Every conversation I have these days starts with hiring woes and worker shortages, whether when having coffee with a banker or discussions in line at the airport. They steer towards how we are all affected by shortages, delays, and uncertainties. It isn't easy to remain optimistic when there are no new ideas around what we can do to fix it.
According to an article in Forbes, approximately 10 million jobs are available while approximately 5 million people left the workplace or were unemployed. Even in the past two years, incredible growth has been a contributor. Job growth averaged more than 500,000 people per month in 2021. While that is still approximately 2% less employed than pre-pandemic, the continued shortages show the depth of the vacuum created by job changes and resignations.
Benefits and Compensation vs Shortages
As a CFO, we are frequently asked to review benefits and compensation. After all, it is about the dollars and cents. But is there something more? In my latest conversation with a CEO about their compensation strategy, it occurred to me that it is imperative that business leaders connect the dots for their employees and build a robust compensation structure that attracts top talent and keeps them engaged. There must be a way to effectively and efficiently increase the attractiveness of our businesses to capture enough of the right talent to meet the increasing customer demands. So, what's the big deal, and why can't we do anything about it?
Thinking back to my undergraduate courses in Economics, the business environment is one of balance. The supply curve and the demand curve meet at a specific point. Any deviation from that central point causes mayhem in labor shortages, increasing prices, increasing wages, recession, and oversupply. The current business environment in the U.S. is pushing the limit of our curves. We have a steadily growing economy in Colorado and consistently see new businesses entering the market. This increased demand pulls from the labor supply and drives up employment costs. As employers are figuring it out, they are increasing compensation offers and pulling good employees away from good employers. Bloomberg's Stephanie Flanders recently podcasted on the topic and identified several factors at play. This included financial pressure and a need for more time for Covid-19 issues or navigating family needs like childcare challenges. Stephanie's podcast points out that some employees are shifting to a gig economy to be more flexible with family time or personal time. What's clear is a balance that companies need to strike between culture, time, wages, benefits, costs to employers, and costs to employees.
I found in my history as a CFO that companies don't do a great job of communicating to employees about the value of their benefits. I remember an executive at one firm who worked with me for more than five years and never contributed anything to his 401k. While he distrusted the company 401k plan, he missed out on a fully vested match of 6% of his salary. More education on the real benefit of benefits is needed. For example, a brief conversation with a financial planner may have shown him how to increase his confidence in the program or move his retirement funds to more trusted investments over time. Another issue that comes up each year is understanding how health care plan design and enrollment options can change each employee's financial picture. This is seldom discussed when seeking a new job; it's usually about the money or the title.
In this competitive environment, it is best to hold onto the key employees. Some companies have uncovered creative tools such as making employee student loans, increasing the 401k match (subject to vesting), adding ancillary benefits like Aflac supplemental insurance or supplemental life, lowering copays and deductibles, or offering an HSA program. In discussing these ideas with Tom Krusic of Intellicents, it seems that a crucial part of all this might be offering financial planning as an employee benefit. This low-cost benefit would help the employee bring all the complicated variables together and point directly to the employer's value. For example, who knew that saving in an HSA now can cover current healthcare costs and possibly grow over time to cover our future long-term care costs. I wish I had known that 30 years ago.
Maybe it is about more than dollars and cents. But for employees to make good career decisions, they need to know the dollars and cents in addition to their clear path for career success. And employers need to find a way to provide that for their team and effectively communicate the details. Using the standard and non-standard benefits available to employers can help business owners build a compelling and attractive compensation package and company culture to do just that.
Reade Pickert. "U.S. sees record job growth." Boulder Daily Camera. January 8, 2022. Page 6A
Interview with Tom Krusic, Financial Consultant, Intellicents. January 24, 2022. https://www.intellicents.com.
Kelly, Jack. "Over Half a Million Jobs Were Added in October-Why Aren't More People Looking for Work?" Forbes, Forbes Magazine, December 10, 2021, https://www.forbes.com/sites/jackkelly/2021/11/05/over-half-a-million-jobs-were-added-in-october-why-arent-more-people-looking-for-jobs/?sh=6a5db23959f8.
Flanders, Stephanie. "Bloomberg Stephanomics." Bloomberg podcasts. Season 6, Episode 6. November 11, 2021. https://www.bloomberg.com/news/articles/2021-11-11/what-s-really-causing-the-labor-shortage-all-over-the-world?srnd=stephanomics.
About the Author
Scott Fowle is a Partner with CFO Selections, serving as the Practice Manager for the Colorado region.
He joined the business development and marketing team at CFO Selections in 2021 to establish the Colorado practice. Scott started his own outsourced CFO business in Colorado in 2016 serving owners, founders, and business leaders in the financial services, software, construction, manufacturing, and professional services industries.
As he leads the Colorado Practice, Scott’s extensive experience in business, leadership, strategy, and finance enables him to quickly understand and assess each client’s unique needs.
Learn more about Scott here.