As the U.S. economy approaches full employment, industries that rely on front-line staff are struggling to backfill the employees they lose. Instead of focusing purely on hiring, many companies are investing in their front-line workers to build better cultures, retain talent, and reduce employee churn.
This represents a big shift in how companies treat blue-collar workers. Only a few years back, retail and hospitality leaders routinely described their front-line staff to me as “replaceable resources.” As a culture-focused Silicon Valley CEO whose company is perpetually engaged in intensely competitive recruiting, I was taken aback by the notion that employee churn was an acceptable cost of doing business.
But it was understandable. The labor market supported this approach with its endless supply of new workers. Operations continued normally if companies achieved quick backfill. As one restaurant executive said, “We need to keep them for six months. Anything beyond that is gravy.”
The good times are no longer rolling. The BLS reports that September’s 4.2 percent unemployment rate is holding strong as the lowest in a decade, and economists are optimistic about six consecutive years of positive job growth. When an hourly waged employee quits, it’s no longer as simple as shuffling the next employee in. There’s nobody waiting in line.
When most unemployed people are simply between jobs, but ultimately able to find one, economists call this situation “full employment.” Many believe we are now at this point, even if the Federal Reserve has yet to declare it.
The downside to this bright economic picture is readily apparent to corporate leaders: The labor supply has tightened. There simply aren’t enough people to fill jobs. In fact, Fortune cites the lack of qualified labor as the No. 1 problem facing businesses this year.
This trend is especially hard for industries such as retail and hospitality. Companies not only need to hire new full-time and seasonal employees, but the costs associated with high turnover aren’t trivial. To replace a worker who earns less than $50,000 per year is nearly 20 percent of that person’s annual salary. Last year alone, Walmart spent about $1 billion hiring workers.
Historically, businesses raise wages to compete for limited talent. However, The Washington Post reports only modest wage increases, with average hourly earnings rising 2.5 percent on an annualized basis: “Some economists argue that wages remain so low because gains in productivity—an all-important measure of how much a given worker or machine can produce—have been sluggish in recent years.”
Productivity is correlated to employee engagement and enablement. While that’s not the only issue at hand, what are businesses doing—or failing to do—to cause stagnation in productivity growth?
Part of the answer surely lies in the vicious hire-churn-hire employment cycle. Despite spending $1,200 and $1,900 per worker on training and development, employers don’t give employees modern methods for engagement and communication while on the job. Instead of using the mobile phones in their pockets, most hourly employees are forced to use printed binders and walkie-talkies, resulting in eight wasted hours per week searching for information—a vexing experience that leads to frustration and dissatisfaction.
Given this lack of on-the-job enablement, it’s hardly surprising that turnover rates are high, especially when 54 percent of employees report being disengaged from their work. The question shifts from “How can I replace this employee?” to “How can I engage and retain him or her?”
I speak frequently with leaders at a major restaurant brand who previously accepted the hire-churn-hire approach. They’re now looking at retention strategies, as the ROI of increasing the average tenure of an hourly employee is increasingly significant to business performance. One manager told me, “If we can keep employees engaged and employed for an average of three extra months, we save millions of dollars every year in overtime and recruiting costs.”
This strategy is supported by more than just financials. Gallup reports that engaged employees are associated with 22 percent higher profitability, 21 percent higher productivity, and 65 percent lower turnover rates. The real challenge is finding ways to enable employees.
One part of the solution is simple: Get people engaged on their phones. Mobile represents a modern method to enable millions of front-line workers in a way that makes sense to them. Employees can execute against tasks and do their jobs with confidence when they can search for and find mission-critical information without delay. Not only does worker proficiency and accuracy improve, but productivity and engagement get a real boost.
McDonald’s learned this lesson more than a year ago when it made training and onboarding materials available to franchise operators on tablets and phones. Not only has the Golden Arches expedited processes, but it is engaging Millennial employees and keeping managers out of the back office. In a similar vein, Taco Bell is implementing tablet-based processes for enabling franchise operators and training workers on the new menu items it releases every six weeks.
On the retail side, Kohl’s was ahead of the curve when it provided employees with tablet devices years ago. It is doubling down on this approach with its “Greatness Agenda,” which, among other things, equips associates with technologies that improve the guest experience.
Companies can dramatically increase important metrics such as sales, profits, and customer engagement when they focus on employee enablement. From The New York Times: “In a numbers-driven world, the most compelling argument for change is the growing evidence that meeting the needs of employees fuels their productivity, loyalty, and performance.”
It’s time to look past the obvious hiring challenge and focus on how to keep workforces engaged and more productive. By addressing the crux of the problem, forward-thinking companies can gain the competitive advantage in hiring and retaining talent and experience productivity growth that warrants wage increases. Embracing the reality of modern technology is a must. And it’s long overdue.
Matt MacInnis is the CEO of Inkling, which is on a mission to transform the way people work. Inkling is mobile-first, so deskless workers can easily access actionable information anytime, anywhere on any device. Inkling helps organizations empower their people to do their best work, every day. Founded in 2009 and backed by Sequoia Capital and Sapphire Ventures, Inking is based in San Francisco. Learn more at www.inkling.com