In A Pro-Employee Job Market, Employers Need To Make Strategic Plans To Deal With Turnover And Job Vacancies
More people are working and working more hours. This has helped push the median household income for Americans up to nearly $63,000. Unfortunately for American workers, the booming economy that has created more work for them has not compelled employers to increase the real wages of workers according to Ryan Nunn, the policy director of the Hamilton Project at the Brookings Institute. For household incomes to remain high and continue to rise as fewer workers become available to enter the job market and current employees max out their capacity to work longer hours, employers will have to increase wages. They will, of course, only have a reason to do so, if they wish to retain their seasoned employees in a competitive job market or they need to attract new employees from a shirking pool of the unemployed. Businesses, which do not meet the interests of their employees, will soon have to make strategic decision on how they will handle increased employee turnover and increased job vacancies.
Employees are going to exit their current place of employment for three main reasons in a job market favorable to them. One, they do not feel they are being paid what they are worth and they feel they can get more elsewhere. Two, they feel they are working too hard for too little and want to find an easier job that pays them near the same amount. Three, they do not like their current work environment or schedule. For employees, the solution for employers is easy: “raise my wages.” For employers, who must look at issues like employee turnover in budgetary terms, it is not so straightforward. First, the business must be able to afford raises. If it cannot, it must restructure itself to shrink to a size where a smaller staff can handle the workload and the business can earn a profit. Second, employers must consider the future as today’s pay increases will become a permanent expense, even if revenue shrinks. Third, employers must be strategic in how they issue raises. Not all employees are equal in terms of their productivity and value. The goal of offering raises is, after all, to ensure adequate staffing levels and retain the high-value employees who do mission critical work.
When a business sets a minimum wage, e.g. Amazon’s minimum living wage of $15 per hour, it is telling employees what it is willing to pay them to meet the basic expectations of their positions. The right amount depends on the job market, employee expectations, and the workload. Anything higher than the minimum wage must go to those employees who are needed to do work that exceeds the work and skill sets of basic employees. Higher wages must also go to seasoned employees who ensure the company runs smoothly. The simple truth is all potential hires, outside of recruitment efforts, understand they will not be paid as well as seasoned employees. They will, however, look at how well seasoned employees are paid and treated when determining where they are going to work. Strategic wage increases that favor high-valued, seasoned employees are, therefore, instrumental when trying to attract new employees as well as retain old ones. Because employees are not equal, the finances of all business are limited to varying degrees, and high-quality employees tend to resent raises going to those who do not pull their weight, it is not necessarily wise or beneficial to raise the wages of all employees or the starting wages of new employees.
When businesses experience major transformations through growth, market shifts, or crew rotations, it is often necessary to reevaluate the company’s needs and restructure. The basic idea is to more efficiently use human resources, i.e. squeeze out wasted time and get more things done right in less time. For a lot of companies, they have already done a great deal to maximize the efficiency of their workers, so it is necessary to ease the burden on the high-quality, seasoned employees in order to retain them. In recent years, more and more employers have relied on part-time, seasonal, and temporary workers. It is a necessity for some businesses that will never go away. As the old saying goes, however, “you get what you pay for.” Part-time, seasonal, and temporary workers are often a cheaper alternative to employing a workforce of full-time employees, but that cheapness comes at a cost. Many of these employees are either low-performing and/or ill-trained, which makes it necessary for high-valued, regular employees to direct them, i.e. provide an adequate level of supervision. Businesses lacking the proper structure to handle lower-performing employees need to restructure their operations to handle the lack of productivity and performance.
From the business perspective, “how low can you go” is the payroll mantra. The answer depends on how willing customers are to forgive quality issues. Businesses with generous refund policies, picky clients, and high prices likely have a very small tolerance before their cuts start to threaten the survival of their business. Looking at the fast food industry, for example, few workers can expect to rise above their near-minimum wage incomes. To simply minimize quality control issues associated with low-skilled workers, fast food businesses rely on automation, pre-made products, centrally dictated assembly-line production systems, heavily structured training procedures, and layers of supervisors and trainers. Businessmen attempting to run a company like a McDonald’s can, expect to provide products and services with the quality of a fast food joint. While low-quality food and numerous order errors are expected by customers, fast food workers struggle to use new technology and make allegedly complex menu items.
Industrialized companies like McDonald’s essentially take professional skills, i.e. cooking, and convert them into step-by-step instructions. Instead of grilling and garnishing a burger then plating it with a side of fries, workers are trained to prep ingredients and assemble product units. They are no longer cooking. They are building units of burger, fries, and drinks. The process is “unitized,” the work space is tailored specifically to the tasks at hand, and the tasks involved are laid out in detailed task chains. The process is more akin to building a Lego set than cooking. McDonald’s, which patterned its operations after those of the industrial sector, is far from unique. Most major chain businesses have adopted industrialized operations to ensure consistent and high-quality results. To be successful in this approach, however, businesses must have the proper oversight structure. The longer the task chains, the better trained, more thorough, and higher performing workers need to be. Key employees, who ensure lengthy, i.e. linearly complex, task chains are properly executed, are on par with the professionals, craftsmen, and artisans these task chains are supposed to supplement, thus they must be paid in accordance while enough of them must be kept on the payroll to supervise the lower-performing workers.
The simple truth is that businesses with ill-defined jobs and complex task chains can expect to falter when using the labor practices of the fast food industry. A business seeking to increase the professionalism of its employees while suppressing wages and cutting hours can only expect to do so by paying a sufficient number of core employees to train and supervise temporary, seasonal, and low-performing employees. This means employees doing mission critical tasks need to be retained. Businesses need to entice their “heavy lifters,” who get the most work done, their “taskmasters,” who organize and motivate others, and their “standard bearers” who maintain the standards of the business, to stay. Not only do they need to retain these critical employees, they need enough of them to compensate for the fallacies of new, low-preforming, and error-prone workers. Failing to recognize worker performance is not equal and relying on weaker workers can transform minor tasks into costly errors and lead to a massive number of these costly errors.
For business leaders, who embrace the need to solve problems, raise standards, and treat their workers as respected, professional members of a team by retaining quality workers, the interests of their workers matter. Fulfilling the needs of employees who take care of the company is the only way to effectively increase productivity and cut costs. Addressing the emotional and social needs of all employees can do a lot to motivate employees and increase productivity, but the financial needs of core employees must, ultimately, be met first. The minimum living wage is the wage someone needs to make in order to sustain a modern lifestyle and, therefore, the true cost of a person’s labor. Those making below the local minimum living wage are running personal budget deficits, which they can only sustain for so long. Today, that minimum wage is rising, but wages are not. Regrettably, this means, even if they enjoy working at a particular company or doing a particular job, workers cannot afford to work their jobs. Because financial interests are measured in incomes, both wages and hours matter, thus employer efforts to freeze or cut the incomes of critical team members force them to seek employment elsewhere, which can easily harm the business, productivity, and profits in unanticipated ways.
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