A Stunning Array of Shortages

From airlines unable to accept phone reservations to fast-food chains shutting down drive-throughs, organizations are already losing critical business from not being able to staff up fast enough in the rising economy.

Housekeepers cleaning up hotel rooms only after guests check out.

Five-hour-long hold times to talk to an airline customer-service representative.

Restaurants normally open every day of the week now open only five days.

Fast-food drive-through lanes closed.

Manufacturers pushing back product delivery dates by days or even weeks.

For years, experts have worried that there would be a massive shortage of worker talent that would hinder future growth. Only now, that long-term worry has become a reality—today. Particularly in the service sector, companies and customers alike are finding that routines of the past—from booking flights over the phone to ordering goods that aren’t the second-best option—can no longer be taken for granted. “Firms are saying they won’t take on business because it’s too expensive,” but it’s really because they don’t have the people to do the work,” says David Vied, global sector leader of Korn Ferry’s Medical Device and Diagnostics practice

A confluence of short-term events and long-term factors is hitting at once. First, and most obvious, is the economic recovery as the nation emerges from the pandemic-inspired economic slowdown. The lockdowns and subsequent economic slowdown pushed companies to lay off or furlough more than 22 million employees in the first four months of 2020. Companies hired back about 14 million people through this April, but that still leaves 8 million roles unfilled as the economy pushes forward at an annualized 6% clip. Companies are finding candidates and scheduling job interviews, only to have people not show up for the interviews because they’ve taken another offer. Even firms that can process an applicant from original application to job offer in five days are finding that their process is too slow.

What’s more, many employees who have been working through the pandemic are fatigued, experts say, not working at their top productivity levels or simply needing a break. “There’s just a limit to the work people can now take,” Vied says. Those tired workers are beginning to take the vacations they didn’t use during the pandemic; by one estimate, they missed 768 million days altogether last year. Since organizations don’t have anyone to cover for those out-of-office workers, organizations have to cut back on services.

In the long term, experts say this can become a bigger issue that may force many firms to rethink their business models.

Typically, the best industries for many entry-level employees without a college degree have been basic manufacturing or a consumer-focused field such as retail or hospitality. But technology firms have now taken an interest in this group, offering training programs to teach people information technology skills; e-commerce companies and logistics firms are scooping up these workers by the thousands for warehouse roles, and healthcare firms are eyeing these candidates as health aides or for similar jobs. “We aren’t just competing within the industry, but the industries are competing with each other,” says Radhika Papandreou, a Korn Ferry’s senior client partner and a leader in the firm’s Travel, Hospitality, and Leisure practice.

Retail and hospitality aren’t the only industries suffering from shortages. In a recent survey, manufacturers said it is 36% harder to find talent today than in 2018, and 77% of manufacturing executives said they expect to have trouble attracting and retaining workers this year and beyond. The new competitors were starting to chip away at the talent pool before 2020, but the pandemic accelerated the trend. Plus, these new talent rivals have been offering higher wages and benefits packages to this group.

Even with those advantages, some the new rivals can’t fill all of their talent needs, either. “Supply chain was already in a talent gap crisis prior to the pandemic,” says Melissa Hadhazy, a Korn Ferry senior client partner and advisor for the firm’s Industrial practice. This has only gotten worse with distribution centers most severally unable to fill open roles and shifts.   

Experts suggest multiple solutions to fix both the short- and long-term issues. For the short term, companies need to figure out how to quicken the time it takes to find employees, vet them, and offer them a job. Papandreou says some of her clients have tried hiring third parties to find new workers fast and giving current employees significant referral bonuses for bringing in new workers. Artificial intelligence software can also help trim down employee vetting time.

For the longer-term issue, organizations may just have to make their offers more competitive. Indeed, this spring, McDonald’s, Walmart, and a slew of other firms announced higher wages for lower-level employees. “When McDonald’s moves, the market has to follow,” Papandreou says. Changing wage structures, of course, may force organizations to make other decisions on pricing.

But it isn’t only about higher pay. The industries that are losing business because they don’t have enough workers need to make their roles seem more attractive as a whole, potentially offering employees more defined career paths, flexible work schedules, additional training opportunities, or more meaningful work. Otherwise, a multitude of industries can expect their inability to hire more people will quickly impact their current and future businesses. “This is an insidious thing causing unexpected issues in markets that least expect it,” Vied says.