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Wage Compression Challenges For Business Owners
August 10, 2021
Lately, it seems like business owners are facing wave after wave of problems that stand in the way of post-pandemic recovery, with the newest obstacle being wage compression. That’s when you have to raise starting salaries to find new workers and the new people start making as much (or more) as your longtime staff.
Why Positions Are Going Unfilled
To look at the raw data, there seems to be plenty of unfilled openings along with a great number of potential candidates. However, when you dig deeper, many factors are complicating the situation such as lack of childcare, health-related concerns, and a steady and robust flow of government financial aid. Additionally, the roles that are open aren’t aligned with the skills and talent of those who are unemployed.
There are other factors to consider as well. The turnover rate across all industries is higher than it was pre-pandemic. This is likely due to employees leaving jobs to make more money, change careers, or reduce workload after the stress and burnout caused by the pandemic. Others are looking to continue enjoying the increased flexibility that remote work can offer and switch organizations to do so.
The Impact on Businesses
The most seemingly obvious solution to fill positions within a business — raising wages — is traditionally the least financially feasible for business owners. Although business aid is accessible and readily available to theoretically cover that expense, the aid is not infinite and in many cases may even need to be repaid. Raising wages is something that an owner can’t “undo” and sets salary precedents and expectations going forward.
Current employees who don’t get a wage increase begin to harbor resentment for not being recognized for their longstanding commitment to the business. So owners looking to hang on to long-time employees are shelling out more for retention bonuses, further creating what could become a deep financial hole that directly affects project margins. Here is an interesting article from the Wall Street Journal that explains more about the wage compression phenomenon.
What Business Owners Can Do
The best and most cost-efficient way to avoid having to fill unopened job positions is by keeping current employees happy. Beyond wage and compensation increases, there are many ways to help retain talent and create a culture that supports business and employee growth. Owners can offer more robust and personalized benefits packages, remote work schedule flexibility, and strive to implement diversity, equity, and inclusion (DE&I) policies.
It’s also a wise move to seek outside help. Business owners who want real help to improve themselves and their business — not just a consultant to try and do it for them — can benefit greatly from hiring a business coach. Some owners still haven’t worked everything out, and are in the process of putting together their ideal vision, not just for their business but also for their lives. Business coaching services can help owners tackle post-pandemic labor shortages and provide the necessary tools to address the inevitable staffing hurdles they’ll encounter in the future.
Why Choose Executive Coaching?
A common issue is that less experienced owners tend to focus on the problem itself, instead of fixating on its source. Sometimes addressing a predicament on the surface isn’t enough, and it will merely keep returning for as long as the root issue remains. It is critical, then, to understand why the problem exists in the first place.
Executive coaching can involve many different elements, given that there’s no telling what issues can arise with personnel in the workplace. This is on a different scale from business coaching, which involves a coach working with the owner and their teams, and tends to cover the bigger picture.
With The Alexander Group, you can rest assured that you are working with a business coach who has sat in your chair. We’ve faced everything you face as a business owner, such as forming new enterprises, turning around struggling operations, and establishing level expansion in fast-growing businesses.
The Alexander Group isn’t your average business coaching company. We focus on providing clients with a more personal, intimate approach to guidance. Coaching isn’t done by phone, or even over Zoom — there is no substitute for one-on-one mentoring, and as such The Alexander Group coaching is always in person. To learn more, contact us online today.
