I’ve been talking to quite a few business owners recently who are really struggling to recruit and are often blaming it on a shortage of workers. In todays video I want to talk about why that isn’t the case and the action every business needs to take to survive the cost of living crisis.
Why there is no such thing as a staff shortage and businesses need to take action
Looking at the employment figures, what’s actually happening is the news and government’s saying this is likely the lowest unemployment rate for 40 years. For the first time the number of jobs being advertised is actually outstripped employment, what that means is that there’s actually more jobs being advertised than there is unemployed people. So when people make statements that there’s a staff shortage, it can sound quite drastic, it can also give the impression that it has really changed the economy. What I want to do is put it into perspective.
Normally unemployment rates are higher and the number of people looking for work are higher. What we are talking about is a 2% change over a period of time. So, while that’s newsworthy, potentially, it’s not actually a massive material change in the economy. But what is interesting is I’m talking to lots of business owners who are just talking about how difficult it is to actually hire a member of staff and how difficult it is to recruit right now. So, these two things don’t add up to me, the number of people talking about how hard it is to recruit compared to the actual changes in the economy and the numbers of unemployment.
Why I really want to get to the bottom of this and the crux of this is, the reason a lot of small businesses are really struggling to recruit is not because there is less people it’s because the cost of living crisis has changed the economy and a lot of these business owners who are complaining about not being able to recruit are not adapting quickly enough to the changes in economy. So the staff are still out there, but at the moment what the cost of living crisis is doing is it’s putting pressure on members of staff to go and find the highest paid work possible so they can maintain their lifestyles.
Normally, when the economy’s stable people will look at the Maslow’s hierarchy of needs, they’ll want affiliation with their team, they’ll want to further their careers. They’ll want to do something that’s actually fulfilling and rewarding. At often times of financial crisis what they have to do is go back to basics and say actually, my first job is to feed my family and essentially put a roof over my head.
What’s happened is employees and prospective employees are becoming a lot more salary sensitive now. So this goes both ways, it’s not just about recruiting, it’s about retention. As a business you’ve got to stop asking the question, ‘what can I afford to pay them?’ or ‘can I afford to pay for this role?’ and start saying, ‘what does it cost to retain this employee?’ or ‘what does it cost to recruit this employee?’ So the mindset has to shift and it has to be more about market salaries and market opportunities for those employees. If what you are paying for that member or staff, even if they haven’t massively changed their role in your business, is less than what they could get in another job somewhere else, then they’re likely to leave. When that’s the case, you’ll have to replace them, and then you’re going to have to replace them at the higher salary anyway because that’s the only way you get the right number of staff.
Two things; if you’re recruiting, up the amount you’re offering, if you’re struggling to recruit that role, and the other thing is, be proactive with your own employees so that you match the competing salary and therefore you maintain retention. Obviously, when you’re recruiting don’t forget your points of culture, that’s such an important part of recruiting. You can watch one of my other videos on points of culture and why they need to be put in place.
How can I afford to pay more? We’ve got less customers because their disposable incomes been decreased. Then what you’ve really got to do is go back and put the prices up, but then chances are you are going to lose customers. If you lose a certain amount of customers, then what you might find is you don’t actually need to recruit anyway. You still make the same profits or even more than you did before. To pay your staff more, put your prices up so you’ve got more money coming into the business so you can pay your employees more. If you can’t afford to grow your team because you’ve lost customers, then what you’ve got to do is just make do with a smaller but better paid team – who will be more engaged because of less demand. It’s not an easy one to do. This is the kind of situation business owners are really dreading, but it’s the only way to survive during the cost of living crisis, which will go on for a couple of years, at least. Don’t be the last one adapting your business processes and pricing, you have to be one of the first.
If you want more support on processes, growing, or surviving as a business through the cost of living crisis then get in touch with me through a quick Strategy Session.