Supply/Demand “Power” Relationship
Labour Market Dynamics
The labour markets – there are many from admin to industrial to legal to technical – are primarily driven by the law of supply and demand. Eagle’s team are experts in professional staffing, primarily Information Technology… but these dynamics apply to all labour types. Often there are certain geographies (cities or regions) where the supply/demand may be one way or another while others may strike another balance. Also, there may be subsets of a labour type that may be in higher demand (or lower demand) than others within that same category – think of data scientists vs cobol programmers. However, there are other times when everything seems to line up and practically all supply and demand effects are the same or similar. A good example of this was in 2008 when the world entered the financial crisis and capital was very hard to come by; much of the world and across most labour types were experiencing lower demand for workers and the labour supply that was available for work was high.
Today, we find ourselves in a very different situation… as we come out of the pandemic, labour supply are approaching all-time lows while demand is steadily increasing. There are several factors that have aligned to create this supply-constrained state; and, for information technology, they are:
Not Enough Interest in STEM careers – The need for science-based knowledge workers have been growing at increasing rates that far surpass people’s interest in taking the STEM education. The result is not enough new graduates are coming available to off-set industry’s demands.
Global demographics – Economists for decades have been predicting the impact of the large baby-boomer generation growing old and retiring. This is finally happening now. The United States was the first country to feel this effect. Prior to Covid, their unemployment rates were at 50-year lows and, in technology, a significant proportion of open roles were going unfulfilled. Large US-companies are opening offices in other countries – Canada included – to ensure they have access to the talent they need. But the same demographic challenges exist in Canada and the rest of the world as well… they US is the “first domino to fall”, the rest of the world will follow.
Growth (and acceptance) of remote work teams – Over the course of the pandemic, knowledge-worker companies have been forced to work from home. This was a forced paradigm-shift and organizations learned how to accommodate working as remote teams and to be successful at it. Now, as we look to exit the effects of the pandemic, companies no longer need to compete for local workers but, rather, can “cast their nets” across the country or internationally to build their teams. The result of this is US-based companies are reaching out to recruit workers from other countries; and, in this way, they are now exporting their labour shortages to the rest of the world. Canada, being the closest and sharing the same time-zones, are an attractive hunting-grounds for these companies. Prior to the pandemic, Canada was slightly supply-constrained in IT… but with increased demand due to the US, we find ourselves in a much tighter spot.
Workers are demanding flexibility – Not only did companies learn how to work via remote teams.IT workers have as well… and they have found they like working remotely. They save on commute times. They can relocate to live where quality of life is higher or living costs are lower. And, with high demand for workers, they are holding out for remote work and are much more open to finding meaningful work beyond the city (or country) in which they live.
Growth of knowledge gaps – IT, and technology in general, is developing/changing at an exponential rate. New technologies, use-cases, and their applications are coming out more quickly, frequently and in greater volumes than ever. This trend will continue, having no end in sight. This is putting incredible pressure on the labour market to supply new skill sets and capabilities; and, with baby-boomers retiring and too few new grads coming into STEM, the labour market cannot develop these skills quickly enough to meet demand.
In the graphic above we present the supply and demand curve, using it to describe 3 scenarios that define where the “power” in the hiring function sits. These 3 scenarios are explained here:
High Demand / Low Supply: When demand for talent is high and supply (availability) of talent is low – as we find in the market today – the power to choose roles and set demands for rates/compensation remain with the qualified job-seeker. In this type of labour market, hiring organizations are experiencing the following:1) higher turnover; 2) candidates not accepting offers; 3) not getting the quality of candidates they are used to.
Candidates are getting multiple offers… and to battle this, companies are shortening their hiring processes. The quicker they can get to offer, the fewer other opportunities they have to compete with.
With Supply tightening, rates are generally strong but are not always the driving factor in deciding which role to take… people want to know that they are working on projects and technology that will make them more marketable and set them up for future roles.
Top resources are looking for high-performance, high-engagement, get-things-done work. They want to come in, leverage their skillset and make a difference. Organizations whose projects drag on for longer periods of time will struggle to attract AAA workers. Some workers are perfectly fine with slower work environments, but these typically are not the same candidates that aggressive, top-performing companies are targeting.
Companies are seeing more “quick quits” than ever. This is when candidates have just barely started, and they are leaving for something else.
Almost always the reason for this is that what the workers found when they started, wasn’t what they were sold in the interview. “Selling” the role is important, but companies must also “live the message”… and set realistic expectations.
We are seeing that candidates are interviewing right through the onboarding process. They are keeping their options open. Hiring companies need to be ready for their new hires… provide a quick turnaround to get them the equipment that they need. And the onboarding experience must match the vision that was set in the interview process.
