Employees are appreciating assets and a stable workforce is typically the #1 business value driver. Many companies are currently faced with this reality, challenged with retaining their existing workforce and attracting qualified workers to fill vacated positions. As the Great Resignation illustrates, the workforce as a whole is shifting. Workers’ priorities and real needs have changed. Costs have risen, with no immediate relief in sight. Take a look inside a business that is facing these issues and seeking solutions.
Deb is a member of our Exit Planning Peer Advisory Board (PAB) and the owner and president of a Colorado-based company that offers specialty services for HVAC systems and sheet metal. Faced with staffing issues, she asked her fellow business owners on the PAB to help by providing their insights and suggestions.
Her perceived issues started with a request for a pay increase by one employee. The situation was complicated by the effects of COVID on her staff and business, and by external factors of the still-changing business and economic climates. The company faced staffing challenges in multiple areas:
- Wages and Pay Scale
- Employee Engagement/Motivation
- Employee Retention
Challenge: Wages and Pay Scale
- In order to hire qualified workers, Deb’s company is paying much higher wages than before. The pay scale has increased significantly over the past two years.
- If a new hire is brought in at a higher wage, how is the playing field kept level among more qualified workers that are currently at the same pay rate as the new hire? [NOTE: Colorado law prohibits forbidding workers to discuss wages and prohibits repercussions if they do so.]
- An employee (we’ll call him Mack) who works as a Field Foreman, called Deb on New Year’s Day to tell her that, to be financially stable, he needed a $5 per hour increase in pay. About sixty days earlier he had told her he needed to make $36 per hour. This would put him at a management level wage. During the conversation on January 1, he shared that the person he trained where he was previously employed is now making $36 per hour and that he should get an increase to $38 per hour. Neither wage seemed doable.
PAB Solutions and Suggestions:
- Provide an inclusive package, with a pay increase plus additional benefits that are truly of value to the employee.
- Offer more paid time off at Christmas and/or in general.
- Consider grocery store and other gift cards that offset employee expenses.
- Set up a 401(K) plan and suggest that employees borrow from the plan in lieu of paying employee advances.
Challenge: Employee Engagement/Motivation
- About 60 days ago, Mack was sometimes failing to show up for work and management learned that he was going through a divorce. At that time, a meeting was set up with him, during which he said he needed to make $36 per hour.
- Following his call to Deb on New Year’s Day, he came into the office the next Tuesday to discuss his need for a pay increase, then called out on Thursday and Friday.
- It was unknown whether Mack’s absences were related to family or personal issues, burnout at work, worries over finances, or something else.
- Deb conducted a survey of basic skills required by Field Foremen, which was completed by office and management staff who interact daily with the foremen. Her goal was to identify her “best” foreman and how Mack fell within the mix. On average, he was ranked #2 out of eight foremen.
- With these results, Deb felt she could justify a higher wage for Mack but did not see how she could manage the $38 per hour he said he needs.
PAB Solutions and Suggestions:
- Be sensitive to personal issues such as Mack’s divorce, which is life changing.
- Share with employees the information you can regarding actual salary costs.
- Be aware that employee pay is not as big a secret as you might think.
- Get employees more involved in running the business.
Challenge: Employee Retention – Real World Factors to Consider
- It really does cost more to live – prices of consumer goods have risen 7% in the last year, with some items increasing by more than 13%.
- According to a recent study by the NYU School of Global Public Health, food insecurity during the pandemic was an issue for 15% of American households, 17% of households with children. This was up from 11.8%, affecting 38 million Americans, some of whom had never before experienced food insecurity.
- Staffing shortages exist in every industry.
- According to the US Department of Labor, 4.5 million Americans voluntarily left their jobs in November 2021.
- Those who quit are looking for change, including:
- Higher wages
- Opportunities for professional training and growth
- A better work-life balance
- Affordable childcare
- Companies that share their values
- Opportunities to be heard, make decisions, contribute, and make a difference
- The cost of turnover typically runs from 16% to 213% of the lost employee’s salary, depending on position.
- It can take up to two years for a new employee to equal the productivity of their predecessor.
- Turnover can impact morale, engagement, and company culture, and may have a domino effect and cause more employees to leave.
PAB Solutions and Suggestions:
- Surprise employees with perks like donuts or pizza.
- Give employees branded items they can actually use, such as hoodies, hats, etc.
- Ensure that employees are heard. Consider an employee survey to gauge satisfaction with their jobs and the company, and to learn their thoughts, needs, and suggestions.
- Offer extra paid time off, such as an extra week at Christmas, to provide more time with family and self-care.
- Consider a profit-sharing bonus incentive, based on completing a job on time and on or under budget.
Other Employee Retention Practices:
- Create a culture of ownership thinking.
- Pay performance bonuses.
- Offer flexibility in work schedules or location to provide a better work-life balance, accommodate childcare needs, etc.
- Provide alternate compensation such as extra time off, gift cards, or paid experiences such as a night out with family.
- Be clear on your mission and vision and how each employee contributes to making them a reality.
- Share information and data to help each team member understand their role in meeting business goals.
- Solicit input and ideas from employees.
- Give staff members the authority to make decisions.
- Make employees feel respected and appreciated by recognizing their contributions and expertise.
- Cultivate and practice authenticity and transparency.
Deb had a lot to consider regarding how she would deal with Mack’s situation. But the issue does not stop with Mack. Business owners and employers must address these issues to retain existing staff and attract qualified workers to fill gaps in their workforce.
She was able to give Mack, who is still employed at her company, what she felt was a fair increase in pay, taking into account that he did not demonstrate, at that time, a greater skill set or level of improved performance that justified pushing the boundaries of the salary range. Deb shared that she felt she was able to follow her own conviction in terms of what was best for her company by maintaining the integrity of her salary range, while still allowing Mack to be heard and have his needs considered.
The Value of Peer Input
Deb was grateful for the time, thought, and suggestions of her fellow Peer Advisory Board members and shared that, “Having the benefit of the perspective of other business owners is invaluable. It’s gratifying to know that my peers are willing to brainstorm with me. And it certainly helps to know we’re not alone in the issues we face.”
With greater insight into the over-arching issues, and many suggestions for addressing them, each of the business owners gained new ideas on how to compensate, engage, and retain their most valuable asset – their people. This is a perfect example of how the PAB is not only a great resource for exit planning but benefits each participant’s business today. Contact me if you would like more information about the PAB or would like to attend a meeting as our guest.