Have you noticed that it’s taking an unusually long time to fill an open position at your company? Or has one of your star performers accepted a position with a competitor that included a hefty salary increase?
That’s because we are in a candidate drought. Companies are struggling to find star candidates in a market with the lowest unemployment rate in 17 years. And a candidate drought doesn’t just affect your ability to attract and hire new employees. It also changes how you develop and retain your current team.
Unfortunately for employers, the situation is unlikely to ease anytime soon. However, you can be successful in this hiring market if you adjust how you attract, hire, and retain top employees.
Below, we’ve given you some background on the changing talent landscape and included key areas your company should focus on if you want to weather the candidate drought.
Tl;dr – if you are time-strapped and want a quick summary, we’ve included a simple, bulleted summary at the end of this post.
ARE WE IN A CANDIDATE DROUGHT?
The first step to solving any problem is to understand it. There are many articles that describe the lack of candidates and the unemployment rate reaching near zero, but what exactly does that mean?
THE UNEMPLOYMENT RATE BY THE NUMBERS
First of all, unemployment is defined by the Bureau of Labor Statistics as people who:
- Do not have a job
- Have actively looked for work in the past four weeks
- Are currently available for work.
The unemployment rate is the number of unemployed people divided by the total number of people in the civilian labor force.
A long-run normal level of the unemployment rate is in a range between 4 and 5 percent. An unemployment rate over 6 percent is considered high and the lowest unemployment rate recorded is 2.5 percent. However, it’s still very difficult for companies to expand and find good workers even in the 4 to 5 percent range.
Over the past couple of years, the unemployment rate has started to drop. Starting in January of 2017, talented people became scarce. The unemployment rate fell to just under 5 percent in the U.S. To give you some perspective, the unemployment rate was nearly 10 percent in 2010. Today, the National unemployment rate is less than 4 percent and the U.S. labor market is unusually stretched.
THE LABOR MARKET MIGHT BE TIGHTER THAN WE THINK
While the unemployment rate continues to fall, the employment-to-population rate has failed to recover since the recession. A low employment-to-population rate means there are fewer people available for work and the labor market may be even tighter than people think.
The change in U.S. demographics can help explain this scenario. There are more than 10,000 baby boomers hitting retirement age weekly. And more young people are going to college and enrolling in graduate programs. Both of these scenarios reduce the ratio of workers to total population.
Also, depending on your industry, location, and the positions you need to be filled, you may have a more difficult time hiring candidates.
Location
The current unemployment rate is less than 4 percent, but that doesn’t mean it’s the same percentage for every state across the U.S. For example, states like Hawaii, Colorado, and Vermont are less than 3 percent, while states like Alaska and West Virginia have an unemployment rate over 5 percent.
And larger states like New York and California have an unemployment rate right around 4.3 percent. These are good stats to keep in mind if you’re trying to fill a remote position or want to expand your search criteria.
Industry and Job Function
The unemployment rate also varies depending on the industry, job, and skill level required for the position. Different jobs and industries are being hit harder by the candidate drought than others, mainly due to a wide skills gap.
A study by Bloomberg and Workday finds that college graduates are not bringing enough technical or soft skills to the job market and four in ten corporate respondents are providing training to try to fill this gap. So while there are a lot of jobs open, there’s an increasingly wide gap between the jobs being created and the skills and experiences in the workforce to fill them.
The unemployment rate is also extremely low for people with a college degree—2.1 percent, which helps explain why it’s more difficult to find highly skilled candidates. Application software developers are the hardest position to fill in 2018. And data from LinkedIn shows that jobs like analytics, machine learning, cloud computing, and cybersecurity are 4-10X more scarce than the typical role.
HOW THE CANDIDATE DROUGHT IS AFFECTING EMPLOYERS
Now that you have a better understanding of today’s labor market, it’s important to be aware of how the candidate drought affects your business.
