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A Dozen Tactics for Hiring and Retaining in a Tight Labor Market

My recent conversations with executives have often turned to the effects of limited talent availability on their companies’ revenue and growth. For example, I’ve had the opportunity to speak to dozens of groups over the last year from Vistage, one of the world’s premier executive coaching and peer advisory organizations. Almost every one of these leaders has told me that their revenue numbers are doing well but their growth is limited by today’s talent shortage.

Here are some quick ideas I shared with these executives, which you can use to attract and hold on to the talent your business needs.


1. Think about hiring more junior employees to do lower-value work being done by higher-paid employees. Before you hire another person in a similar position to your existing people, consider whether you should instead take away the lowest value work from existing people and hire a more junior employee. It makes no sense to pay people $50 an hour, only to find them doing a bunch of $20 an hour work. I’d rather take all that $20 an hour work away from them and their peers, hand it to that new employee, and have the higher-paid employees doing work they’re qualified and valued for. Plus, you’ll have an incoming junior employee with growth potential.

2. Understand current compensation trends. Employees are looking for a “fair day’s wage.” Once they feel they are earning that, money drops off as a primary motivator. The marketplace tells you what a fair day’s wage is. It’s possible to end up hiring a new employee at a higher rate of pay than existing employees and hoping the new guy doesn’t say anything. Nevertheless, there is considerable wage “compression” at both low-wage and high-wage levels; employers are having a difficult time getting service workers as well as engineers, nurses, and lawyers. Bottom-line, be prepared to pay at least 10-20% more for new employees.

3. Start or improve an employee referral program. The most effective way to find a new employee is through a robust referral program. Companies may pay $20,000-$50,000 to hire a $100,000- year employee but have a referral system that only offers a $250 bonus when an employee does the same thing. You must put considerable “juice” into the employee referral program to get past people’s natural fear of referring somebody who doesn’t work out. The CEOs I spoke to who had the best programs put at least $3,000-$10,000 into the process. Depending on the position, you can pay some upfront, some in 3-6 months, and some at a year, to offset the risk of an unsuccessful hire.

4. Never hire anyone out of desperation. If you’re desperate, put them on somebody else’s payroll. Instead, position yourself to be difficult to come to work for because your standards are so high—like the Navy SEALS of hiring. “We only hire the best and want to make sure you are a great fit for our team.” Don’t be afraid of the fact that this tactic may eliminate losers.

5. Make sure it’s easy to find your careers page on the web. Most career web pages are hard to find. Some companies even put a “splash page” on top of their website in their search for employees.

6. Finally, make sure there are three videos on every hiring page. First, the CEO talking about the company in terms of aspects like its history, culture, and vision; second, a “day in the life” video vignette that conveys what it’s like to work for the company; and third, a series of testimonials from existing employees praising their work experience. These are easy to produce on an iPhone, transfer to Vimeo or YouTube, and upload to a WordPress plugin.


7. Get to know employees post hire. Ask new employees to tell you all about themselves. Find out what matters to them. Here’s a list you can use. They need not answer questions they don’t feel comfortable about. Use their answers to show them you care about them.

8. Know the cost of turnover. It’s hard to make good personnel decisions without all the facts. Here is a Turnover Cost Calculator I created with a team of 15 HR executives. On average the cost of replacing a mid-level employee (50-60K range) is 1:1. The ratio is greater as folks get paid more. Replacing that 100K engineer will cost $150K or more. More important, the revenue it will take to replace that 50K cost is at least $200,000. Remember, every HR problem becomes a sales problem!

9. Know why they are leaving—and do something about it. Money may have something to do with it. According to the Pew Research Foundation, employees who left their companies got an inflation-adjusted 9% bump in pay. Those who stayed saw their real earning power DROP by 1%. Do people have to leave your organization to get paid more?

Are they demanding work flexibility? Is there a compromise that can be reached that addresses performance and productivity concerns? Are you focusing the work being done “at work” on matters that require collective action…or are they sitting at a desk looking a screen… just like they can do at home? Think in terms of presence with purpose.

10. Be aware of burnout. So many of my coaching clients are toasted. Wanting to grow but overwhelmed by all that’s on their plate. Many are thinking about quitting their job. Some already have. I’m sure you know that feeling. Going back to what I said in point #1, if they are making $50 per hour or more, why are they still doing $20-per-hour work? That’s wasteful, exhausting, and limits their growth. Hire $20-per-hour people to do the $20 work and so on. Cascade responsibilities down to their lowest point of execution.

11. Take the input of new employees seriously. Turnover is most common in the first year of employment, especially the first 90 days. We want to treat new employees as mini-consultants. Fact is, as a new member of the team, they can see things you can’t. Tap into that from the outset. On the first day of hire, give them the 60-Day New Employee Survey. Sixty days later, have them share what their experience has been to this point. What do they like? What can go better? What do they see as an opportunity? Plenty of insights have been gained by companies using this approach…and new employees feel they are being listened to, which helps them feel valued and engaged.

12. Finally, ditch the anonymous surveys. If the goal is to improve the workplace so you can have honest conversations, then why don’t you start by having an honest conversation? They only time a survey should be anonymous is with a compliance reporting tool. Think about it. What percentage of your workforce would be “afraid” to respond honestly if it was not anonymous? I often hear 20%. Whatever the number is, if it is much more than that, then don’t do any survey until you fix the management team. Is that 20% afraid to respond to your most valuable employees? Does it make sense to convince the 80% they should be afraid too?

Think about it this way: as an owner, HR exec, or hiring manager, I am afraid to do surveys non-anonymously because the employees may be afraid of retaliation for their honesty—because their managers may be afraid of their honesty. So, I’m afraid because they’re afraid because they’re afraid. Anybody seeing the logic in this approach? Fact is, it’s fear-driven from the outset. When we get anonymous information, we have no way of approaching anyone to gain additional clarity or insight. It’s ludicrous to assume we can reassemble the real meaning from scattered parts.

Instead, keep it simple. Focus on one thing at a time. Have everyone on board with it. Focus on working groups. Performance happens at the local level. Ask a few questions that everyone is required to respond to as part of their job. The understanding being none of us are as smart as all of us. Then work on solving the problems together. As the saying goes, sunlight is the best disinfectant; anonymous workplace surveys should be a thing of the past.

Hope these dozen strategies are helpful for your hiring and retention efforts in this crazy economy!

Don Phin is a California attorney, executive coach, consultant, and speaker. You can learn more about him and download a ton more free tools at You can reach him at

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