Over the past few years, the labor shortage has grabbed headlines nationwide, and Southern California is no exception. California typically has a higher unemployment rate than the nation’s, but starting in 2020, our rate has hovered several points above the national average. As employers can attest, that’s not necessarily because there aren’t jobs available. It’s attributable, at least in part, to potential employees picking and choosing among jobs.
While the employment rate may settle, some California economists caution that the labor shortage isn’t going to go away anytime soon. Instead, it may signal a changing employment environment. As a result, employers likely need long-range plans to steer their organizations through any labor climate, including the recent “Great Resignation.”
Your company might consider these five approaches to manage through a labor shortage:
1. Evaluate your pay scale. One key attraction for workers: money. Assess how your pay scale compares to your competition’s. Will your budget allow an increase in pay and benefits? Offering a little bit more than the competition might bring in workers who will be loyal to a more generous workplace.
2. Learn what workers want. Today, many people are not shy about asking for what they need and want at work. An attractive physical workplace and a comfortable, pleasant work environment go farther than you might think. Some teams value quarterly bonuses, bring-your-dog-to-work days or a well-equipped break room. Your staff might instead look for a flexible spending account (FSA) plan to pay for child care with pre-tax earnings, days off for birthdays and serving the community, a demonstrated commitment to equity and diversity, or other appealing lifestyle benefits. Meeting people where they are can boost retention.
3. Embrace flexibility. For just about any business, it’s possible that increased efficiencies could strengthen your cash flow position and deliver some financial breathing room. Your banker can assess your treasury management strategies and recommend techniques such as automating deposits, utilizing sweep accounts and streamlining payroll and accounts payable processes. You may even find that updated bookkeeping solutions could free up FTEs for other needs as one tool to mitigate the labor shortage. Your banker may also have insights from their expertise in your industry — from ideas about equipment leasing to automation.
4. Recruit before you have a need. Recruitment is about finding the right person at the right time, often through relationships. Reaching out to great candidates 365 days a year, known as passive recruiting, might put you in a position to make an offer and get the right individual on board.
5. Build efficiencies through financial technology. We’ve probably all heard, “It takes money to make money.” In the case of some innovations of the past few years, a sensible investment can return earnings, along with reduced labor needs. Your banker can help evaluate your opportunities and financing options to build more profit into your business. For instance, Restaurant Business has reported on restaurants spending around $70,000 to add a drive-thru — a change that can raise profits by $300,000 per year, with minimal added staffing needs. Other restaurants build “ghost kitchens” (minimally staffed kitchens for delivery only), while retailers convert shops to dark stores or micro-fulfillment centers. These locations often mean faster delivery for consumers. They also may appeal to employees who prefer to work without much face-to-face customer contact.
For insights into how your banker can assist in building flexibility in the face of the labor shortage, contact your Torrey Pines Bank relationship manager, or learn more about our bank’s approach to working with the community management industry.