Creating Purpose in the Workplace

November 11, 2022 – The U.S. labor market has undergone various changes since March of 2020. From historical wage growth to a shift in worker habits, today’s economy is much different from what it was just a few years ago, according to a new report from Executives Unlimited’s Tomilee Tilley Gill.

Still, with ongoing inflation and repeated interest rate hikes from the Federal Reserve, Ms. Tilley Gill notes that we’ll likely continue to experience additional shifts in the market. For executives, understanding how to navigate these situations can aid in improving overall employee retention.

What the Data Shows 

Throughout September, U.S. employers added some 263,000 jobs to the market, the lowest monthly increase since April 2021, according to the latest Bureau of Labor Statistics report. Additionally, the figure comes below August’s job growth of 315,000 and the monthly average of over 400,000 seen throughout the first half of 2022.

In a similar cooldown, wage growth continued to trend upwards only slightly in September, with hourly earnings increasing by only 0.3 percent. Compared to September 2021, total wages have increased by five percent. However, while earnings may be historically high, workers’ wages continue to be stunted by a year-over-year inflation rate of 8.2 percent.

“We’re seeing labor demand cool,” said Wells Fargo economist Sarah House. “However, we still have a “long way to go towards restoring the balance between supply and demand for labor.”

Tomilee Tilley Gill founded Executives Unlimited in 2001 and today serves as a coach and mentor to her firm, as well as their clients. As an advisor to her clients, she helps companies define how they envision their goals, and examines all aspects of her client company’s operations, laying the groundwork for a successful search process.

She leads the Executives Unlimited team using her extensive skills to advise companies in qualifying, selecting, and engaging executives. Ms. Tilley Gill specializes in working with entrepreneur founders and family-owned businesses. She possesses expertise in a variety of industries and clients ranging from entrepreneurial middle market companies to PE firms to billion-dollar multinational corporations, publicly and privately held, including non-profits.

The Federal Reserve has continued to hike interest rates, doing so a total of five times throughout 2022. “Still, the Fed has hinted at the likelihood of additional hikes by December. As the effects of each increase begin to impact the market, Ms. Tilley Gill notes that her firm is seeing some organizations react by slowing down on hiring and team expansions.

“Across all sectors, companies within industries sensitive to interest-rate changes (such as real estate, finance, and technology) have begun to either slow hiring or lay off employees,” said Ms. Tilley Gill. “Similarly, organizations that witnessed an increase in demand early into the pandemic are struggling to adjust as consumer habits shift.” She points to major companies such as Meta, Amazon, and Alphabet that have all announced their plans to limit hiring going into 2023.

A Loss in Confidence

Organizations are stepping away from expansion plans until they gain further confidence in where the economy is heading, according to Ms. Tilley Gill.

In a survey conducted earlier this year by CNBC, CFOs across varying sectors were asked if they believe a recession is on the horizon. Out of all respondents, nearly 70 percent of CFOs believe we’ll enter a recession during the first half of 2023. Additionally, no CFO respondent considers it possible to avoid a recession in 2023, citing inflation and aggressive hikes as primary catalysts.

“While this fall has provided signs that the labor market is slightly cooling, it may take months to determine how the Fed’s interest hikes impact the job market and a recession,” said Ms. Tilley Gill.

“All and all, businesses are “very much preparing for the possibility of a downturn,” said Julia Pollak, chief economist at ZipRecruiter. “For companies still hiring, they are “focusing on essential hires rather than nice-to-have hires.”

What Businesses Can Learn from Patagonia 

In a tight job market, wage increases are often used to attract the best talent to an organization. But with wage growth slowing down what can executives do to attract employees that will be proud of the company they work for? As companies like Patagonia have shown, the answer may be as simple as sticking to your values.

“Besides salaries, companies have countless approaches to building value for their employees,” said Ms. Tilley Gill. For example, she explains that increasing work-life balance benefits, engaging in charitable causes, and being an industry pioneer can provide value to your employees without necessarily changing their pay.

