Episode Transcript
Speaker 1 00:00:23 Well, a warm welcome to all of my clients and fellow coaches and colleagues. This is my inaugural podcast on Coaches Corner with Dr. K. My name is Jack Kirnan and I wanted to talk about an issue that I think is really important as we face the fourth quarter and right on into next year. And, you know, I came across a quote that really struck me. It goes back to my high school days reading that great book from Ernest Hemingway called The Sun Also Rises. But there's a line, there's a phrase, from that book, describing a conversation between two characters, Bill and Mike. And Bill asks, Mike, how did you go bankrupt? and Mike answers two ways, gradually then suddenly, and I think that famous Hemingway quote, really captures the mood of the markets as aggressive fed tightening, persistently high inflation readings, the war in Ukraine and the continuing supply disruptions, offer clear signals that economic growth is slowing, especially in the US and Europe.
Speaker 1 00:01:36 Yet until last week's, surprisingly weak job openings and labor turnover survey report showing a 1.1 million drop in job openings in August, The US labor market has remained surprisingly resilient with another 263,000 jobs added in September. And the unemployment rate falling to a 50 year low of three and a half percent average hourly earnings remain elevated at 5% growth, which could potentially complicate the Fed's efforts to cool inflation, particularly if wage gains precipitate or repeat of the costly wage price spiral that the US economy witnessed during the 1970s, whether we're heading into a recession or are already mired in one. Changes in monetary policy operate with a significant lag on the real economy. So pressures will continue to build in the near term for companies to taper their hiring plans with many already announcing a hiring freeze or even modest job cuts, particularly in the high tech sector.
Speaker 1 00:02:41 During prior economic downturns, companies have viewed labor as an expense that had to be aggressively managed just like any other major expense like materials cost, or selling general administrative expenses. As a result, aggressive headcount reductions often played a major role in how companies were able to lower their operating costs and maintain critical access to financial capital. While access to financial capital will always be a strategic imperative for any company's long-term viability, major structural and societal changes during this past decade have elevated the role and the importance that human capital will likely have on an organization's sustainability. Even with the surprising jolt report last month, many companies across a wide swath of industries continue to have difficulty filling open positions. There were about 10 million in August alone, as the number of persons per job opening remains at a historically low level of 0.6. However, the labor market has lost a momentum in recent months as employers reassess hiring plans and look for creative ways to redefine where and how work is done, and whether AI based strategies can continue to reduce the physical number of workers that are needed for any given task.
Speaker 1 00:04:17 Talent retention continues to be a major challenge, as well as evidenced by record employee turnover, and historically elevated quit rates. Indeed, a recent survey by Mercer reported that a record high 81% of employees were suffering from burnout. There's been a modest recovery in labor force participation rates since the earlier stages of the pandemic, but the current rate of 62.3% is still below the pre pandemic rate of 63.4%. Back in March of 2020. A full recovery to pre pandemic participation rates would clearly lend additional support for employers looking to fill vacancies and ease some of the upward pressure on wages and allow the Fed to finally pivot to a less restrictive policy stance on interest rates even before the onset of the global pandemic in March of 2020. Many employers have begun to view labor in a much different context than in past periods. Adopting a more human-centered approach that clearly puts people first, where the employee's health and wellbeing becomes a strategic imperative for sustainability.
Speaker 1 00:05:38 Such an approach doesn't mean that old school styles of leadership focused primarily on performance management, expense control, profitability, or meeting project deadlines on time have become any less important because those metrics will always remain important. But human center leaders are totally focused on enhancing the overall employee experience with an inclusive style that empowers employees to collaborate and embrace empathy and compassion in their day to day interactions with employees. They encourage and validate employee feedback, accepting their own vulnerability by taking responsibility for any mistakes they make, and they're rewarded for their authenticity and transparency. Improving that overall employee experience reflects a growing recognition by business leaders that they can no longer avoid hot button issues and concerns that are increasingly coming into the workplace, such as employee mental health, their concern over the recent outburst of gun violence across the country, the controversial Supreme Court decision on abortion, changing policies on covid protocols and lingering worries over whether employees feel safe in returning to an in-person environment.
Speaker 1 00:07:04 Moreover, according to a recent survey by the Edelman Institute, employees globally place a far higher level of trust in business than they do in any of the major institutions like Congress, the Supreme Court, or even faith based entities. That employee trust is even more remarkable as it has taken place during the greatest disruption in the workplace due to all the questions and uncertainty created by the pandemic and the continued polarization of the political climate. In a way, employers realize that with trust levels toward other institutions at all time lows, employees expect their employer to take care of them. And if they don't provide that expected care, employees will continue to leave and seek employers that do provide that expected level of care and trust. It's almost as if employers now see their employees as a community or a subset of the broader society that we live in where there's an explicit social contract between the employer and the employee.
Speaker 1 00:08:17 So as we head into the fourth quarter, the economic data continues to paint the picture of a likely recession next year. Housing has already exhibited a sharp pullback with mortgage rates now hovering at 7%. Consumer confidence levels have remained much weaker than levels seen earlier in the year, and despite higher nominal wage increases, real wages have continued to fall, and the stimulus from earlier pandemic induced initiatives is likely to wane in the months ahead. As a final note, used car prices have been weakening for several months now and have traditionally been a harbinger of weaker new vehicle sales, especially now with higher financing rates and record transaction prices. So as companies finalized their 2023 budgets during the next several weeks, the list of companies announcing reductions in headcount is likely to grow. And at some point, the 10 trillion loss in consumer wealth from the sharp pullback and stocks and bonds this year is likely to reduce overall consumer spending.
Speaker 1 00:09:29 So against that backdrop, there is a more challenging economic environment. And with that, a big question will be whether employers will continue to embrace this more human-centered approach to the workforce, or will companies revert back to past behaviors when the recession does arrive. In my view, how employers conduct any future layoffs, reductions in force and or restructuring activities will speak volumes about their commitment to human centered principles and policies towards their workforce. And whether currently high level of employee trust can be maintained, employers will build even stronger levels of trust with their employees. If in the execution of any headcount reductions that are necessitated by the weaker economic environment, they can honor the following set of human centered principles. First, continue to intensify efforts that promote more flexible work structures that can enhance the work life balance employees want and need in the future. Second, to extend generous benefits to any employees affected by a RIF or a layoff, and provide ample support through access to both out placement and career coaching services.
Speaker 1 00:10:58 Employers have to remember that when employees leave without such support, they're also your customers and they can further hurt your business and efforts to retain and recruit through negative reviews on Glassdoor. And indeed. Third, companies need to carefully address and communicate with employees how any RIF or layoffs may impact current diversity, equity, and inclusion initiatives, and how they impact underrepresented employee research groups at the company. Fourth, assess how any RIF or layoffs may impact the talent retention of key employees. Again, communication with employees is paramount. Fifth, companies need to expand the level of support and the significant investment they have made in recent years on employee wellbeing and mental health initiatives. This is arguably the most important differentiator in a human centered leadership approach and the most visible sign that employers really value and care for their employees. And finally, companies need to continue the progress made in recent years on pay promotion and gender equity, as well as the policies, policies that have been put in place on paid maternity and paternity leave programs. Well, with that, that's my first podcast, folks, I hope you find some value in that. And with that, I wish you all the great day and stay safe, everyone. God bless.
Speaker 0 00:12:53
