Business Growth Strategies
Labor Shortage Strategies: CEO Panel Offers Suggestions
Strategies to address labor costs, attract and retain talented employees, and reposition your business for the future
CEOs on a recent Union Bank roundtable panel offered a variety of strategies for responding to tight labor market conditions, ranging from relying more on business automation to communicating with employees more proactively.
Leo Feler, senior economist at UCLA Anderson Forecast, set the stage for the CEO Forum by outlining the challenging labor conditions CEOs are facing — including sub-4% unemployment, escalating wages, and extreme inflation that is leaving many employees unsatisfied by their wage increases.
Panelists also pointed to a labor shortage caused by an array of factors, including the growing gig economy, older workers retiring early, and a reduced flow of legal immigrants — as well as rising costs related to employee benefits such as workers compensation.
Here are several strategies the panelists said their companies are using to address labor costs, attract and retain talented employees, and reposition their businesses for the future:
The panelists agreed that manufacturing companies are wise to automate some warehouse tasks to reduce labor needs and costs.
According to Roger O’Brien, president and CEO of Santa Monica Seafood, since the pandemic arrived, the West Coast’s largest seafood distributor has cut employee headcount to about 700 from 800. “We accomplished this through a lot of automation, not just with equipment but with software and workflow processes,” O’Brien explained.
Automation is critical for businesses to combat the fast-rising minimum wage in California as well as other labor challenges faced by employers in the state, including rising post-termination claims, O’Brien said. “You are just not going to survive economically in the state of California, and in many other states as well, if you have too many workers.”
One of the strategies the CEOs cited for attracting and retaining talented employees in this environment is variable pay. Jonathan Wilson, CEO and chief value creator for Dubb Value Creation, a management consulting firm with a focus on mergers, acquisitions and strategy, described the new posture many companies are taking with employees: “If you’re going to add more value to the company, we’re going to compensate you for that.”
Founder and CEO Sandra Cho reported introducing variable pay at Pointwealth Capital Management, a wealth management consulting firm. “I’ve implemented a profit-sharing plan where employees get to participate in the growth and success of the company, as well as bonuses,” she said.
Employees want more than just bigger paychecks, however, the CEOs stressed. “Wages are not No. 1 for most employees. Culture is No. 1,” said O’Brien of Santa Monica Seafood.
“People want to work where they see the opportunity to be promoted from within, where they are given good responsibilities, they are mentored and where it’s a fun place to work,” O’Brien said.
Added Wilson of Dubb Value Creation: “We really have to focus on culture within our companies.”
A big aspect of enhancing culture is enabling employees to achieve work-life balance, the CEOs said.
One of the best ways to support work-life balance, they said, is enabling employees to work remotely, a strategy that was made necessary by the pandemic but which continues to resonate as a way of improving company culture.
All the panelists endorsed remote work — at least a hybrid workplace model where employees would have the option of working some at home and some at the office — for most traditional office workers.
O’Brien said he isn’t looking to persuade workers to return to the office following the worst of the pandemic. “Once people get used to it, appreciate the work-life balance and that you’re doing this for them, they become more loyal as employees,” he said.
Additionally, O’Brien said adopting remote work has expanded his pool of potential new employees and increased the quality of new hires. “We just hired someone in Texas. We have a person in Kansas who’s been working for us for a year. And next week I’m talking to a person in New York we want to hire,” he said. “We want them to work from where they are, and based on their responsibilities, it will work for them and it will work for us.”
Without the ability to hire remote workers, “I’d be looking for people locally, and the labor force here [in Southern California] is not too pretty right now,” O’Brien said.
Wilson, who works with a lot of Fortune 500 companies, said he’s seen a number adopting mandatory hybrid models to reduce use of office space and overhead, while making employees happier. Some of his clients are implementing a “hotel model” where employees share desks and work spaces with other employees who come to the office on different days. “There are many benefits with having a hybrid workforce,” he said.
Sterling Sankey, head of Wealth Management at Union Bank and panel moderator, noted that some companies, in response to the trend of more companies supporting work at home, are redesigning their offices. “Instead of having a lot of individual work spaces, they develop more collaborative spaces” for those times when employees come to the office to work face-to-face with colleagues.
A prominent theme in the CEOs’ comments was the need for stepping up communication with employees, for a variety reasons.
O’Brien said listening to employees is key to understanding what they are looking for in their jobs, what would make them happy and productive, and how his company should shape compensation and corporate culture. During the pandemic, he also spent a lot of time reaching out to employees with company updates. “I needed our employees to know that we’re financially in great shape, their jobs are in good shape, and here’s how we’ve been growing,” he said.
Wilson discussed the importance of informally checking in with employees to assess if they are taking steps to maintain good mental health.
To that end, and to combat the expanded hours many employees are working at home, Cho, of Pointwealth Capital Management, has implemented more personal days and paid time off. “It’s very important that my employees take a break and their entire life doesn’t become work,” she said.
Economist Feler said beginning next year higher interest rates should begin to slow growth and he expects to see unemployment start rising and inflation recede enough to begin tamping down wage escalation. But for the foreseeable future, he said, expect some tightness in the labor market. As a result, most of the labor shortage strategies promoted by the CEO panelists should remain relevant for some time.
The views and opinions expressed in this article are those of the panel participants and do not necessarily reflect the official policy or position of Mitsubishi UFJ Financial Group, Inc. (“MUFG”) or any affiliates of MUFG.