This past September, Patagonia founder Yvon Chouinard boldly announced that he would transfer 100 percent ownership of the company into a trust and non-profit, putting future gains towards helping combat climate change. According to Mr. Chouinard, the unprecedented move was the only way to ensure that Patagonia’s core values, such as protecting nature, could be preserved after his departure. “As of now, Earth is our only shareholder,” he said. Instead of going public, you could say we’re going purpose.”

Patagonia Retains Hanold Associates for Head of Total Rewards Search

Patagonia, a high-performance outdoor apparel and accessories brand, has selected Hanold Associates HR & Diversity Executive to lead in its search for a head of total rewards. Kile Hanold and Adam Watson will lead the assignment. As Patagonia continues to grow, this individual will be expected to align HR functions and policies to support the company’s employees. This leader will be charged with partnering closely with senior leaders and team members to expand Patagonia’s compensation and benefits philosophy. With the recent transfer of Patagonia’s ownership to an environmental trust, linking total rewards to Patagonia’s purpose and values will take on added significance.

Patagonia’s move is only the latest in the company’s long history of empowering its employees. Since its inception, the company has famously allowed for flexible hours, was an early adopter of parental leave, and has consistently maintained its core values by reinvesting in causes important to its fundamentals. As the company shows, being a thoughtful employer with a high-quality product can help cement a brand as a leader in the marketplace.

Setting the Stage and Attracting Talent

How have candidates reacted to the market cooldown? According to labor statistics, the number of total quits remained relatively unchanged overall, with only a slight decrease within the professional and business services sector—a stark contrast to the “Great Resignation” that filled headlines throughout much of 2021.

What we are observing is a growing hesitation to leave current positions based on economic uncertainty, according to Ms. Tilley Gill. “In such markets, how can organizations set themselves apart to recruit top talent? Not every organization will be able to follow in the direct steps for Patagonia, nor should they. However, starting small by investing in your company’s culture and connection to its principles can have rippling effects that help attract the best candidates. Pay is a strong metric to bring an individual in but it alone isn’t enough to encourage long term retention.”

Related: Retaining Your Employees During the Great Resignation

Ms. Tilley Gill says to consider the following examples of companies that have made strides to connect their labor force with the company’s mission and how it has positively impacted the organization.

Toms — As a certified B corporation, Toms is no stranger to using its profits for social causes important to the brand. Famous for its one-for-one model, the company has long stepped forward as an industry pioneer. As a result, it has some of the highest retention rates among similar-sized companies. When people are tasked towards a social good, it’s easier for them to be proud of where they work.

Shopify — As a multinational E-commerce brand, Shopify has high-level employee advocacy and one of the highest retention rates among its competitors. While no simple feat, the company can accredit much of its success to sticking to its core values of “always learning.” Since 2018, the company has relied on two parallel growth tracks that foster an environment focused on continuous learning. Because of this, employees are given the chance to develop their skills while having a clear path ahead, creating lasting value.

Buffer — In any workplace, trust is fundamental, and few companies demonstrate this as well as Buffer. As a remote SaaS company, Buffer builds trust by being fully transparent with its pay scales, annual reports, and overall expenses. As a result, employees are shown that they are valued, and they can easily identify their role in the company’s overall purpose. Compared to similar companies in the San Francisco area, Buffer ranks in the top 25 percent for retention.

“As shown, there are various ways to attract and maintain top talent within your organization,” said Ms. Tilley Gill. “The key is to create a company culture where employees can find purpose while working towards the overall mission. Whether it’s giving back to social causes, encouraging career advancement, or being transparent, such actions show potential candidates that your organization is a place where they can feel proud to work.”

Moving Forward 

During times of economic uncertainty, maintaining company values and efficiency is essential, according to Ms. Tilley Gill. “As we can see, the job market entering Q4 is beginning to lose the traction it built throughout the first half of 2022,” she said. “So, while we prepare for a new year filled with economic suspense, it’s important for executives to take a step back and fully assess their business plans to prepare themselves accordingly.”

Related: Hiring Top Talent in Unprecedented Times

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media