People: The Pressing Need
People: The Pressing Need
What is the biggest asset that your business has? People. Every day the people that work for your company check out of your business and you are hoping that they show up again. Everyone knows that, but sometimes it is worth saying out loud especially when you look at your schedule and reflect on how much time is allocated to people building. This is especially relevant as we head towards a constricted talent and labor market.
My expectations in preparing for the 2030’s are for a challenging business environment. A lot of that view is based on demographics with people that today are 65+ finally retiring at a significant pace. For perspective about 240,000 people per month in the U.S. will retire over the next 5 years or about 14 million in total.* These are the people that have built the business to where it is today, whether on the management team, in critical functional roles, or in operational positions. They are not easily replaced.
Additionally, people costs will increase dramatically over the next five years so that you should be factoring 25-30% cumulative people cost increases over the next 4 years into your planning. Now is the time to do a fundamental review of your strategy before you are under pressure to attract and retain your people.
A people plan is one of the most critical aspects of our strategic planning. Whatever your strategy review cycle it is probably focused on the here and now without considering a five year build. Simple things like is your company a destination or a rest area for talent? What critical skills are you losing through retirement and people leaving to fill retirement fueled gaps at other companies? Thinking through these areas of focus is helpful:
Leadership funnel. Your team should have good visibility to the people inside and outside of the organization that can be considered for more leadership responsibilities. This is tough in ordinary times because you are busy running a business. Zoom out and do the exercise with the assumption that you will lose some leadership talent and then identify gaps in your funnel. Implementing a formal leadership development program can create a more robust funnel as well as be a key to attraction and retention. Compensation planning also needs to be ahead of the curve instead of reacting market conditions including ownership participation or performance bonus structures.
Critical roles. With a large amount of educated, experienced people leaving the workforce now is the time to create a map of how you are backfilling. Looking at current labor market conditions or assuming that AI will reduce your reliance on talent is misguided. Younger people that might be underemployed in the market will become in high demand very quickly. What are you doing to be the employer of choice accessing the skills that you need? This means a structured plan that is documented with a team identified implementing action plans.
Frontline workers. We went through this crunch a few years ago when it was difficult to hire people at an operational level. Wage rates and onboarding incentives increased dramatically in a short period of time. We are headed back to that environment and I doubt that anyone wants to be in the position of competing based on wages alone. Knowing that not all workers are equally dedicated to high performance now is the time to backfill departing employees while demand isn’t super high. Having a plan for attracting workers with a history of solid performance should be your focus right now. At the same time have a plan for how you are going to retain them when the job market heats back up and pay rates increase considerably.
These areas of focus each need attention in your evaluation. Breaking them out separately based on the needs of your company is useful to create a bottoms up approach to make a plan. That then rolls up to the overall people strategy including things like HR fundamentals of regulation, insurance, retirement plans, etc.
Circling back to macroeconomics keep in mind that while large numbers of people are retiring they typically become even bigger consumers early in retirement. This will continue to drive the U.S. consumption based economy for the next 5 years. So demand will continue to drive economic growth while labor supply will decrease substantially. Ultimately the loss of talent will be a factor in loss of productivity, although that will take a few years to show up. This underscores that being comfortable that likely the economy bumps along for the next few years is not a robust plan.
Take the time now to do focused work on your people plan. While it is an important element of your fundamental strategy review that I recommend there is no reason that you can’t start laying the people groundwork now as you work through the bigger plan.
Let’s have an extended conversation about alternatives to people design including going deeper into the research and thinking. Bringing it all together while focusing on your particular needs will give you the insights that you need. An engagement with Economics Designed expands your ability to evaluate your potential strategic actions.
Now is the time to perform a deep review of your fundamental strategies. There are many complexities to consider beyond the day to day work of making things run. Step way back to take a long view and begin to put actions in place for your future.
Strengthen your future by strategically designing the economics of your business!
*The Peak Boomers Impact Study: Robert Shapiro and Luke Stutgen April 2024