Talent risk management strategies to address the growing labor gap 

Unless addressed, this can quickly prove disastrous for a business. Put simply, firms that have the right employee value proposition (EVP) — including competitive rewards and benefits structures — will attract talent, and those that don’t will be left behind.

Our People Risk research shows that HR and risk managers are wide awake to the growing threats created by labor shortages; globally, they rank it as the second-greatest people-related risk facing their organizations in the next one to two years¹. Our research also provides valuable insights into some of the key barriers preventing companies from tackling the problem.

The sixth-highest-ranked risk facing businesses is uncompetitive talent strategies. Our data show that 70% of companies report not having an effective EVP in place today¹.Although base salary is an important factor in attracting staff, it’s the overall benefits package, alongside company culture and purpose, that makes people stay².

Firms should urgently examine their current EVPs and take steps to understand how they match up with employee expectations. Flexible benefits solutions can be a cost-effective way to ensure you’re meeting the needs of all your employees, including typically underserved cohorts, such as young employees, women and minority groups.

Furthermore, well-planned member communications can allow you to engage employees more effectively on the value and use of health and benefits programs. Ultimately, helping to ensure employees’ basic needs are met promotes thriving and productivity, which will have a cumulative effect on other areas of risk.

Another key piece of the puzzle is evaluating the skills needed by the organization rather than focusing on jobs or open positions. Too many companies are hyper focused on attracting new talent rather than upskilling or reskilling existing employees. Technology can play a critical role here. Advances such as AI and machine learning, when deployed successfully, can take over routine and boring tasks and free up employees to focus on value-adding activities that generate revenue.

Our Global Talent Trends research shows that employees believe the three greatest barriers to productivity are too much busywork, not enough thinking time and ineffective organizational structure³. If leveraged effectively, technology can help free up the time people need, which can allow for innovation and creativity.

Strong leadership is critical to the changing needs of organizations. Senior executives need to be able to recognize employee needs, inspire engagement and loyalty, and support their people through critical moments in their lives and during company crises. Although communications from leaders are helpful, taking action is essential. Organizations can show employees they care by investing in benefits aligned with organizational purpose. This engenders trust and is crucial in supporting a culture of risk management.

Worryingly, our People Risk research shows the C-suite does not consider uncompetitive talent strategies, ineffective leadership and disengaged workforces to be among the top 10 risks¹. This suggests a blind spot at the senior management level when it comes to the effects of a disengaged workforce or leadership-skills shortages on business success.

At the same time, we found that one in three HR and risk professionals is concerned about senior leadership’s lack of expertise in crisis management¹. Weak decision-making, communication, emotional intelligence, vision and direction will erode trust. This, in turn, could result in high employee turnover, decreased productivity and reputational issues. Although training is critical, organizations should also focus on enterprise risk management to identify and predict emerging risks, assess their impact, and respond and control them on a holistic basis.

At the core of effective enterprise risk management is strong collaboration between risk management teams and HR. These teams should break down silos and work together to tackle people-related risks. Better collaboration between HR and risk is strongly correlated with better risk management. For instance, 36% of organizations with strong collaboration say they’re managing talent risks very well, compared to just 20% with no collaboration at all¹.

The right risk culture throughout the organization is also critical to effective risk management. This starts with tone from the top, which means aligning senior management around key talent risks and controls. But it also means embedding risk management throughout the organization — from encouraging employees to speak up to incentivizing the right behaviors in personal objectives.

Organizational purpose is important here too. Our research consistently shows that employees want to work for companies that mirror their own ethics and take a stand on issues that matter³. That means businesses need to have a point of view on the issues that align with their brands, and those that want to recruit key skills need to take action on these issues.  

Ultimately, labor shortages are driving a focus on productivity, attraction and retention strategies, and leadership that can support the workforce through critical moments. Therefore, businesses should invest in the employee experience, including rewards and benefits, while reinforcing a risk management culture throughout the organization.

By taking ownership for creating a resilient organization, you can build a culture that stands for smart risk-taking, trust, innovation, exceptional results and good health as you prepare for future crises and motivate the workforce toward a common purpose.

References

^{1 Mercer Marsh Benefits, People Risk 2024
2 Mercer Marsh Benefits, Health on Demand 2024.
3 Mercer, 2024 Global Talent Trends (GTT) Study}