Wanted: Dealing with a staffing crisis

By the end of the first quarter of 2022 the UK economy will have recovered its pre-pandemic size. Gross domestic product is rising, meaning that businesses are growing again after the deepest recession since World War II. But the impact of the pandemic is far from over.

In October 2021, the Office for National Statistics reported that the number of job vacancies across the UK reached a 20-year high of 1.1 million between July and September. That’s more than double the number at the start of the pandemic.

Brexit hasn’t helped. A fall in the number of workers from European Union countries has contributed to labour shortages, particularly in the manufacturing and hospitality sectors. But no industry is immune, nor is this an exclusively British phenomenon.

The causes vary – generous furlough benefits and part-time work schemes in European countries and stimulus cheques in the US have given many workers a financial cushion that may be delaying their return to the job market. Travel restrictions have disrupted the flow of seasonal and migrant workers, many of whom returned home during the pandemic and have stayed there.

Then there is the simple question of job security. After one of the most challenging periods many have faced in their lives, people are conscious that they may lose job security and rights to redundancy payments if they switch to a new company.

“We are absolutely in a candidate-short market and that’s across all sectors. The majority of our clients want and need to recruit. However, among our candidates there is still some conservatism, in particular for permanent roles,” says Lorraine Twist, director of professional services at Hays.

“With the pandemic we are moving into a new work world and many candidates want to wait and see how that plays out for them before they do anything. There's also a lack of confidence because of the instability which Covid has caused and continues to cause. That has made many candidates reluctant to move.”

From an employee perspective, staff shortages may be a good thing if companies have to offer more attractive salaries and training opportunities to attract and retain talent. However, no one enjoys working in an under-staffed team, and asking people to cover for missing colleagues, work long hours or do work they are not fully trained or competent to do, as well as having too few staff to fulfil orders, leaves organisations exposed to a host of risks. A company is nothing without its people so identifying and mitigating these risks must be a priority in 2022.

“We are starting to see some flexibility from companies and our advice is that they need to be incredibly agile,” Twist says. “They need to be more creative about the candidates they are looking at and they need to be training more. And they must be quicker in the process as well. If clients take their time to interview people and offer roles, those candidates will have gone from the market.”

Checks and balances

At EDF, internal audit recently engaged in an HR assignment. This was already on the audit plan, so was not a direct response to the pandemic. The company needed assurance that staffing on the construction of the Hinkley Point C nuclear plant was being managed effectively. Internal audit wanted to know whether the business had identified the industrial skills required for the project, the numbers of people necessary and their rates of pay and, overall, whether a clearly defined recruitment process was in place.

“Essentially, we found that they had identified the risks of not having the right number of people, with the right skills at the right time. By way of controls, they had clearly defined job descriptions, they knew how many people with the requisite skills would be needed on-site and when, and they were receiving 16 weeks’ advance notice from contractors of available resources. This enabled them to identify any gaps and what training would be required to upskill people so they had the numbers needed to keep to the schedule,” says Alistair Smith, UK internal audit director at EDF.

Internal audit should also be questioning whether the HR team continuously monitors turnover and the reasons why staff leave. A certain level of employee turnover is normal and necessary – it brings in new ideas, skills and talent – but HR should be monitoring any changes, since recruitment and training are an investment and an increase in the numbers leaving could indicate a problem with management or culture.

“This is a construction project, so the workforce can be migratory. When people leave it, we expect to see evidence that exit interviews are being used to understand where people are going to and why, in case by tweaking arrangements we can dissuade people from defecting across to HS2 or Thames Tideway, or another site,” says Smith.

Reputation counts

Money helps, but staff retention and performance is not only about remuneration. The pandemic has brought wellbeing and issues of staff burnout to the forefront. Working from home, interacting via video, constant emails and notifications, plus worries about health, members of the family and the state of the economy can take its toll. Not only does this lead to reduced work performance but it can also lead to increased sickness – exacerbating staffing shortages – and to people choosing to leave their company or to go part-time.

Recruiters are expecting more people to leave organisations that they do not think supported them adequately during the pandemic – and it is hard to find people willing to work for employers that have gained a reputation for being uncaring over the past couple of years.

