Inflation + Salaries: Is the Sum a Problem or an Opportunity?
The rising gas prices and the increase in grocery bills are being felt around the country – inflation makes inroads to almost every conversation these days. As leaders are trying to build back a strong workforce and retain current employees amid the present labor shortage, they must reexamine salaries with the strain the economy is facing. If paychecks are not going as far as they used to and organizations cannot raise their wages, attrition in the workforce will rise. What are employers to do?
The Strain Everyone Is Feeling
Nationally, the consumer price index (CPI) rose 8.5% year-over-year in March—the largest 12-month increase since 1981. That is an enormous jump when you consider that the long-term average inflation rate in the U.S. is around 3.2%. However, the jump is even more shocking when you look at the last decade – the average annual price increases from 2010 to 2019 was 1.75%. The current workforce of Gen Z and Millennials, many who still have student loan debt, have never faced economic tension quite like this.
The Impact for Employers
How are people responding? Many made a job change in attempts to appease their own inner fears and financial struggles. According to a survey from Pew Research Center, over 50% of Americans who quit their jobs last year stated they increased their salaries in their new positions. Among that same group, 37% stated the most significant contributor to the change was low pay, while 26% said it was their secondary reason for finding a new job.
In a research study from Grant Thornton Internal, 40% of workers said they left their current position for an organization that offered at least a 10% compensation increase, if not more. Within that same group of workers, 13% said they acquired a salary increase of 20% or above.
Those are just a few observations from current studies. The more you dive in the data, the clearer you see the common thread of workers job-hopping to boost their salaries. This brings an unavoidable and imperative question – what can business leaders do to prevent attrition and control a crucial element of selling, general, and administrative costs?
What Can Be Done
It would be nice if raising salaries was the simple (and feasible) solution. But with an already struggling job market and pressure to meet supply and demand, increasing wages may not be a viable option for your organization. Will your deeper-pocketed competitors always beat you? Not necessarily.
Steps can be taken, especially when you consider the situation from the employee perspective. If they are struggling to make ends meet or attempting to gain momentum in their career, what support can employers give?
A Culture of Collaboration
Start with taking a good look at your culture. Is your organization a place where employees on every level, not just the executive level, feel motivated? Do you and your leaders cultivate a culture where people want to be? If you are unsure how to answer that question, dedicate some time to discovering the current pulse of everyday employee sentiment.
For example, some business leaders like Tanner Krause, CEO of Kum & Go (a Midwest convenience store chain), works a full shift in one of the company’s gas stations once a quarter, to stay in the loop of what conditions are like and walk in his employees’ shoes.
Employees are looking for an open door policy (not just one conversation every six months) to share their struggles and ideas, providing a place of belonging and value, from warehouse associates to account managers.
A Pathway for Career Mobility
A healthy culture also maps out where people can go. Maybe you can’t give them all a raise today, but can you show them a model of upward trajectory as they stay with your company? If they work for a certain number of years or gain experience in certain roles, where and how can they grow with the business?
Another idea is to explore new roles or assignments part-time while employees continue their daily positions. This dynamic is temporary, of course, but allows leaders to test the waters with their current employees to see if there are ways to enhance their business while also offering more opportunities for existing employees.
Not everyone will be a CEO or executive in the company, we understand that, nor can this framework eradicate all turnover. But clear communication about opportunities will strengthen the relationship and trust between leaders and employees. The more businesses embrace a mobility mindset, the better leaders can motivate and grow their workforce.
Informed & Intentional Planning
Planning for the future is imperative. In a Deloitte survey, 86% of leaders believe succession planning is an urgent priority. However, only 14% believe they can create a solid plan currently because of demand for short-term needs, subjective opinions, and little accountability in the process.
This calls for more concrete planning with viable and actionable steps.
Many companies spend time mapping out their customer’s journey, and rightly so, but have you ever considered spending time and resources constructing an employee’s journey? Have you defined the critical moments in their voyage with your company? The ideal journey for your employees includes considerations in recruiting, onboarding, defining schedules, handling reviews, offering promotions, and more. Pinpointing these key moments in workers’ journeys and ensuring they have the support and resources for each step can make a significant impact on your workforce.
As you consider the best solutions for your business, keep the employee’s perspective in focus. Raising salaries will likely be an ongoing conversation, but you can also invest in your people today and structure holistic plans for tomorrow. That way, whatever rollercoaster twists and turns our economy takes, you will have a strong workforce by your side.
Every business is unique, which means you need a staffing solution tailored to your goals. Take a look at our contingent workforce solutions and find out how we can strengthen and enhance hiring and retention for your business.