Competing for Talent During “The Great Renegotiation”
October 26, 2022 | BY Simcha Felder, CPA, MBA
Earlier this year, I wrote about the term ”The Great Resignation” describing the record number of employees who have left their jobs since the start of the pandemic. Although the number of employees who are quitting remain at record levels, economists have begun using a different term to describe the recent employment phenomenon – ”The Great Renegotiation.”
”The Great Resignation” seems to imply that employees are simply resigning and finding new jobs or leaving the workforce altogether. The truth is much more complicated. There is a growing belief that the worker-employer relationship has changed both fundamentally and permanently. According to a report by McKinsey, 65% of workers who took a new job in the last 2 years did so in a different industry than the one in which they were previously employed. The pandemic has made employees adjust their priorities and rethink their work expectations.
Put a little differently, employee expectations have gone up, so organizations need to examine how they recruit talent. According to McKinsey, employees have different priorities and want more than just higher compensation, and it is up to employers to adjust. ”The Great Renegotiation” has begun, and companies who are committed to making the necessary work and cultural changes can leverage this workforce reshuffling into a powerful opportunity.
Traditional tools such as compensation, titles, and promotion are still important, but shouldn’t be the only levers that companies can use to attract employees. Katy George, a senior partner at McKinsey & Company, wrote a paper highlighting five changes that companies should consider making if they want to succeed in the emerging talent market:
From Pedigree to Potential
Job descriptions typically list specific education and experience requirements, but this can discourage candidates from applying who may be able to do the job despite lacking a certain credential. To broaden an employment search, companies can shift the focus from degrees to skills – simply changing the entry barriers, not lowering them.
From Preset Career Paths to Self-Authorship
In years gone by, employees would follow a pre-determined career track up a corporate ladder. Given the rapidly changing nature of today’s work and how quickly skills can become obsolete, employees are now taking charge of their own professional development. Companies should provide more professional development, apprenticeship, and personal growth opportunities. Self-directed learning can support both individual ambitions and company priorities.
From One-Way to Two-Way Apprenticeship
Traditional apprenticeship was about a younger person learning directly from an older one. Today, learning and teaching should flow both ways. For example, an apprenticeship that brings together a senior finance manager and a lower-ranking IT engineer would be an excellent way to share knowledge. A two-way learning dynamic gives employees opportunity for continual growth and can lead to greater loyalty and productivity.
From Time Served to Impact Delivered
An employee staying with a singular company for their whole career is pretty much unheard of nowadays. The stigma in leaving a job has never been weaker and the relationship between tenure and performance is nonexistent. Employees are looking for meaningful work where they feel they are making an impact. Employees expect their jobs to bring a significant sense of purpose to their lives and employers need to help meet this need. A paycheck is great, but a paycheck coupled with the feeling that you’ve positively contributed to society is even better.
From Culture Fit to Inclusive Culture
Capturing the full benefits of diversity is not about hiring people who can fit into the existing corporate culture. It’s about creating a company culture that is supportive and adaptable enough to embrace all kinds of talent. If a company does not work to embrace diverse talent, they will miss out on adding creativity and innovation to their team. Whether it is encouraging empathetic managers, or conducting fair performance reviews, there are many different ways to improve a company’s culture to be more inclusive.
Given the stress in many labor markets and the increasingly global hunt for talent, “The Great Renegotiation” is expected to intensify – but it is a process, not an end result. Adopting the changes above will be no small undertaking, but they are important steps to meeting both the present and the future needs of the labor market.
This material has been prepared for informational purposes only, and is not intended to provide, nor should it be relied upon for, legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.