Job openings in the United States continue to hover at record high levels, exacerbated by the Great Resignation and a sputtering emergence from the pandemic. Competition remains fierce among companies struggling to find qualified workers.
Yet many employers, particularly those that rely on low-wage employees, overlook a solution to these hiring challenges that is right under their noses: advancing their own workers, according to Building from the Bottom Up, a report by the Managing the Future of Work project at Harvard Business School. As the pandemic eases and businesses ramp up, the old belief that low-wage jobs will always have high turnover needs to be reimagined, says Joseph B. Fuller, co-chair of the project and a professor of management practice at HBS.
“Employers are going to be under duress to come up with new ways to find people, since the old playbook is probably going to be insufficient,” Fuller says. “That calls for an almost deductive logic—the easiest way to fill a job is to keep the person who’s in it.”
What’s more, many low-wage workers are people of color, women, and those with “substantial caregiving responsibilities”—the very groups many companies are seeking to hire and promote, write Fuller and Manjari Raman, the program director and senior researcher at the project.
The researchers counsel companies to solve their labor problems—and perhaps contribute to fixing a worldwide supply-and-demand conundrum—by investing in programs rooted in stability, mentorship, and a clear path to promotion.
Low-wage jobs see high turnover
To figure out why the standard way of filling low-wage jobs isn’t working, the researchers surveyed workers and employers from September to November 2020, zeroing in on pre-pandemic experiences. The surveys included 1,025 low-wage US employees ages 21 and older with at least three years of work experience. Another survey queried 1,150 leaders, from top executives to mid-level managers and front-line supervisors, to gauge perceptions of low-wage workers. The surveys separately included questions about how the pandemic may have changed things.
The results show that the potential pool of workers companies can nurture and advance is huge. About 44 percent of US workers—53 million people—were working in low-wage jobs before the pandemic, without a clear path for advancement. The authors define low-wage workers as an individual who lives in a household of three with an annual income at or below $39,970, or those making roughly $20 per hour or less.
In eight of 16 industries examined, 80 percent or more of low-wage workers moved to different jobs within five years. “We had some people saying, ‘We had 90 percent and over turnover of low-wage employees.’ Others 75 percent. And vast numbers saying over 40 percent. In which business world is that acceptable?” Raman says.
The manager-employee disconnect
Most employees want to stay with their current employer. Some 62 percent said a clear pathway to promotion, job security, stable and predictable pay, and working hours were the most important attributes in deciding whether to stay with a company.
Yet, the employers surveyed ranked none of those in the top five reasons they perceived as most important to employees when deciding whether to stay.
Another disconnect: Employers were usually unaware of an employee’s personal circumstances—and had weak or no formal ways to discover a worker’s career goals and the barriers to achieving them.
Employers “simply don’t know enough of what matters most to their lowest-paid employees,” the authors write.
In one example, the CEO of a family-led auto parts business in Texas said he hadn’t realized the challenges his workers faced until he arrived early one day to find a shop-floor employee sleeping in a car. The employee told the executive he had been homeless for months and slept in the parking lot to maintain his spotless attendance record, according to the report.
In companies that do have retention policies for low-income workers, executives were likely to have “very high confidence” their policies were executed well, according to the research. For example, a policy may dictate that managers provide clear and actionable feedback to workers during performance reviews. Yet workers often feel they are not getting the feedback they need to develop their skills and advance, the research shows.
Senior managers make “the classic business mistake of thinking because you announced the [retention] policy and created it that it's getting done right,” Fuller says.
Look a little further down the supervisory chain, and managers that directly oversee low-wage workers “say ‘Gee, we really don't do that,’ or ‘I really do that infrequently,’ or ‘We do it occasionally.’ Whereas the CEO says ‘We do it every day all the time,’” Fuller says.
Provide a path for low-wage workers
So what steps can employers take to tap and retain low-wage workers?
1. Make sure low-wage employees know they’re critical. Most low-wage workers want to stay with their company and have already figured out issues that can interfere with landing a low-wage job, like transportation. Figure out what will keep them from leaving, the authors suggest. It’s critical that employees know that management values them—and wants them to stay.
2. Lay out clear retention paths. Business leaders should ask, “How do I keep the workers I have?” rather than merely “How can I get the workers I need?” the authors write. There are three keys to retention, Raman advises: Make sure workers are aware the opportunity for advancement exists, provide mentorship, and invest in training for a well-laid-out career path.
3. Do the math—and invest in the process. Every time a low-wage worker walks out the door, it’s the equivalent of a “self-imposed tax,” for the employer, the authors write. Measure how much it would cost to train employees for advancement against the cost of recruiting, training, and placing new employees.
“Investing in upskilling incumbent workers who already possess knowledge, credibility, and a history of service would seem to offer a far better return on investment than making frequent, speculative bets on an influx of candidates based on their job applications,” the authors write.
4. Measure retention programs like a product. Rigorously measure programs like training, coaching, and mentoring. Provide feedback.
“We don't run the processes of evaluating, supervising, hiring, and training employees with the same type of analytical rigor and control that we do a lot of other processes,” Fuller says. “If we were doing quality control on manufactured products with the same unevenness, lack of follow-up, and measurement tools we use for adding value to workers, cars would be breaking down constantly and planes would be falling out of the sky regularly.”
5. Invest in partnerships, so those who don’t get promoted can advance elsewhere. Fuller and Raman point to big companies like Disney, Amazon, and Walmart that say their business models don’t have room to promote all low-wage workers into higher positions because there are fewer of those jobs.
Those companies are now investing in ways their low-wage workers can advance outside the company, for instance, by offering help with community college tuition. “They are experimenting with models that serve as springboards for advancement outside their own companies,” the authors write.
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[Unsplash/Josh Olalde]