The US economy has experienced two consecutive quarters of declining real GDP. The annual inflation rate of 8.5% reported in July is the highest since November 1981. At the same time, the labor market is strong; the unemployment rate has returned to a pre-pandemic rate of 3.5%. Finally, the Great Resignation is not showing any signs of slowing down; in June of 2022, another 4.2 million workers quit their jobs.
✔ Focus on Labor
Labor can be as high as 70% of your overall costs, so looking at labor expenses is certainly important. Different approaches (layoffs, furloughs, salary reductions, etc.) will have different impacts on your bottom line as well as on the morale of your workforce. This is a time when you also want to focus on keeping your best workers. These are the people who are maximizing your ROI in them, who are not only skilled to meet the demands of today but can make the needed adjustments to the demands of tomorrow, next month, and next year. They are also the very people who are most prone to the call of the Great Resignation if they are not finding what they are looking for on your payroll. Whether or not you find it important to cut your overall labor costs, now is the time to invest in your best people so that they are incented to remain with you rather than to move to your competitor or to another industry altogether. Here are our recommendations for increasing the ROI of your best.
✔ Ask, Listen, and Understand
Now is not the time to assume you know what is important to your employees. In a study reported in the September 2021 McKinsey Quarterly, only one factor (work-life balance) cited by employees as the most important reason for leaving was also recognized as most important by employers. The other most important factors driving employee departures (not being valued by their manager or having a sense of belonging) were believed to be less important by employers.
What one person means by work-life balance is not the same as what another means. What makes one person feel valued by their manager is different than what gives another that same sense of being appreciated. Have those conversations that allow you to understand what is important to the people in your organization. Enlightened managers build relationships with people, not with employees, job titles, or job duties. Ask, “What gets you up and excited about your work every day?” Ask, “What can I do to better support your success?”
✔ Build a Coaching Culture
A 2018 study by the Human Capital Institute and the International Coaching Federation found that 78% of the high-performing companies in the study that utilized coaching to support their change initiatives reported it was very or extremely helpful in achieving success. Gallup’s research on how millennials want to work and live found that one of the significant cultural shifts that organizations need to make is a shift from “my boss” to “my coach.” Managers and leaders at all levels of the organization who can bring a coach approach to their interactions are inherently addressing many of the factors driving the Great Resignation. They are driving increased engagement and improved retention. They are deepening the relationships that drive performance. And they are creating greater psychological safety in the workplace. Now is the time to build a coaching culture. It is an investment in succeeding through unprecedented change. It is an investment in increasing the ROI you gain from your best employees. It is an investment in leveraging the factors driving the Great Resignation to attract the best from outside your organization to join your team.