experience. This means leveraging technology to streamline recruiting and onboarding (no paper-based systems!) and tightening up the timeline for the interview process. The consensus from our roundtable discussion was that 3 is the maximum number of interviews that candidates will tolerate before getting fatigued on the process, and that while broad feedback from internal teams is nice — it’s not required to identify good candidates and can slow down the process unnecessarily.
Lastly, the most important aspect of the candidate experience is communication. Clear and timely communication about how the process will run, next steps and even compensation, is critical. Being transparent about compensation levels at the outset can save time later and can also help recruiters garner insight into industry wage trends.
3. Deliver more than salary. There is a lot of non-salary value that employers can provide to make open positions more attractive to potential candidates, but perks need to be tailored to today’s workers. Having a ping pong table isn’t necessarily going to mean much for employees with young families or long commutes.
Perks provide a unique opportunity to deliver wrap-around-services that are attractive to a company’s specific employee base. Our survey of M/C portfolio companies found that all are using some form of hybrid WFH structure and expect to continue the practice over the next year. In addition to flexible WFH policies, enhanced commuter benefits are becoming more common as are emergency childcare, charitable giving and volunteer days off.
In addition, companies should not underestimate the importance of having a strong mission and purpose. This is especially critical for recruiting and retaining younger workers, who gravitate towards mission-driven companies. Businesses will do well to emphasize not just what they do, but why that matters and make sure this is clear across the company’s website, social media (especially LinkedIn) and sites like Glassdoor.
4. Walk the walk. Keeping current employees happy is more important than ever in a tight job market. More than half our portfolio companies have responded to rising attrition rates by accommodating remote work flexibility, sending swag and hosting team building and social events.
In addition, M/C portfolio companies are emphasizing employee engagement. This means having a performance management system, making time for 1:1s and mentorship, and having well- defined and clearly communicated expectations. Employees need to know they are valued and they want to understand what their career path looks like.
Lastly, employers should not overlook the importance of wage equity between existing employees and the compensation levels they are advertising to new employees. If companies find there is a discrepancy between compensation for current employees and the level they are hiring at, it may be time to engage an outside consultant to help benchmark compensation rates and re-set salary bands that will be competitive and equitable.
Based on the data and the experience of M/C’s portfolio companies, recruiting and retention challenges are likely to persist over the next few years regardless of our experience with the pandemic. Ongoing surges will likely constrict the market as they have in the past, but lower than average participation rates ensure that labor markets will remain tight in any case.
HR leaders are on the front lines of an unprecedented shift in the labor market and the old HR playbook is unlikely to hold up. To succeed in this changing environment, companies need to reimagine their HR processes and practices.
What strategies will your organization use to remain competitive today and into the future?