Candidates are demanding the option to work remotely. The workers with the strongest resumes/skills know that they will find employers willing to provide this flexibility. If this is not an option for your company, you are competing for a small pool of resources (local workers) with national and international companies and the subset of workers that want remote work will not be in your candidate pool either.
Low Demand / High Supply: When there are fewer jobs and more workers looking for work, the power in the hiring relationship falls into the hiring organization’s hands. Companies hiring in this kind of labour market are able to set the rates and terms of employment/contracting. In this type of labour market, hiring organizations are experiencing the following:1) lower rates of attrition; 2) candidates being extremely responsive and accommodating; 3) not only is the quality of interested candidates strong, but hiring companies can often get a number of the nice-to-have skills/experience on their wish-list for a candidate.
Companies can set the hiring timetable that best suits their needs. Candidates will often remain available through extended processes, multiple interviews, etc.
Exact (or close to exact) fits for skills and experience can be expected.
Candidates will show much greater flexibility when it comes to hours, work environment, overtime expectations, etc.
The work and/or technology offered need not be as enticing and still be accepted by the worker.
Contractors already working can be enticed to accept a rate roll-back/reduction. **However, use with caution!! Contractors have long memories… ones that feel they’ve been mistreated, will not hesitate to move to another opportunity when the market turns around. Trust and loyalty is significantly impacted when employing this tactic. The best time to re-negotiate rates is at the natural extension point rather than in the middle of a contract period… after all, companies do not appreciate it when contractors look to renegotiate rates in the middle of a contract either.
Demand and Supply are Balanced: The most natural states for the labour market is either High Demand / Low Supply or Low Demand / High Supply and, depending on the economy, what is happening in the local market, new and hot technology coming out, mobility of labour, etc., the scenario will swing from one side to the other. As it passes the middle point, where there is a “balance” between the two, one might expect that this would be a time of harmony and stable rates/compensation. Unfortunately, this is rarely the case. Instead, it is a time of chaos as neither the job-seeker nor the hirer recognizes the equilibrium. Rather, both “sides” believe that the power in the hiring process rests with themselves. This type of market is characterized by the following:1) frustration with the inflexibility of “the other side”; 2) long, drawn-out negotiations; 3) hurt feelings, bitterness in one or both parties; 4) a wider range for rates and compensation.
Expectations across just about every aspect – compensation, work environment, hours worked can be contentious.
Both sides have difficulties understanding the other. Depending on which way the market is headed, hiring companies may believe that the market conditions are still those that suggest they should have the power in the hiring process. Or job-seekers have “heard” that the market has turned around based on one or two colleagues acquiring a placement with stronger rates. There is often a lot of misinformation and hearsay that colour the hiring process.
Hiring companies and workers, alike, are dissatisfied with staffing agencies. Agencies are caught between two very different sets of expectations and can fail to achieve consensus between the two parties.
Hiring in a Supply-Constrained Labour Market
Given that the present-day labour market is supply-constrained relative to the growing level of demand, there are some approaches – strategic and tactical – that may be employed to improve your chances for success while acting to limit the negative impacts found in such a market.
Leverage REMOTE Workers/Teams when possible – All of North America is in a labour supply crunch, IT being one of the tightest areas. Through the pandemic, companies have been forced to learn how to manage remote teams and they have figured it out. Now, organizations in one region are competing for talent with not only other employers in the same region, but with organizations across Canada and the US as well. By limiting your supply pool to local-only resources, you are at a distinct disadvantage and will struggle to bring on high quality people.
Know what you want and, when you find it, hire quickly – Get top candidates off the market before they are snapped up by another company or they collect competing offers which will negatively impact your rate negotiations. And be ready for them when they start; get them in and productive as quickly as possible. There should be no internal delays keeping them from being productive – this is especially important for contractor hires where they are not able to bill during the delays.
Build an employee/contractor value proposition – A value proposition for the company’s brand and for the project’s as well should be created and shared with members of your IT leadership team, project team and any staffing agency partners with whom you are working. Share the appealing technical aspects of the project and the role as well as the non-tangibles. This is to help sell the position - what makes it attractive – to prospective candidates. Be sure that what you are selling is truly a reflection of your organization’s operations.
Simplify the bid process – Top candidates are in high demand and have multiple offers. Requiring candidates to rework their resumes and answer detailed questions as part of the application process is a no-go for most of these AAA prospects. The ones with the time to put into this bidding process are typically not the candidates you are hoping to hire. Likewise, we advise against asking for a long, shopping list of must-haves or nice-to-haves… whittle it down to what you really need. Do candidates REALLY need to have a university degree? Do they REALLY need all their certs to be active? If so, keep them in… but if not, remove these. You are looking for people with the necessary skills, experience and willingness to embrace your vision, culture and operating environment. Do not limit your candidate pool based on irrelevant requirements.
