US Labor Shortages Will Affect Businesses for Decades

Entire industries are in crisis mode already and it is going to get worse.

David Pollard – CEO, PredictiveHR

We tend to deal with Labor Shortages on a very tactical level.  We look at weekly unemployment applications, monthly employment rates, current job opening and workers to fill them and so on.  That view has bred a certain myopia to what will be a very long term business challenge that is only going to get more extreme and impactful.

Part of the reason for the short-term view is our own history.  Every time we think we are in The War for Talent, as in the late 90s, we have experienced a course correction in the form of a recession.   Recession has led to massive disruption in the workforce and relief on the labor shortage side for employers.  This cycle, it may be assumed, will happen again and again and keep us from accepting and dealing with the new reality that labor shortages have only begun to be really felt.

The data analysis tells me that will not happen this time.

Today we are SOLD OUT.   Let’s start there.

5-6% unemployment is considered “Full Employment”.  We are at 3.9%.

According to the Bureau of Labor Stats, we have nearly 7 million open jobs and a maximum total of 6 million available workers (I believe this is high).  We have more jobs than people.  By a lot and growing.

Some industries are already feeling the heat.  Just to name a few:

  • Oil fields are not being fully exploited in petroleum rich sites due to a lack of workers to do the extraction.
  • According to the National Association of Homebuilders, 82% of all construction companies are experiencing labor shortages, up from 13% in 2011.  Houses aren’t getting built.
  • Trucking Industry is already 51,000 drivers short and that will climb to 150,000 by 2026

And it only gets worse.

Now, add in the unavoidable looming macro employment and population changes that are upon us.

  • The Manufacturing Institute reports that its sector will lose 25% of its current workforce by 2026, due to retirement.  The Baby Boomers are done and there is no workforce to replace them.
  • Worker productivity has flattened since the 1990s, when we realized a huge boost that has really not been sustained.  We are working as hard as we can and have maxed out the current technology designed to improve productivity.   We already carry our iPhone everywhere we go, 7 days a week.
  • Declining birth rates are not replacing workers fast enough.  The US peaked in 1960 with a 3.6% birth rate and we are now settling into 1.8%, a reduction of 50% since the peak.

We have a problem.  A business problem.  And it is going to get worse.

Smart businesses are at least recognizing that this labor shortage may actually last a while and is so severe as to hamper the flow of goods and services to market.  The entire economy hangs in the balance.  At least the fate of the company does.

Progressive organizations are doing a much deeper dive into this problem, leveraging new technologies and Big Data Analytics as one part of the solution.

One of our smartest clients is diagnosing the causal relationship between numerous business factors and higher than acceptable employee turnover.  They have actually quantified the business impact of each % point of turnover in terms of Revenue and Earnings.  That has gotten the CEO’s attention and serious remedy actions are being taken and then measured through Predictive Analytics to gauge the result as measured by turnover.   That, in turn, is allowing for better predictive view of the overall financial health and future earnings of the company.

Over the next 10 years, many companies and industries will do the same.  This has gone from an HR challenge to a business problem.  It is on the CEO radar right now.

There will be many approaches to handling the looming labor shortage crisis but the common thread will be Data Analysis.  We now have the historical data that can inform future remedy.  We just need to go mine it effectively and then deliver it to the CEO’s desktop so that they may take appropriate action in concert with HR.

 

It is time for HR Leadership to flex your muscles, fully leverage the data you have collected, and drive real business value that may actually be the difference between success or failure of your company.

What’s Time to Hire, and Why Does it Matter?

The Competitive Job Market

It’s no longer news that today’s job market is very tight. Finding good candidates for almost every role is harder than ever. Job boards, staffing agencies, company websites, social media, and referral programs are all flooded with open positions.

Importance of Timely Hiring Decisions

What this means is that job candidates have their choice of roles and are able to consider multiple new positions simultaneously. It’s not enough to attract candidates and get them in the door, you’ve got to make a decision and make the offer before your competitors do. The alternatives are open positions or compromising on new hires’ qualifications and experience.

To be clear, it’s not just about being the first to hire. After all, candidates will find ways to stall and pause in order to have multiple offers to weigh. However, it’s important that the hiring process not send a message to new hires that your businesses is disorganized and/or incapable of making timely decisions.

