In the past year, many companies have faced a dilemma: demand has returned to pre-pandemic levels, supply chain issues are behind us, and machinery has been maintained. However, productivity remains stagnant at 20%, 30%, or even 50% less than in the pre-pandemic period, measured by products per hour of work, tons per man-hour, or hectoliters per shift. Management efforts to increase productivity are not achieving their goals.

The first explanation for this phenomenon is that certain roles, critical to the productivity of others, remain unfilled; Human Resources cannot recruit certain profiles quickly enough to cover employee turnover. The second, less visible explanation is that the basic training of new employees is weaker than that of employees who held the same positions before the pandemic. Specifically, we have seen in some operations that the number of roles filled by employees with less than a year of experience has doubled, first-year turnover exceeds 40%, and, as a result, know-how has been affected.

We have encountered this phenomenon in various industries in Chile, Peru, and the United States, from consumer goods and agribusiness to metalworking and mining. However, this experience is just one aspect of a widespread phenomenon: this year, 77% of employers are struggling to find talent, in LATAM as well as globally – the highest rate in over 20 years and double that of 2010 [1]. At the end of 2022, job openings in the U.S. outnumbered job seekers by 4.3 million, nearly double, and the “quit rate” is at a record high, exceeding 30% annually [2]. Despite net wage increases above inflation in the U.S. or slight reductions in real wage levels in Chile, the problem does not seem to be resolving.

Is this a period of adjustment, or are we experiencing a “new normal,” as discussed in 2021?

There are many underlying reasons for this phenomenon [3], but we want to highlight four main ones:

1. In several sectors, the post-pandemic recovery forced companies to rapidly recruit the workforce needed to respond to renewed demand, even though people hadn’t yet returned to the job market – state Covid support programs in many countries slowed the resumption of job searching
2. 2020 was an invitation for many to rethink their lives. The experience of different balances has led to changes in priorities, with the search for purpose surpassing the pursuit of higher income. Dual-income couples at a certain level decided to spend less and depend on a single salary, and many baby boomers took early retirement or created their own jobs or businesses – these large-scale changes represent a significant loss of know-how for companies
3. Today, new workers have little practice in basic domestic skills, such as fixing a car or home plumbing. This is a non-formalized educational foundation but is necessary in many industries, and today it is virtually non-existent
4. The most recent employees typically have 1 to 2 years of weak or no remote training relative to their predecessors due to pandemic restrictions. Those who will join in the coming years will be less prepared: For example, the World Bank revealed that due to Covid closures, the percentage of 10-year-olds struggling with basic reading comprehension increased from 50% to 80% in Latin America and the Caribbean [4]

Employment trends seem to be reversing now [5] – fewer job openings, more applicants, which should reduce pressure on employers. However, three of the four changes mentioned above are deep-seated and cannot be resolved in the short term, nor by an economic crisis.

So what to do? How can large companies address this? We propose some ideas to explore, which some early movers are developing:

1. Reduce turnover of trained staff.

More clearly distinguish benefits for recent employees from those for experienced ones. For example, they can develop additional benefits (insurance, clubs, vacations, etc.) accessible only to those with more than 12 or 18 months of tenure in the company. They can emphasize special recognition for employees who reach certain milestones or levels of specific competence in the company, thus reinforcing why the company values them.

2. Shift the recruitment funnel.

Instead of filtering talent during the recruiting process, broaden the recruiting net and implement continuous evaluation after one or two quarters to retain the most committed and capable employees. This can be done by creating an “apprentice” role, with a fixed-term contract, and offering a substantial reward upon “graduation” and transitioning to a permanent contract. Communicate that retention is a special achievement.

3. Strengthen the purpose of the role and the company.

This requires shifting the job profile articulation from the functional (roles, responsibilities, tasks, KPIs, and competencies) to the objective – what is the purpose of the role? How does it contribute most to the company’s purpose? Additionally, reformulate and communicate the company’s purpose. Strengthen the connection with employees at all levels through activities that make a difference to society, for example, through foundations.

4. Strengthen useful training.

Establish career plans and levels of expertise or competence by role, and articulate specific technical training and development programs. Communicate it as a pathway, and make it an integral part of the company for employees, from operators to managers.

5. Adapt working conditions.

Wherever possible, meet the new requirements for flexibility and the development of extrawork passions.

Naturally, the proposed actions require special efforts from company leadership at a time of major disruption due to digitalization and artificial intelligence globally, and the decision to move to a 40-hour work week in Chile.

But it’s worth it: by advancing these actions, the company can build greater resilience from within its organization, and, to quote LinkedIn founder Reid Hoffman, “no matter how brilliant your strategy, if you’re playing alone, you’ll always lose to a team.”

References:

[1] ManpowerGlobal survey 2023, 39.000 empleadores en 41 países

[2] US Bureau of Labor Statistics 2023, BíoBío

[3] KornFerry, McKinsey, Salesforce, ManpowerGroup, SHRM

[4] WorldBank, The State of Global Learning Poverty: 2022 Update

[5] US Bureau of Labor Statistics, Banco Central de Chile