Corporate reputation matters more than ever when recruits can pick and choose. This may be good news for those that have earned the respect and gratitude of their staff, but it will take time for those that have lost it to rebuild trust in the labour market. Now, more than ever, employees want to be seen and treated as individuals and they are far more likely than in the past to ask potential new employers for tailored working conditions, such as flexible hours, remote working or additional time off for other projects or caring responsibilities.

How do you reconcile the management of personal issues such as mental health with broad and impersonal corporate strategy? The processes, policies and strategies that HR has in place to hire, manage and retain talent has to be aligned with the organisation’s strategy and goals. Quantifying that alignment, however, is not so simple.

“That really comes down to internal audit’s professional judgment. We would try to look at two key governance tools: the strategic plan and the risk management system,” says Brian Hayes, a partner at consultancy firm Moore Ireland.

“Is there an acknowledgement in both that staff wellbeing is a risk that has an effect on the strategic objectives, and does that cascade down into a programme or a framework or a series of actions that can be defined, managed, measured and reported upon?” he asks.

“The strategic objective might be to have an enterprise-wide staff wellbeing programme in place by 2023. And then in the risk management system, there should be various acknowledgements that disruption of people is a common business risk that must be managed. So those two things communicate and they shape a plan of action at management level. For example, the CEO is going to oversee and meet the HR executive once a week to understand what's going on in these areas: recruitment, wellbeing and group morale. These can then be broken down into stretch measures.”

“Stretch measures” is a term used by the Central Bank of Ireland in its assessment of diversity and inclusion (or a lack of these) in the country’s financial services sector. According to the bank, low levels of diversity increase the risk of over-confidence in decision-making, resulting in a lack of internal challenge, a reluctance to change, and an excessive resistance to external challenge.

Are you stretched?

This groupthink can result in over-reliance on a core set of assumptions and may cause an organisation to underestimate risks stemming from its decision-making and behaviours. Diversity is therefore a key component of the risk culture of a firm and stretch measures may be needed to improve workforce diversity.

“There's really strong empirical evidence that having a diverse workforce helps a business to perform,” says Smith. “The business has set itself targets and when it comes to hiring it recognises the risk that people may recruit in their own image.”

EDF’s response to this challenge has been to pilot a blind recruitment process so the recruiting manager is unaware of the sex and ethnicity of job applicants. If the person has the skills the company wants, they will be shortlisted. The recruitment panels are also diverse to promote diversity of thought on the hiring decisions.

HR will then analyse how effective those measures are, assessing, for example, how many people got through to the first and second rounds of interviews and who has joined the organisation. That should reveal whether the policy is changing the number of women or ethnic minorities being hired as well as whether there is under-representation of specific groups.

“Then the business can question why that might be and what it can do about it. We hope there would never be conscious bias, but we are trying to reduce risk of unconscious bias,” adds Smith. The results of the pilot programme are being analysed and are likely to be implemented permanently once some system changes are made.

Diversity is a long-term risk, and employers should already be looking to identify new places and ways to recruit a broader range of people – using online and social media to attract the attention of, and build their reputation among, those who do not normally look at their adverts. Those that already do this effectively will find it easier to trawl the largest pool for new recruits now that people are scarce.

Questions of resilience

However, the great staffing shortage caught most companies off-guard and this raises issues about horizon scanning and resilience. Hayes suggests that internal audit should not just view the immediate crisis in terms of HR policies and staff wellbeing, but should also help businesses to understand their resilience better and whether they are equipped to cope with whatever challenges come its way in future.

“Business continuity is about a single point of failure, whereas resilience is about dealing with multiple points of failure over a prolonged period of time and that’s what we’ve seen with COVID-19. It’s multi-faceted,” he says.

“The past decade has been defined by risk management; we manage known risks. Humans are predisposed to a recency bias. There is now a move into resilience to ensure we can cope with radical uncertainty. Will there be a major national cyber attack, severe climatic events or energy shortages, and what would that mean? An organisation cannot function without resilience and a key piece of that is its people.”

The staffing crisis has no end in sight, but it cannot be seen in isolation. Other challenges are on the horizon and, to be resilient, organisations need people who can deal with these. It is therefore critical that they identify who they need, as well as the skills and support these employees require, to weather the approaching storms. 

This article was published in January 2022.