Select candidates based on the best VALUE, not the lowest rate. Although this may not be applicable to BCFSA, this is a big difference between gov’t and private sector businesses. Some of our gov’t clients (typically the Federal Gov’t) hire based on an RFP bid response without even meeting the candidate. This is a recipe for mediocre hires that don’t have the soft-skills or proper team fit.
When onboarding be quick, slick, and legit – Be ready for a new hire. Top performers want to be engaged and productive. If they cannot start producing due to a lengthy onboarding process or the lack of tools, they could get cold feet. We are noting that many contractors are continuing to interview all the way through the onboarding process. They are keeping their options open, making it all that much more important to get them engaged and committed as quickly as possible. And, again, ensure that what you sold them in the interview is what they will find when they start their new role at your company. Today’s workers will not think twice about leaving something they feel was a bait-and-switch.
Hire for attitude, base skills… and train for the rest – This is an approach that many organizations have been employing for permanent employees for some time. They find someone who is the right fit culturally, shows both interest in the role and the ability to learn, and then they train them to complete the job they need them to do. Recently, we have seen more companies considering this approach for contract resources as well! As mentioned previously, people are choosing their next jobs based on whether it will make them more marketable in the future. By offering to bring them in to train on a new role or new technology, you may save on their rate (at first) and build some loyalty which is harder to do in with contractors than with your own employees. Out of the box approaches are going to become more common as the demand and supply gap grows over the coming months and years.
Offer contract extensions early – Attracting top talent is only half the battle in a hot market. Keeping your existing workers is just as important (and maybe more so!).For contractors in key positions, offer them extensions to their contracts well ahead of the current end-date. This way, you will remove any doubt as to whether they will be extended or not… and then they may not even entertain expressions of interest from other companies.
Tweak and Tune your staffing vendor strategy. Staffing companies, whether it is Eagle or others, are going to be key to finding the best candidates. In addition to finding and attracting talent, leveraged correctly, they also offer a market feedback mechanism and a chance to pro-actively manage your brand.
See below for some ideas for working more effectively with staffing vendor partners…
Getting the Most from a Staffing Vendor Strategy
Best Practices for Managed Vendor Programs include:
Agency partnership strategy…
Fewer partners (via master services agreement) – choose fewer vendors and work more closely with them, granting access directly to hiring managers or hosting opportunity intake calls
Share coming plans and projects quarterly via Business Review meetings or via Vendor Town Hall meetings where a company representative can share your project roadmap, any likely talent shortages, timing, challenges, etc.
At these meetings, it is also a good time to share your sell messages, ensuring that your agency partners are sharing YOUR messages with the market… and are consistent about it.
Make hiring a pro-active process rather than a reactive one. The more and the earlier that agency partners know about coming needs, the better they can prepare for the hiring requests when they come out.
Leverage your agency partners to help build your brand. Provide them with selling messages for your organization, IT dept, projects and the individual roles. Agencies speak with hundreds of prospective candidates every week… they can carry your message to the market. Of course, it is up to you to ensure that you message is reflected in the business that you conduct and the team environment that you create.
In addition to building your brand, agencies can also provide a feedback mechanism to determine how the market is perceiving your organization, brand, culture, work environment, etc.
Shrinking vendor lists offer the following advantages… mitigates risks with fewer contracts and players to manage; allows a partnership approach whereby direct relationships can be more easily managed; you get much stronger vendor engagement/effort; the quality of candidates and the vetting is of the highest level; as well as taking making it easy to take advantage of the above 4 points regarding branding and feedback.
To ensure the quality of the candidates, vendors are asked to submit a maximum of 2 to 3 candidates. If there are 3 or 4 vendors on the list, 3 candidates is about right (9 to 12 total) and for 5 or 6 vendors, 2 submissions are often the max (10 to 12 total).From this list, it is reasonably easy for the hiring manager to pick 3 or 4 to interview, knowing that the quality will be high. This is especially true if you have, previously, spent time with the agencies to explain exactly what you are looking for - hard and soft skills, etc.
Leverage staffing vendor partners to assist when planning for hiring. You will collect a snapshot of the availability of candidate types as well as collecting the going market rates / comp expectations for your planning purposes. You may also learn of similar projects at other companies that are either about to ramp up, making it harder and more costly to find the resources you will need; or similar projects that are about to be completed, meaning that a month’s delay might mean being able to attract more talent or even and entire work team.
Eagle hopes that you find these ideas and best-practices of value as you set/review your own hiring strategies.An Eagle Account Executive or member of our management team is easily reachable should you wish to explore any of these topics further.We look forward to successfully supporting you through these supply-constrained market conditions!