What Got You Here, Won’t Get You There

Briefly after the layoffs caused by the pandemic, some thought leaders expected to return to an employer’s market. In an HBR piece published a few months after the shutdowns, we cautioned against too heavily using old rules-of-thumb to predict how Covid might impact hiring outcomes and argued that the ensuing labor market would not be “like anything anyone has observed seen since the birth of modern capitalism.”

Now, like then, a number of companies we have spoken to are heavily relying on conventional approaches when making their labor market predictions, which reduces the effectiveness of their hiring solutions. For example, a number of the corporate leaders have told us that they expect most of their labor woes to be resolved once pandemic-related unemployment compensation benefits are rolled back. However, a recent working paper examining the impact of the Federal Pandemic Unemployment Compensation shows that a 10% increase in unemployment benefits caused a 3.6% decline in applications. While this is a noticeable declined, few employers we have spoken to would argue that a 3.6% increase in applicants will solve all their hiring challenges.

Therefore, a successful recruiting strategy starts with acknowledging that you won’t solve your current hiring challenges by applying the solutions of the past. This is the time to revisit your previous underlying assumptions, stress-testing them one by one. Let’s review a few of the drivers that are likely to impact your hiring strategy the most.

Make it easier for employees who commute. 

For hourly workers and lower-salaried positions, location is one of the biggest — and often underestimated — drivers of effective recruiting. Research has shown that minor geographic differences in available talent and open jobs, even in the same city, can lead to higher unemployment. Many Americans moved for family and Covid-related reasons in the last year and more are actively considering relocating, which implies that recruiting challenges can increase for employers whose job sites have remained the same.

But exactly how significant is this issue? Our own research indicates that a 1% increase in distance is associated to a 4.4% decrease in commuting flows across U.S. counties. One practical implication of this for hiring managers is that if you are able to recruit from a county that is 10% closer to you, you will find 44% more people who are already commuting to your location. In other words, obsessing about attracting local talent pays off.

If the effectiveness of your local talent strategies is wearing off, look at ways of improving accessibility and other ways of reducing commuting time. Structuring your 40-hour workweek as four shifts of 10 hours each, instead of a regular five-day workweek, will reduce the time your workers spend commuting by 20%. Moving a shift’s starting time away from rush hour widens the set of home residences that can reach your establishment in a given driving time. And as employers who have been able to offer remote work are considering a return to the office, they should know that experimental research values the option for remote work at 8% of the wage for the average job-seeker.

You might additionally consider providing ride services, offering reimbursement for lengthier commutes, relocation incentives, or opening satellite locations. In the longer run, recognize that access to your work location by great talent is hard to substitute when workers account for a large share of your value creation—you should incorporate accessibility measures in selecting future locations.

Break with market norms.

Instead of focusing on past practices or what solutions other firms use, you can solve your talent problems by calculating what the right answers are worth to your organization.

Adjusting your salaries to the cost of living is a good starting point. Since 2020 alone, real average hourly earnings have decreased by more than 3%. One organization we worked with had been offering their service representatives the same salary of $30,000 annually for the last 20 years. The organization’s CEO was shocked to realize that the current inflation-adjusted salary would be $45,000, and increased these wages to precisely that number. In the past months, some large employers like Amazon, Bank of America and McDonald’s have followed a similar approach, and by our estimates increased the salaries of well over 500,000 workers.

Likewise, try to understand who your best recruits could be and creatively break with market norms in attracting them. For example, women tend to be more reliable and loyal employees, yet as the burden of childcare tends to fall on women, Covid-19 has made female workers less available to job opportunities. Employers could tap into this vast talent pool by partnering with providers of day care, after school, and drop-off/pick-up services to help employees with children juggle their work and home schedules. Yes, it might also involve some out-of-pocket investments, but think about it this way: How much is the lost revenue or higher attrition among your workers costing you?

Many companies fight over the same narrow set of candidates who fit all their criteria. You can gain an edge in your local market by hunting for talent where others are not. For example, older workers are vastly underemployed and were hit harder by C0vid-related layoffs than their younger counterparts. A recent review of a vast literature of labor market research since the 1960s shows that these older workers have higher productivity than many firms assume.