A Wakeup Call to Middle Market Companies
New National Report Outlines How to Find and Develop the Talent You Need to Grow
Talent management issues like recruiting, training, and retention top the list of challenges middle market companies continue to face. There’s work to do, so it’s time to roll up your sleeves and take control. The acute workforce challenges you face—and the solutions—are clearly presented in “Help Wanted: How To Find and Develop the Talent You Need to Grow,” the Fall 2017 report created jointly by the National Center for the Middle Market and the Metropolitan Policy Program at Brookings. The report confirms what I’ve been telling middle market companies for years: Your size can be a strength or a weakness. It’s up to you to determine which it will be.
You Help Drive Our Economy, but Talent Issues Can Limit Your Growth
As a middle-market company ($10 million to $1 billion), you can take pride in the fact that you are a key driver of our economy, creating more jobs than any other sector. The research shows that taken together, companies like yours:
- Provide about one-third of U.S. private-sector jobs;
- Account for the largest share of private job growth—about 60 percent of net new private sector jobs; and
- Saw payroll growth of 3.7 percent over the last 5.5 years—more than twice the rate of either small or large companies—and up to 4.7 percent in the first half of 2017.
Despite the positive overall numbers, you likely face significant hurdles in finding and keeping the talent you need to grow, especially as Baby Boomers retire and the talent pool shrinks. You need to act now to remain a driving force in our economic engine. Already, almost four in ten middle market companies say their growth is restricted because of a lack of talent; and 44 percent can’t find candidates with the skills they need. These challenges are most critical at top level positions, but apply on up the skills ladder, across both technical and soft skills.
Acknowledge Areas of Weakness
Compared to larger organizations with more diverse resources, growth for middle market companies is more directly limited by their talent needs. This is made worse by the increasing talent inventory problem—an issue of supply and demand. It’s just simple math.
And that’s not all that plagues middle market companies. You operate within a set of unique circumstances that restricts your access to talent. Typically, middle market companies:
- Lack extensive brand awareness, so don’t have a large pool of candidates knocking at the door.
- Have a leaner HR function with less robust talent forecasting, recruiting, and training capabilities, which can mean losing qualified candidates to larger companies.
- Maintain a stronger HR focus on the transactional versus strategic, stifling creativity in talent acquisition and management.
- Lack a strategy for identifying current and future skills gaps and a succession plan for key positions.
- Can’t offer as many opportunities for professional development and career advancement, impeding both retention efforts and the ability to groom talent from within.
- Get fewer resources than larger companies from external sources like educational institutions, trade associations, and governmental organizations, limiting workforce development.
All of this may make you feel that you’re operating with one hand tied behind your back. But there are many excellent ways to overcome these hurdles and put policies and processes in place that will solve your people puzzle way into the future.
… But Also Recognize Your Power and Strength
Here’s some good news: One of the top five things employees want from their jobs is a sense of purpose, and as a mid-market employer you can offer more opportunities to do meaningful work and more directly contribute to your mission than large corporations. That’s an important strength and competitive advantage you can bank.
You’ll have to do the rest of what it takes to improve your situation by taking a proactive role in your recruiting, training, and retention efforts. Neither blaming outside forces for your talent woes, nor waiting for them to rescue you, will secure your company’s future. But you can. Here’s how with some valuable advice based on the “Help Wanted” report and my own experience working with middle market companies that have modified their practices to make people their priority.
- Elevate HR beyond the administrative/tactical to a strategic leadership role.
- Establish an ongoing, strategic, and proactive recruitment process that includes identifying current and future skills gaps, rather than waiting until you have open positions to fill.
- Understand and enhance your employment brand and promote it, leveraging what may be your best-kept secrets.
- Treat recruitment as a sales process by developing a candidate pool, nurturing relationships with potential hires, and offering an exceptional candidate experience.
- Value your candidate pipeline the same as you do your sales pipeline.
- Focus on candidates’ soft skills, like attitude, aptitude, and culture fit rather than simply considering technical skills.
- Enlarge your candidate pool by removing unnecessary filters, like requiring a bachelor’s degree when it’s not really needed to do the job, for example.
- Welcome new employees with a personal plan that provides total support and clear communication. (And don’t call it “onboarding”!)
- Move beyond recruitment to focus equally on retention by offering training and development programs, and providing a variety of career paths.
- Excel at performance management by treating it as an integral part of the workday and enlisting senior executives to give regular, informal feedback.
- Bolster your internal HR staff through partnerships with appropriate outside resources.
- Create relationships with colleges and other outside resources to offer internships and/or apprenticeships that can allow you to acquire talent early on and groom people internally.
- Ask for help and resources from universities, community colleges, nonprofits, and public- and private-sector institutions that may not usually think to focus on middle market needs.
- Participate in consortia and networks that leverage your efforts with those of other companies in your region or industry.
As a best practice, the report notes that human capital should be focused on 1) attraction, 2) performance management, 3) development and 4) talent planning (the overall process of managing these functions). It also emphasizes that the best-performing middle market companies undertake a more comprehensive talent planning approach consisting of interwoven tactics and activities that address the other three areas. The powerful combination of these activities creates momentum for aligning strategy, culture, operations, and innovation in ways that make all the components collectively more valuable.
And Don’t Overlook Culture
One significant element of talent acquisition and retention that was not included in the scope of the “Help Wanted” report is culture. Culture is hard to quantify, but it’s a hot topic for executives of middle market companies. Developing a purposeful culture is a major factor in your ability to attract, engage, and retain people. As a middle market company, you are smaller and more nimble, poising you perfectly to improve and promote your difference. Be sure to focus on culture by design, and not by default.
Today, younger generations want more than a job; they want to find meaningful experience in their work. They want to be part of something larger and more significant than themselves. They want purpose. At the other end of the talent, spectrum are the Baby Boomers, many of whom are not ready to retire for either personal or financial reasons. What they need from you is accommodation and consideration that will enable them to contribute to your business into their 60s, 70s and maybe beyond. Flexibility in everything but your values should be a given across the board.
The top-down hierarchies and rigid policies of the past no longer serve the needs and desires of today’s workforce. Designing a 21st Century culture gives you a strong competitive edge. Cultural design begins with a profound understanding of why you are in business and what that means to your employees and clients. Clearly define how that distinguishes you and make certain that your policies and actions support your words. Find creative ways to promote your unique culture to candidates and ensure that employees are empowered to live it.
Agile Middle Market Companies Will Find Solutions
Middle market companies are constantly changing, learning, and evolving in order to overcome their unique challenges. This creates an awesome environment in which to grow a company. Increasingly, mid-sized companies are waking up and taking control of their workforce challenges. All that’s needed is a courageous leader, a solid process, and a strategic mindset when it comes to your people. If you’re missing any of these building blocks, you have work to do. There’s help out there, and I challenge you to take advantage of it to ensure that talent issues don’t slow your growth now or in the future.