The basics of supply and demand were drilled into most of our brains back in our Econ 101 days. I distinctly remember discussing the topic and thinking that it was interesting but not necessarily something I’d need to know in my future career. Well as I’ve seen over the years, I was wrong on that one because supply and demand actually plays a big role in how recruiters do their jobs and job seekers find new positions. Of course, when there is increased demand, supply often diminishes. And during times when there is an increased supply, demand often decreases. This is why retention is key to essential in HR as well as recruiting. The economy will bring high and low tides of open positions and job seekers, but a company that can retain its employees will not feel the affects of those tides nearly as much.
It’s November which means you are hopefully knee deep or wrapping up your 2017 recruiting and HR planning. Yes, I can’t believe it’s November either, but it is which is why I’m taking a moment to remind you that retention is critical your recruiting and employee retention efforts in the next 12 to 24 months.
Putting Recruiting and Hiring Theory to Practice
We saw this theory clearly put into practice during the 2007 recession. Companies were feeling the pain of a weak economy and were making cuts to meet their own needs, which ironically, were affected by other aspects of the rules of supply and demand. Americans were clutching their wallets a little tighter, and companies had to adjust to stay financially stable during the downturn. It was a tough time for nearly everyone. One of the most common ways companies adjusted was by discontinuing some of the perks they offered employees, including significant things like generous paid vacation, 401(k) matching and tuition reimbursement, and even less valuable perks like free soda at work, holiday parties and gym memberships. Companies were cutting corners, and they saw this as a way to do so.
Even more importantly, many companies had to cut back on their workforce when cutting down on perks just wasn’t enough. This put job seekers in a tough position and furthered our economic situation as there were thousands upon thousands of unemployed people and just as many companies with no open positions. We had an increased supply of candidates with the demand for them diminishing. Not as many jobs were being created or filled, making the demand much lower. It was a recruiter’s market, but not in a way that any of us wanted.
What this recession caused was a situation where employers were offering less and expecting more. In the job market, the demand for open positions was high and the supply was low. Companies were not only taking away perks to make ends meet but quite honestly, they didn’t need to offer a lot of perks to attract candidates. This impacted salaries, benefits, workload and so much more.
Fast Forward to the Job and Economic Market 2016
The recession of 2007 may not be that far behind us, but you wouldn’t know that by looking at the job market today. Companies have quickly increased their workforces, brought back perks like unlimited vacation, excellent training and some benefits that were unheard of even before the recession hit. The Presidential election weighs heavily on the entire globe as we wait. The signs the economy might be slowing and is waiting for either Trump or Clinton to be our next president is a major reason the Federal Reserve is expected to hold off in November in raising interest rates due to our strong but uncertain economy.
It’s also affected the supply and demand of positions and job seekers. In fact, it’s flipped it on its head. Job seekers now have their pick of jobs, and recruiters are working harder than ever to fill those positions. This flip also demonstrated why retention is so important in recruiting. As I mentioned above, companies that are able to retain employees will be impacted less by the high and low tides, and the way our job market is looking now is a perfect example of this. Companies who aren’t able to retain employees are in the constant race to recruit, but those that have retention on their side are able to focus on fewer open positions at any given time since they the best people work right under their roof.
When the nation recovered form the recession, companies suddenly had a need for larger workforces to help them meet the demands of customers who were beginning to be freer with their money. In order to build up their workforce, companies had to bring back the perks they had cut, and then some, to attract candidates. There is an increased demand for talent and companies are revisiting not just revisiting the topic of perks, benefits and compensation programs. They’re also shifting their focus to be around retention in general. This is because we’re now in a job seeker’s market, and the competition to attract the best candidates is a great reminder of why retention truly is the future of recruitment.
Supply and Demand vs. the Repeat Customer
When we talk about supply and demand in the job market, there’s a sense that either recruiters or job seekers are on top. The problem with this for recruiters is that while we may be on top at moments, we have no control over when or how that happens. Companies that aren’t able to retain employees will be carried by the high and low tides of the job market and economy. On the other hand, companies that are able to retain will be affected less in those shaky moments, and will be ahead of the curve when the job seekers are in control. In a way, it’s like having a repeat customer that continues to buy the essentials from you despite the fact that they may have to cut back in other areas in bad times or may be tempted by a hotter, newer product in good times. As a recruiter, retention is powerful.
Now that the economy has turned, companies are focused on hiring for the long term rather than just doing what’s best in that moment. Filling that leaky bucket that is your workforce is not just expensive in terms of recruiting costs but also productivity costs. It also impacts a company’s ability to grow and take advantage of this growing and thriving economy. That’s why retention in these four areas is key:
#1 – Retention of candidates
You may be thinking that retention only applies to employees, but a recruiter’s biggest asset is their talent pipeline. Retention starts from the moment a candidate visits the career page, talks with a recruiter or begins considering working for the organization. Maintaining that pipeline is just as important as maintaining your workforce since turnover will happen, no matter how well you retain employees.
# 2 – Employee Retention
This is probably where your mind first went when we were discussing retention, and there’s good reason for it. Your employees are the lifeblood of the company and an experienced, tenured workforce is one of the most valuable things a company could possibly have.
#3 – Keeping High-Potential Leaders
During times of high demand for workers, companies will likely be actively recruiting your high potential leaders, but they’ll also be sought after during tough economic times as well. As I said above, turnover is inevitable in every organization and when the job market isn’t looking great for candidates, recruiters can cherry pick who they want. Don’t leave your company vulnerable to having your high-potential leaders pulled away in either situation.
#4 – Retaining Linchpin Employees
It’s a widely accepted fact that companies that aren’t able to retain their key leaders suffer from all the stress surrounding the situation. Productivity, strategic vision and morale are all affected, so retaining these linchpin employees is essential for a healthy organization.
Retention. Retention. Retention. I can’t talk about this topic enough and as an HR and talent acquisition leader either can you. It’s critical to business and organizational success in 2016, 2017, 2018 and beyond. We have to keep our best talent, train them, develop them and most importantly learn from them before your employees takes that knowledge to your competition and helps them establish a competitive advantage over you.