Retaining and attracting talent in a transient world
Over the last few years of market shocks and geopolitical tensions, mid-market businesses have grown accustomed to bracing for the unexpected - and planning for it. Despite ongoing economic uncertainty, data from Grant Thornton’s most recent International Business Report (IBR) shows that optimism among business leaders remains relatively buoyant. As they entered 2023, 59% of mid-market firms were optimistic about the year ahead, only 6% lower than the figures six months previously.
Business leaders currently face a unique set of challenges. In many markets inflation and interest rates are high and, although economic growth is sluggish, employment rates remain high too, meaning that skilled workers continue to be in short supply. Firms will need to invest in their people strategies if they are to attract and retain talent and deliver for their clients amid these challenges. Good leaders know that they need the right teams in place to do this, and how they develop and invest in their people during this period will be crucial to overall commercial success.
Competition for talent is tight and availability of skilled workers remains a key restriction in most locations. Labour costs also remain a concern, with more than half (55%) of mid-market business leaders identifying this as a barrier to business growth. Although down a few points from the highs of 59% in 2022, concerns about labour costs are still outstripping pre-pandemic levels, which averaged at 45% in 2019.
However, for firms looking to make cost savings, reducing headcount may not be the most attractive option. A record number of businesses cite availability of skilled workers as a key constraint to growing their business (57%). Leaders will need to take a longer term view in how they address these challenges, so that they don’t find themselves short-staffed when economic uncertainty subsides and demand expands.
Labour costs and availability of skills across key sectors/industries
“Companies need to assess what kind of expertise is needed. We must keep people in place and select them for the skills that we could benefit from. When growth occurs, these people will be indispensable. Companies must make themselves more attractive to talent by working on training and development as well as new products and professional services. They must be moving with the trends.” - Lydia Lejay, Partner, GT France
Record numbers of people have left their jobs since the pandemic, and while most workers have moved in search of higher salaries, World Economic Forum data shows that over two-thirds say they are seeking more fulfilment in the workplace.[i]
If the right skills are hard to come by externally, businesses will need to take a long-term approach to both ensuring they have the skills they need and creating the right environment for the needs of today’s talent to thrive. Working to be an attractive employer, retaining the right talent, and developing the abilities of existing teams to meet the firm’s future skills needs, will be crucial for leaders who want to be in a position to capitalise once economic uncertainty abates.
"Several years ago some of our clients were looking at how they could right size the work force due to the high payroll cost. There was a general move to do more labour contracting, hiring of particular skills when needed, but reducing your permanent staff. Now we’re seeing something of a reversal of that. In part, that’s because those firms were finding that they weren’t always getting the costs savings they’d hoped for over the long term, and often found themselves struggling to develop the skills they need.”
- Wesley Beene, Partner, Grant Thornton Zambia.
A key struggle for hiring and retaining top talent is pay. Wages are growing but for most they fail to keep pace with rising inflation. For example, in the UK, inflation fell slightly to 8.7% in April[ii] as energy prices softened, but prices are still rising more quickly than wages. The latest figures for wage growth show that average private sector wages had grown by 7%, while public sector earnings were up 5.6%[iii] - the highest growth rate in 20 years, but still significantly behind inflation.
Globally, four in every five mid-market businesses (82%) intend to give pay rises this year. Nevertheless, given persistent high levels of inflation and additional costs, there is a limit to what businesses can afford through pay rises, with only 24% of businesses indicating they intend to offer ‘real increases’ over the next 12 months. As a result, looking beyond the paycheck will be a major factor in retaining talent. As firms struggle to compete on pay, many are looking for other ways to stand out as an attractive employer.
Global business intentions on offering a pay rise, or an above-inflation pay rise
“Competition for top talent is still fierce, and the continued surge in labour costs just adds to the challenge for mid-market firms. Post-Covid, the goal-posts have shifted and pay isn’t necessarily always top of an employee’s list when considering a role. The focus now is on the employee experience, and this is an opportunity for organisations to strengthen their culture, employee value proposition and overall employee engagement strategy, outlines Angela Nalwa, Managing Director, People and Organisation Practice Leader, Grant Thornton US.
“Salaries are clearly still important, but employees are also increasingly attracted to firms that can offer other benefits, whether that’s flexibility in where and when they work; wellness programs that include physical, mental, emotional and financial; and career development opportunities.”
With skills in short supply, many firms are aiming to be more creative and inclusive in where they look for the talent they need, in order to make the most of all the skills available. Organisations which actively seek out candidates from diverse backgrounds are able to open up new, previously untapped talent pools. Equally, by having a wider range of perspectives and experiences, diverse firms are also more creative and innovative, helping them find new ways to respond to the challenges they face.
Sinead Donovan, Chairperson at Grant Thornton Ireland, pointed out the benefit of flexible and hybrid working in increasing diversity in The push for parity, Grant Thornton’s most recent Women in Business Report[iv]: “The pandemic has given us a bigger pool of talent and so our workforces have become much more diverse. Businesses are able to hire people from different countries when they offer remote working. This brings real benefits to decision-making, and ultimately, to business performance.”
Embedding a culture which is inclusive, empowering, and diverse is a crucial element for any organisation wanting to operate today. It allows for more cross-bordered thinking, breaks down silos, and can be the catalyst to innovative new ideas. The right talent won't settle for anything less.
Matthew Cooleen, Head of Global Banking Industry, Grant Thornton US comments: “Fostering a diverse workforce is incredibly important. A high performing DE&I-based environment only works if it is supported by a thoughtful bottom-up eco structure and top-down cultural thought process.”
Emerging technology also presents an opportunity to reshape the way we work, the roles the workforce perform and the jobs of the future. AI platforms such as Chat GPT and Google’s Bard, accessible to most firms due to their relatively low costs and intuitive interfaces, potentially offer companies opportunities to increase productivity whilst also innovating to create jobs and careers that are more appealing.
“Today, people starting out on their careers don’t want to come in and do mundane repetitive tasks. They just won't stay. So firms have to have the right technology in order to make the job interesting and appealing. Investment in tech and AI is going to bring the ability to remove some of those repetitive, low value tasks and create more time for analytical higher end activities. And that will help attract new people and keep them as they grow their careers.” - Shona O’Hea, Partner, Grant Thornton Ireland
Despite the concern about uncertain economic conditions facing the business world, perhaps it is no surprise that mid-market businesses remain optimistic. Opportunities for growth and emerging developments in working culture and technology offer an element of dynamism to the business world.
Being equipped with a talented and resilient workforce provides a lifeline in a period of economic uncertainty, and can act as a springboard to capitalise on growth when it comes around. With the right people, and a good track record on ESG and DE&I, firms will be well placed to maintain growth, despite the economic uncertainty, and the added challenges of rising interest rates and difficulties accessing investment.
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i. weforum.org - The Great Resignation is not over: A fifth of workers plan to quit in 2022 - 24.06.22
ii. www.bankofengland.co.uk - Inflation and the 2% target - 24.05.23
iii. www.ft.com - UK wage growth shows little sign of easing - 16.05.23
iv. www.grantthornton.global - The push for parity - 08.03.23