DIFFICULTY GROWING YOUR COMPANY
As the demand for top employees has increased, the supply of highly skilled workers has dwindled and puts companies in a difficult position. They want to take advantage of the booming economy but aren’t able to find the skilled talent they need to grow their companies.
Small businesses are being hit especially hard. In June of 2018, small businesses added 29,000 jobs, compared with payroll gains of 80,000 for midsize companies and 69,000 for large ones, according to ADP.
More telling, thirty-six percent of small-business owners had job openings they couldn’t fill in June, matching the record high set in November 2000, according to the National Federation of Independent Business’s monthly survey.
INABILITY TO PROPERLY SERVE CUSTOMERS
While a lack of talent will hinder your company’s growth and potential revenue, it can also create holes in your business where you need talent. Customer service roles that are left unfilled, for example, will cause a negative effect down the line. You won’t have the support staff in place to assist customers, making it harder to retain clients and earn repeat business.
It will also put an increased strain on employees who have to fill in and help with these roles. The extra stress and pressure on your current team to get these positions covered could eventually lead to them accepting a position with another company.
INCREASED WAGES FOR IN-DEMAND POSITIONS
Even as demand increases for top talent in the tech industry, for example, the available talent pool remains shallow. When this happens, it creates a highly competitive labor market and wage growth. The wage growth for the technology industry has grown almost 15 percent since 2006 and show no sign of slowing down.
Jobs in the IT industry also see more wage growth depending on which city they’re located. Tech-savvy cities like Seattle, San Francisco, and Boston, all experienced an annual wage growth of more than 3.9 percent for IT positions.
It’s important to know what a competitive salary in your industry is if you want to hire the best talent.
LONGER HIRING PROCESS
The average time to fill a position is 44 days, and that number is up from 23 days in 2014. Today, the hiring process could take even longer since you have a much smaller talent pool to find top candidates.
In addition to a lack of candidates slowing down your process, you should also expect more counter offers during the negotiation stage. Employers are doing everything they can to keep their best employees. However, you should have a strategy in place throughout your recruiting process to prevent the counteroffer in the first place.
Your hiring process may also become longer if you add on more interviews or skills tests. Employers today want to hire and retain the best candidates they can and avoid turnover at all costs. More interviews or assessments in your process may help you determine whether or not a candidate is the right fit.
However, make sure your process isn’t too long or you risk candidates becoming unengaged and accepting an offer from another company while they wait for your decision.
CURRENT EMPLOYEE TURNOVER
Today’s hiring environment not only affects your ability to recruit top talent, but it also affects how you approach retention of your current team. The cost of turnover is extremely high by itself, but it will cost you even more money and time to find a replacement candidate in today’s market.
According to a Gallup poll, a pay bump of 20 percent or less is all it would take for employees to consider taking a job with a different company.
Furthermore, of actively engaged employees, 37 percent said they would leave their current positions for a 20 percent raise. It doesn’t take a much higher salary offer to lose some of your most productive and happy employees.
And even more worrisome, 54 percent of actively disengaged employees would consider making the leap to a new job for a raise.
If you have an exceptionally productive or skilled employee, it’s essential to recognize their contributions to your company. If they’re producing great work and not being rewarded for it, they’re likely going to consider new positions.
WHAT YOU CAN DO ABOUT IT
As you can see from the data above, the candidate drought not only makes it more difficult to find candidates, but it also shows that candidates are more likely to leave their current position knowing that it won’t be difficult to find a new job.
Fortunately, there are steps you can take to attract quality candidates to your open positions and retain your current employees.
EMPLOYER BRANDING
Today, many skilled candidates are happily employed and aren’t looking for new job offers. So it comes as no surprise that it’s very difficult to get a potential candidate to read, let alone, respond to your job offer.
However, candidates are more likely to respond to you if they recognize your brand or think your company has a good reputation. But you need to earn and build your company brand, it’s not something that will happen overnight.