The hiring process is the first real interaction your potential hire has with your organization. You want the experience to send an accurate message about your company culture and to comfort new hires that they’ll enjoy being part of the team.

Understanding “Time to Hire”

Taking a step back, “time to hire” is the time elapsed between engaging a candidate and their acceptance of an offer. There are three major factors impacting your efficiency here:

  1. How long does it take you to spot the right candidate from your pool of applicants?
  2. How fast do you get started once you find the right person?
  3. Where are there potential bottlenecks in your hiring process that make the process take longer?

Note that this is not about sourcing. What channels work for attracting candidates is important, but it’s only part of the picture. There are any number of external factors that impact your organization’s ability to attract candidates.

Role and Department-Specific Time to Hire

Likewise, there are any number of factors that might impact the time between a candidate accepts an offer and the time they actually begin working. Things like personal commitments or obligations to a current employer may lead to a delay in starting work.

But Time to Hire is all about the efficiency of your internal process, which means it impacts your ability to compete. Understanding and improving your time to hire lets you directly impact the overall performance of your business.

Taking Action and Continuous Improvement

Of course, you’ll need internal benchmarks to begin your improvement process. You can find industry averages to get a ballpark figure on your organization is doing relative to those averages.

There are likely to be variances between your organization due to the peculiarities of your location or the types of roles you’ve been filling. However, if your performance is completely out of touch with those averages, you should quickly look at three areas of your process to get a jump start on improvement.

Break down your hiring pipeline by stage. Generate reports that tell you how long each stage takes. If candidates are being sourced well but get hung up during the screening process, you might need to consider adding resources to that stage or evaluating priorities.

Break down the time to hire by role or department. If there’s a lag for a particular function or within a specific department, have a chat with the hiring manager to find out what’s going on. Make sure they understand the importance of making quick decisions in the hiring process.

Finally, take a look at the length of your interview process. How long does the process take? How many people are involved? What challenges exist around scheduling interviews?

Once you know your time to hire metrics, you can quickly take action to make rapid changes and then focus on continuous improvements to your process. Injecting efficiencies into your hiring process will send the right message to job candidates, and to your peers on the management team.

Don’t Let Sloppy HR Budgeting Kill Business Growth

For most businesses budgets aren’t suggestions or wish lists, they are real guidelines with an absolute upper limit on how much can be spent. On the other hand, even though nobody wants to go over budget, they also don’t want to be too far under budget. Being under budget by too much usually means that opportunities for growth or improvement have been missed. Missing such opportunities can make CEOs and lines of business execs crazy.

Human resources budgets are notoriously inaccurate, through no fault of the HR team. HR budgets typically include annual headcount, however companies don’t accurately predict exactly when hiring will take place. Too many factors inside and outside of the organization impact hiring timing. Things take longer than planned, and in today’s tight labor market, the problem of underdelivering on hiring is only likely to get worse.

This is often exacerbated when companies underestimate the amount of employee attrition that will take place over the course of a year. Often, budgets are assigned to staff who don’t remain with the organization for the entire year.

Another issue injecting uncertainty into HR budgeting occurs when companies lose track of employees that are transferred from one business unit to another. When these different BU’s have different accounting systems, it takes way too long for budgets to keep up and resolve on the organizational level.

For these reasons, it’s common to pad HR budgets to ensure that workforce needs aren’t in jeopardy of being underfunded. Between the padding and poor timing, the likelihood of being close to reality diminishes.

All of this is made even worse by the fact that companies don’t have an accurate way to understand exactly what impact headcount has on cash and profits. Companies typically use averages based on backward-looking data (lagging indicators) to determine average commissions, average bonuses, average pay increases, average costs of benefits, etc. But since we do know that the past doesn’t necessarily match the future, HR managers add budget variances based on even less precise criteria.

Of course, healthy and conservative budgeting is not a bad thing. Every dollar saved does go straight to the bottom line. But companies don’t save their way to growth. For companies with a top line growth goal, knowing funds were available for new initiatives or accelerated marketing but were tied up as padding in the HR budget can make executives question the business savvy of their HR peers.

