There is no doubt that recruitment and search job orders across the western world have hit a flat spot. Most people that we speak to across our Executive Search, Recruitment and Interim Executive networks are reporting shorter pipelines, lower volumes of activity and a much greater focus on completing all of the assignments they are offered, even the contingent ones, in order to maintain revenues.
All this is going on while the continuing demographic certainty of a talent shortage in Western economies with ageing populations still makes good talent hard to find.
We can’t recall a time in our industry when a talent shortage combined with a significant slowdown in job orders. Typically, job orders are slowing as unemployment is rising, however employment figures, with some minor variations, are generally quite static and typically below the 20th century economic assertion that 5% unemployment represented full employment.
in addition to job orders flatlining, recruitment and search professionals are saying that they are having to “work harder” to complete a placement. What this really means is that despite the talent shortage, employers are still expecting robust shortlists and are then often taking as much as double the time to make hiring decisions as they did in the two years immediately following the pandemic.
Sometimes they get away with this, but often in a competitive talent world, the good candidate will have been offered a position by more agile employer and will have taken another offer by the time the client decides on a second or even third interview. The realisation that purple unicorns are mythical is having a slow dawn.
We recently saw a report by “Reward Gateway/Edenred” titled “The Engagement Paradox Report”. It’s Australian data, but we suspect there are similar trends in all western markets.
The subtitle is “Why Australian Employee Retention is Up but Happiness is Down”. This is both a subtitle and an explanation of the paradox. The data is worth commenting on. The report explores the context of retention being up while engagement levels have decreased. Arguably, increased retention is simply a factor of the job market and a reluctance during cost of living increases to take risks with new employment.
There is nothing new in this relationship, we have seen the same splits for over 15 years with many line managers and human resources professionals unable to establish cultures that engage rather than merely retain. Staying is not the same as engaging.
While salary growth is a higher priority for employees during cost of living increases, businesses with staff that are engaged understand that culture and purpose override salary expectations
The commentary on this report identifies that people see job security as more important than being happy at work. The happiest employees report that recognition reward programs and flexible work make a significant contribution.
The hidden metric in this statistic is that, certainly in Australia, there is an enduring per capita recession. Overall, the economy is growing very modestly but GDP per capita has been declining for six or more quarters. Somewhere in this, employers need to find a balance between creating engagement and improving productivity.
If two thirds of the workforce say that, at best, there has been no change in their engagement, then it’s clear that many organisations have lost focus on how to build an engaging culture.
This seems like an obvious statement, and it makes the inaction on engagement initiatives even more pronounced. What more incentive do businesses need?
In a 100 person strong professional workforce earning average of $80,000 per annum each, and assuming that they are creating or protecting economic value at least three times higher than salaries, then a 2% improvement in productivity is worth $480,000 a year. Spending on initiatives supporting the engagement required to drive this level of productivity would be a fraction of this. Why isn’t this money being invested?
While this is arguably the most rubbery number in the report as it will vary enormously according to the size of the organisation, all it does is support the higher engagement equals higher productivity equation.
There are many more detailed insights in this report, however, we would argue that the Engagement Paradox is not new, it is just more in focus. What is clear is that the risks in the near term are much more significant. Businesses that do not generate high levels of employee engagement will inevitably experience lower productivity and when the employment market improves many of these employees will move on. Recruiters and Executive Search consultants will have a field day.
They will be moving on in a continued talent shortage, these businesses will struggle to attract more top talent due to availability and also partly because it is inevitable that details and anecdotes of poor culture seek out into the employee community. Arguably the biggest challenge of a hybrid working environment is to create a culture of connection yet that is probably the single most important strategic opportunity facing human resources professionals and executive line management.
It is incumbent on hiring managers, executive search consultants and recruiters to work together to establish the foundations of high engagement at the beginning of an employee journey. Being decisive about the people that they want and then collaborating on a different level of onboarding processes is just the start.