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Bill George

Harvard Business School Professor, former Medtronic CEO

What’s Behind the Labor Shortage?

Most employers are having trouble finding enough qualified employees to run their businesses, but the reasons may not be what you think. The shortages are most apparent in the hospitality industry, but in truth they are impacting all industries. There are plenty of people qualified to do the jobs that go unfilled, but they sit on the sidelines.

COVID-19 with all its time away from the workplace has caused a profound rethinking of people’s attitudes about their work. No longer are people willing to work in jobs and in companies in which they find no purpose and no passion. Many would rather stay at home and get by with fewer material things than work in a place of drudgery for meager compensation.

The workplace should be so much more than a way to earn a living, but often it is more drudgery than inspiration. For the past four decades pressures from shareholders to increase earnings and cash flow have caused employers to routinize work and minimize pay and benefits. To accomplish this, they have added layers of middle managers and employed expensive consultants to take costs out. While this focus has accomplished its near-term bottom-line objectives, employers are learning the hard way that it is not sustainable with the people they need most to carry it out.

If we learned anything from COVID, it is the value of front-line workers. Before vaccines became available, these employees were risking their lives to serve those who could get work done behind Zoom screens. They include the restaurant cooks and servers, warehouse workers, delivery drivers, shelf stockers in stores, checkout clerks, police, and nurses and doctors caring for patients who made our lives possible. Yet they receive little gratitude for their efforts; just more work. Worse yet, they are often compensated at the lowest end of the pay scale, while employers find ways to reduce and remove their health care and other benefits. Small wonder they don’t want to return to this kind of workplace.

The solutions to this problem are readily apparent: create empowering workplaces with an overarching sense of purpose and pay people generously for their efforts. How can any employer justify paying people the minimum wage of $7.25 an hour? Employers need to determine “the living wage” for their employees, with benefits like health care, vacation, sick leave and retirement included, and compensate them accordingly. There should be compensation parity between women and men and among all races. Training programs are a necessity to enable employees to upgrade their skills and take on higher levels of work. If employers cannot meet this standard, then they should employ fewer people who are appropriately compensated and trained.

Would doing so mean higher costs? Yes, it would, but with it will come higher levels of quality, service, reduced turnover, and increase loyalty. That is a fair tradeoff for any employer that is committed to provide high quality products and superior service to its customers.

This is a necessary first step, but it is far from sufficient. Companies need to imbue their cultures and their employees with a deep sense of purpose and clear, consistent values that everyone can embrace. That purpose needs to inspire people throughout the enterprise, especially those on the front lines.

That’s what former Best Buy CEO Hubert Joly did when he took over a demoralized company with declining sales and profits. Instead of laying off people, he motivated his employees to raise levels of sales support built around an inspiring mission, built a thriving e-commerce business, and turned personal service into the company’s competitive advantage. His approach is similar to what generations of Medtronic leaders have done to use the Medtronic Mission to inspire employees as the company grew to 100,000 people, while achieving remarkably high levels of employee engagement.

On this Labor Day, all employers should rededicate themselves to creating inspiring workplaces that attract the most talented, most dedicated employees and pay them fully for their efforts. After all, what is more important than your employees in making your company successful?