Join the Money Matters Email ListReceive email alerts any time a new podcast episode is released!
Small Businesses and a Tight Labor Market
If you drive around town, you are sure to see a growing number of “now hiring” signs in the front yard of business all around. If you’re a small business owner, you’ve likely had difficulty finding people to help keep up with the growth that your small business may be experiencing in this economic environment. The national headline unemployment rate is 5.4%, much better than it was in the early days of the pandemic but still very high by historical standards. In Tennessee we are doing a little better than that with 4.7% state wide at the end of July. Normally, in an economic recovery, you don’t see employers screaming for new employees while the unemployment rate is still this high. Theoretically, there should be plenty of people to fill those jobs. But we have an imbalance here where small businesses are looking to hire, while there are still 8.7 million people in the US that remain unemployed at the end of July. This doesn’t make sense on the surface. There are two explanations for this.
The first is the presence since the beginning of the pandemic of Federal and State Unemployment benefits that allowed recipients at one time to make the equivalent of $15 per hour. That certainly removes the incentive to go out and find work if you are making that on unemployment. Now Tennessee’s participation in this unemployment benefit ended in early July, but there are other states that will not cease their participation until the beginning of September. As these federal unemployment benefits begin to cease, more people are likely to be motivated to go back to work. Now the July jobs report was a blockbuster one, with the unemployment falling dramatically at about 0.5% which is a large amount for the number of unemployed. Perhaps this was due, in part, to the federal unemployment benefit ceasing in multiple states. The July job’s report should offer some small encouragement to small business owners. It is an encouragement that it might get a little better in the second half of the year seeing more people who have been on the sidelines rejoining the workforce and being motivated to work.
A second reason for this tight labor market despite so many people being unemployed is a mismatch in skills available vs. skills required in the workplace. This is a longer term trend that will take time because the workforce is going to have to be trained to participate in the jobs that are available. Some call this phenomenon “creative destruction.” Certain jobs that fit the skills available are being removed while new jobs that require new skills are being created. Again, this is a long term trend that is not going to fix itself overnight.
If you are a small business owner, what can you do tangibly in the meantime?
- Take good care of your existing teammates. People’s minds automatically go to compensation which is absolutely true. You must be competitive in the marketplace with compensation. But it also involves intangibles such as quality of life. Here are some questions for you to consider: Is your workplace family friendly and flexible? Do your teammates have some measure of ownership or input in their work? Do you promote a culture of cooperation? It will take a total package to keep employees on your team in the future. If you happen to lose a teammate (which may happen in this environment), take the opportunity to listen to them and learn from them on their way out. Conduct an exit interview that allows them to tell you everything they liked working for you and everything they didn’t like. It might be hard to hear but this can help you lean into your strengths as an employer and learn from your mistakes.
- Simplify Jobs duties to become more efficient and effective. Over time, there are going to be certain items of work that tend to accumulate that might be unnecessary. People prepare reports that may never be reviewed, people develop procedures that contain unnecessary steps, and people perform manual processes that might be able to automated. Take on the exercise of asking your teammates to break down their responsibilities. How is their time being spent? Do they have ideas of steps that can be cut out of their processes to help simplify them? If they are doing things the way they’ve always been done, is there a better way to do them now? Are there ways that your business can rely on electronic signatures and records, rather than processing a high volume of paper? If you take the time to make your team more efficient, you might be less dependent on the need to hire in the future as your business grows. A word of warning here: You cannot enter this exercise focusing solely on efficiency. It is also important to also focus on effectiveness. Whittling departments down to a bare bones staff can have a detrimental effect on morale and can hinder your ability to do an excellent job for your customer. You are looking for efficiency and effectiveness – not simply efficiency alone. This is a really hard tightrope for small business owners to walk, and you may not realize your tipping to one side until your customer or teammates send you the message. So keep your ears perked up as you try to manage this challenging tightrope.
- Look for retired workers to help fill some gaps. Retired workers represent a wonderful pool of talent and experience. Some people retire, only to find that they miss interaction with people and engagement of serving others. They may not want to come work for you in a full-time capacity, but they might be open to part-time. This can be good for the retiree to have a place to come and to contribute. It is also good for the organization to be able to benefit from their experience and expertise. Consider reaching out to former teammates who retired from your organization in the past to see if they might want to come back on in a part-time capacity. Also ask around in your church or social circles to see if there are retirees looking for a way to contribute outside of their home and be able to earn a little extra money for doing so.
Being a small business owner is a blessing and a challenge. Wouldn’t it be great to have a partner to help you navigate challenges like these? At Foundation Bank, we view our role as just that – a partner. We want to come alongside our small businesses and not just provide money, but sound advice. Your CPA can be a great objective advisor for your business and so can your banker. If you don’t have that relationship with your bank, we invite you to start your financial conversation with us today. We hope this episode has been helpful for you and if it has we hope you will subscribe and share with others that could benefit particularly others who would appreciate this small business conversation. Please remember that today’s conversation does not constitute a recommendation. You will need to consult your own financial advisor for specific tax or loan or other financial advise. We are a Member FDIC and Equal Housing Lender. Until next time… God Bless.
– President Chad P. Wilson, CFP
Today’s episode of “Money Matters” was written and recorded by President Chad P. Wilson of McKenzie Banking Company / Foundation Bank on August 31, 2021.