A few places to start building your brand are on social media and your company website. Keep your content updated and make sure to include any company news or awards. Social media is also a great place to showcase your company culture. Did your team volunteer at a local food bank over the holidays or have a jersey day to showcase their favorite football teams? These are just a starting point for sharing more about your company and what it’s like to work there.
INVEST IN YOUR CURRENT TEAM
Instead, you need to develop your team and show genuine care for your employees. You can start by investing in their professional development. Offer a stipend that goes towards books, courses, or certifications.
Another idea is to host team building activities. Studies show that close friendships at work boost employee satisfaction by 50 percent. And it doesn’t have to be an all-day event. Just a fun activity that breaks up the day can be enough for employees to feel engaged and build friendships.
Investing in your team doesn’t have to cost a lot of money either. Getting to know more about your employee’s personal lives or hobbies is also a great way to show you care.
ONBOARDING
When the labor market is tight, new hire orientation becomes more important than ever. You need to immerse your new employees in your company culture from their first day and make sure they’re buying into the company.
One way to do this is to have a proven onboarding process that lasts more than the employee’s first week. Start by building a new hire orientation process that lasts a year and includes regular check-ins and opportunities for your new employees to make friends and have fun.
Also, in this tight labor market, you might have to hire someone who has a related skill but is not a perfect fit for the position. Make sure you have the right training and mentorship opportunities available to help your new hire get up to speed.
RECRUITING STRATEGY AND PROCESS
Talent is at the core of any organization and you can’t afford to lose out on talented professionals if you want to stay competitive. So while the talent pool is limited, there are still ways to find top candidates.
One option is to expand your search criteria. Look for talent outside of your current location to a place that is less saturated. You can even open your position up as remote if it’s possible.
Another option is to look outside of your industry. Many employers only like to hire candidates with industry experience. However, if this is not a requirement, then consider removing it from your search criteria and your talent pool will expand greatly.
You should also consider new recruiting strategies you haven’t tried before. Have you tried recruiting candidates on social media? What about using a specialized recruiting firm to help you recruit for a position that has been open for months?
No matter which new strategy you choose, if you try to recruit candidates like you did ten years ago, then you’re going to struggle to find top candidates.
COMPETITIVE COMPENSATION
While many employees aren’t currently looking for new positions, they would still be tempted to leave if offered a position with more money. Make sure your current employees are being compensated competitively so they have less of an incentive to leave.
This is the same advice when it comes to making job offers to potential employees. Today’s candidates are savvy and are more informed about the salary you’re offering. They’ve done their homework on sites like Glassdoor and Payscale to find out exactly how much they should be getting paid.
If you want to compete with top talent then you need to do the same. Seek out a compensation specialist or salary guide to find out what the market is paying for certain positions and skill sets. You can then develop your salary ranges around that data.
ALWAYS BE RECRUITING
If you wait to start recruiting until you have a vacancy, then it can take an extremely long time to find the right candidate. Instead, you should always be recruiting and on the lookout for top candidates.
Actively participating in networking groups or associations is a great way to meet potential candidates. Also, reaching out to your LinkedIn connections and friends can help strengthen your bond. Building a relationship with these people now is important so when it is time to hire, you will have potential candidates to reach out to immediately.
IN REVIEW (tl;dr)
There’s no doubt we are in a candidate drought and it’s becoming harder to hire and retain top talent. The stats are clear!
The impacts on employers can be:
- Restrained growth
- Poor customer service
- Lengthy hiring timelines
- Wage growth
- Increased employee turnover
As an employer, it’s important to make the necessary adjustments to compete in today’s market, including:
- Market and brand yourself to target candidate audiences
- Invest in the development of your team
- Improve onboarding to improve success and enable a broader talent pool
- Move fast in your hiring process
- Offer competitive compensation
- Continuously recruit
Please share how your business has been affected by a lack of candidates for open positions.
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