So what can HR executives do to gain credibility and trust with their peers, particularly those in the finance department who typically look after budgeting? Using advanced workforce planning tools, such as the PredictiveHR platform, will enable HR to gather critical HR data from across business units and use that data to develop predictive models. These models can be tested against past actual data, which will prove its accuracy to executives in finance, operations, and sales – increasing those executives’ trust in their HR colleagues.

With better numbers and more accurate timing, HR can fine tune their budgets – budgets that often represent the largest share of expenses for most organizations – freeing up capital for other mission critical initiatives inside the organization.

Buddy Punching: How Much Is It Costing Your Business?

“Hey, I’m running 10 minutes late, can you punch in for me?”

This message is sent thousands of times every year all across the country. And far too often, it is answered with “sure”. If you’re a business owner, officer, or manager, you know this is a big problem – but how much is it really costing your business?

To put it in more concrete terms, here are some statistics found from a recent American Payroll Association study:

  • The APA estimates that over 75% of companies lose money from buddy punching
  • Employees reported stealing roughly 4.5 hrs/week – the equivalent of 6 weeks vacation!
  • In total, buddy punching accounts for approximately 2.2% of gross payrolls.

Ouch. That’s a lot of lost money due to buddy punching

It’s also worth bearing in mind that these surveys asked workers to freely admit to buddy punching – something many probably wouldn’t admit to doing. So if these are just the statistics of workers who admitted to buddy punching, how many are actually doing it?

Although we may never know for sure just how much time buddy punching is accounting for, we do know for sure that it’s a huge problem for big and small companies across the country.

So we wanted to share 3 tools that can help your company prevent buddy punching:

  • Swipe cards

Also referred to as “punch cards” these are a great way to prevent buddy punching. They are unique to each employee and must be swiped for the employee to punch-in. So unless an employee knows well in advance that he or she will be late, it is unlikely that they will be able to give another employee their swipe card to be punched in.

  • A Biometric Employee Time Clock

You may have heard of employees clocking in by using their fingerprints. A Biometric Employee Time Clock is the device that is used to make this happen. This is by far the best tool on the market because there is no way for the employee to punch in without being physically present. These devices are generally very easy for employees to use, and are a great way to prevent buddy punching. There are many options on the market today, and they are relatively inexpensive compared to the lost labor costs of buddy punching.

  • Notifications & Alerts

Unfortunately, even with one of these tools in place, employees can still steal time by claiming that they “forgot to punch in”. Many punch-in tools today offer a feature that will notify employees that they have yet to punch-in for a shift they were scheduled for. This eliminates the “human error” part of the equation that could still be hurting your bottom line. Make sure that any software that you use to prevent buddy punching accounts for this.

This is an exciting time in workforce management. With the technology available today, issues like buddy-punching are starting to be solved – which will save the market billions of dollars in stolen labor costs.

We hope that your company will be one of the many that will update its attendance software in the future!

15 Things To Know About Naming UKG Pay Codes

We know. When designing and building a Kronos system, naming conventions can be the last thing on your mind. You’re so focused on gathering the detailed requirements that little thought is given on how to name the building blocks. However, proper naming of these building blocks can make support and management of the system much easier down the road.

Naming conventions have a direct, underestimated impact on system usability, especially when it comes to pay codes. Pay codes impact every timecard user, and help them understand how their time is being classified for payment and/ or tracking purposes. In Kronos, pay codes sort alphabetically by default, and it is considered a best practice to maintain this organization. By introducing Pay Code Display Orders, it just adds one more configuration building block that must be maintained as pay codes are added. The best pay code naming conventions simplify the task of finding the correct pay code (in a list that undoubtedly requires scrolling), and gives the user confidence that the correct pay code is being selected.

Some thoughtful planning when naming pay codes will make the system easier to use, increase accuracy of employee pay, and simplify support and maintenance.

Here are 15 things to know when naming Kronos pay codes

1. Will you be deploying Kronos Globally?

If so, consider using the country code from ISO-3166 as the prefix (i.e. US = United States, MX = Mexico, FR = France, DE = Germany, CN = China, etc.). This will make building the pay code data access profiles, generic data access profiles, and pay code distributions easier as your system grows.

