3 Ways to Fix Your Labor Shortage

Today’s post is courtesy of board member Bob Clements, President at Axsium Group,  a leading workforce management consulting firm.

Most organizations are experiencing a labor shortage. While pundits debate the causes (or if the shortage even exists), the problem is very real at many organizations and needs to be fixed.

Here are three ways to fix your organization’s labor shortage:

Fix #1: Increase wages

The first solution is to increase wages. Companies like McDonalds, Under Armor and Bank of America have all announced wage increases to attract workers – moves that have been well received by both employees and the public at large. In principle, it is easy to throw money at the problem, but in practice, it may not be possible. Higher wages cut into profits so you will need to make a strong case that wage increases will pay for themselves, and then some.

Another approach might be to examine the risk of not increasing wages by equating labor shortages to decreased customer service and, in turn, reduced sales. No matter what, you face an uphill battle to get the executive support needed to raise pay.

Fix #2: Increase hours

The second option is to ask your existing employees to work more hours. Giving more hours to your current workforce reduces the need to hire new workers, along with the training and onboarding expenses associated with hiring.

Two big hurdles need to be cleared for this solution to work:

  1. Your employees need to be willing to pick up more hours. Some may be happy to do this others will not or cannot due to childcare, other commitments such as school, or lifestyle. Therefore, offering more hours can soften the labor shortage but may not fully eliminate it. It is helpful to provide your employees with technology that allows them to see what shifts are available and let them choose the shifts they want to work.

  2. Those most likely to take the extra hours will do so to get paid overtime. For many organizations, overtime is a four-letter word and something to be avoided at all costs. The fact is that overtime can be less expensive than hiring new workers. This is due to recruiting costs, benefit costs, and the higher productivity of experienced workers. Fellow Workforce Institute advisory board member John Frehse talks about this in his white paper “The Overtime Lie”. Organizations that are able to overcome their hang-ups with overtime will be well-positioned to keep operations running during a labor shortage.

Fix #3: Increase productivity

The third solution is to increase the productivity of your existing workforce. Increasing the output of workers already on staff reduces the need for more workers and the need for overtime.

There are two paths to improving productivity:

  1. Productivity gains can come from big ideas like eliminating tasks, reducing the frequency with which certain tasks are performed, or redesigning tasks entirely. The bigger the idea, the more time it may take to implement. So, recognize that this path may not have an immediate impact on your labor shortage but should have a large, sustainable impact when implemented.
  2. Big gains can come from small changes. Unlike the big ideas mentioned in the last point, small changes can often be implemented quickly. To find such opportunities, look for tasks that are performed frequently. Eliminating just one step in a frequently performed task or moving a piece of equipment closer to where the task is performed to reduce travel time can have an outsized impact on productivity. Saving a few seconds may not seem like much but when that savings happens thousands of times a day in each store across your entire portfolio, it begins to add up quite quickly.

One size does not fit all when addressing a labor shortage. Each organization and its workforce is different, and what works for one may work differently for another due to culture, demographics, geography, industry and more. The good news is that each of the solutions outlined above can be used alone or in combination with others. They can be implemented in parallel or sequentially. The important thing is to act because one thing is certain: You won’t solve your labor shortage by waiting for more workers to appear.

4 thoughts on “3 Ways to Fix Your Labor Shortage

  1. Nice piece here recognizing the hurdles and not just throwing out pipe dreams. We are seeing wages at 25/hour in certain parts of the country still not move the needle on hiring. Work/life balance strategies around shift schedules combined with the great info you added on productivity and overtime may be a good first approach. Well done!

  2. Bob – well articulated and pragmatic solutions to an important and immediate business problem, along with common pitfalls to consider when considering solutions to implement.

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