The Labor Shortage & How It Affects Your Exit Strategy

For most of your career you’ve never had trouble finding qualified candidates to fill open positions at your company. You did what was necessary to retain your best, most productive employees. Conversely, you cut ties with employees who struggled with attitude issues, absenteeism, or poor job performance, knowing that there would be someone better out there to fill the position.

But something changed slowly over the past decade or so. Your plentiful well of qualified job candidates started to dry up. You watched as positions went unfilled first for weeks then months then years in some cases. It started to feel as if people’s orientation toward hard work had changed, and the “war for talent” was really heating up. In order to fill your shop with needed bodies, you had to start making compromises you’d prefer not make. It wasn’t pleasant, but you had figured out a way to cope with this new normal by making some changes to your HR policies.

Then 2020 hit you like a freight train. The slow leak of the last decade became a gusher, and the labor pool completely dried up. Nobody wanted to work. You’ve raised wages, you’ve made jobs more flexible, you’ve offered more benefits, signing bonuses … You name it, you’ve tried it. Two years later, you feel like you’ve made no progress at all.

Your labor challenges have burned you out and you’re ready to be done with all of this. What do you do?

Strategies To Manage Current Labor Challenges

Consider Outsourcing

A very common practice among companies is to post a job whenever a need arises requiring labor. However, just as one might consider a “make v. buy” or “rent v. own” analysis with regard to a new piece of equipment, you could perform a “hire v. contract” analysis for labor decisions. With labor it’s not just about cost, but also competence.

By way of example, tech companies tend to demonstrate a knack for identifying non-core tasks and sending them outside for completion. In many cases, especially for back office tasks, this opens up geographical locations outside of the company’s footprint. For example, if your customer service department manages a flow of phone calls, emails, and online chats do they need to be local? Probably not.

Perhaps your company can take a page out of this playbook and leverage the regional, national, or global labor market as opposed to just those within a 30-minute drive of the office? By taking both the hiring and task completion responsibility off of your plate, you may find some sanity restored to your life while having more time to focus on the activities you’re best at.

Consider Automation

In cases where the work must be done physically under your roof or virtually in-house, you may also want to give automation a try. For years, the labor v. capital cost equation may have made it cost prohibitive to buy a robotics system or code the software required to automate your business. You may have opted to remain analog in a digital world because the labor savings simply was not enough. However, if you consider absenteeism, degradation of employee productivity, increased employee turnover, and other factors, you may find that the cost of automation is looking better by the day.

Ultimately, this will come down to a similar trade-off analysis to the one regarding in-house v. outsourced labor resources. And it will not solve every problem.

But a phrase I’ve come fond of saying is, “Robots never call in sick. They don’t require healthcare. And they are willing to work long hours without complaining.” While this may be a sad reflection on the quality of today’s available pool of labor, this is not something that you as a business owner can change at the macro level. You have a business to run and a responsibility to the employees you do have to make sure you remain competitive and profitable.

A More Resistant Business is a More Valuable Business

Implemented properly, labor outsourcing and process automation will reduce your business's reliance on the labor market, which is a potential risk factor in your business. As we have discussed in previous articles, the potential buyer for your business is risk averse and the value of your business is based upon the size and perceived risk of your cash flows. Additionally, taking either of these paths may require some upfront investment, which may require deferred gratification. But in the end your investment will be worth it, if you see it through.

Are you suffering through labor issues?

Do you feel like you’ve exhausted all routes of inquiry? Doescher Group works with business owners to help them plan for and execute their exits, leaving behind their life’s work on their own terms. As part of this process we identify areas of weakness and work to turn them into strengths in order to position the business as best as possible prior to sale. Check us out to learn more about our succession planning, and exit strategy services.