2. Will pay codes have different properties within a country?

For example, perhaps vacation will count toward weekly overtime for some unions, business units, divisions, etc. Consider identifying pay codes with an identifier for a specific use. For example, perhaps vacation in the state of California has different properties, so you name it US-VACATION-CA.

3. Capitalization can help with the naming convention.

For example, one client named their vacation pay codes “VACATION wOT” and “VACATION nOT” to represent whether the pay code counted toward overtime (wOT = with Overtime) or not (nOT = no Overtime). You can see how capitalization assisted with the interpretation of these codes.

4. Will use you spaces, dashes, or another character to separate elements of the pay code?

(i.e. US-VACATION-wOT or US VACATION wOT)

5. Remember not to include any Kronos reserved characters when planning your design:

/ | * ( ) : ; # % ^ ? [ ] =

6. Will abbreviations be used? Will any abbreviations be inappropriate?

Abbreviations can be helpful as pay code names are limited to thirty-two (32) characters. Consider a pay code for Funeral Leave – putting it into an abbreviated naming convention might end up looking something like US-FUN, whereas US-BRV for bereavement might be a more appropriate choice.

7. Are there paid and unpaid pay codes for the same type of time? How should those be sorted?

For example, you might have paid and unpaid sick time. If they are named US-SICK PAID and US-SICK UNPAID, they will appear together alphabetically. Additionally, the designation of PAID and UNPAID leaves little room for error when choosing the correct pay code. Alternately, perhaps unpaid sick and other unpaid pay codes are rarely used, so you would prefer them to be at the bottom of the list, if so US-UNPAID SICK might be a better choice.

8. Will similar pay code names be used for hours and days pay code types?

This commonly occurs with vacation, where some locations may take vacation balances in hours, while others may take vacation balances in days. In this case it would be better to clearly identify in a pay code name which is for what type, such as US-VAC HRS and US-VAC DAY.

9. Will your design include any Duration or Cascading pay codes?

Keep in mind that these can’t share names with existing pay codes, so consider including “DPC” or “CPC” in your naming convention to make identification of these pay code types easier.

10. Will your design include pay codes for leave or attendance?

Considering including LV or ATT to identify these pay codes. For example, US-MATERNITY-LV or US-LV-MATERNITY.

11. Which pay codes will be mapped to your payroll system?

For these pay codes, consider names that are closely related to the pay element names that will appear on an employee’s statement of earnings. Doing so will minimize the number of questions employees have when they receive their pay.

12. Consider including factors for overtime or other pay codes that pay a premium rate.

This will enhance understanding of how hours will be paid. For example, there may be different rates of pay on a public holiday. Naming the pay codes “US-PUB HOL-1.0”, “US-PUB-HOL-1.5”, and “US-PUB-HOL-2.0” will clarify how the hours will be paid.

13. What will be your order for your pay code naming convention?

Once you have identified all the variations of pay codes that you will have, you will need to determine an order for your naming convention, so that it is consistently followed. We suggest country and pay code name as the beginning of each pay code at a minimum. To help with this process, it is also recommended that you build the list of pay code names in a spreadsheet, and sort the list alphabetically so you can see how it will appear in Kronos. Designing the list of names in a spreadsheet allows you to use a separate column for each attribute of your naming convention and you can then link them together to form the final pay code name. (You can also use a function to confirm that your pay code name is thirty-two (32) characters or less as required by Kronos.) This will allow for quick flexibility in changing and adding attributes to the pay code name while they are being designed and reviewed with your implementation team.

14. Decide how to educate your user population on your naming convention.

Perhaps an online job aid or printable reference guide could be used to outline the naming convention, as well as define when each pay code should be used.

15. Finally, names for combined pay codes should not be forgotten.

Combined pay codes often summarize groups of similarly named pay codes. For example, many clients setup a combined pay code for regular hours that may include REG, REG 2, REG 3, etc. to represent different shift differentials. You may decide to include a specific word in all combined pay codes to identify them such as “TOTAL”, resulting in a combined pay codes name such as “TOTAL REG” and “TOTAL OT” that will sort nicely. You may decide to use a symbol at the beginning of the combined pay code name such as an underscore to make combined pay code names easy to identify and sort, such as “_REG”.