The past several years have been a wild ride for distributors. Supply chain disruptions followed by rapid economic growth and fueled by labor market shortages created a talent crisis for distributors in the industrial and construction channels.
In the post-pandemic new normal, the double-digit revenue growth of 2022-23 is not normal nor sustainable. The economy is expected to soft-land. Economists and market forecasts have distributors returning to modest growth in 2024. Combined with rapid evolution in customer expectations, technology advancement and demographic shifts — more than ever, the future of distribution growth hinges on talent. Skilled talent can create value, provide seamless customer experience and fuel growth.
While distributors compete with other distributors on sales, they compete with everyone for talent. The speed at which businesses can grow depends on its people. People are vital to executing strategies and achieving growth.
Effective sales talent is in especially short supply, and many distributors struggle to staff warehouse associates and drivers.
While there is urgency and intense focus on recruitment, distributors should take a long-term view and develop talent strategies and processes to recruit, develop, manage and retain talent. Retention is just as important as recruitment. Lagging is these areas is no longer an option. You can’t achieve excellence with mediocre talent.
The following three mindset shifts provide focus areas for distributors to improve in 2024 and beyond. Making small improvements in a few of these areas over time could make you a talent magnet – and accelerate your growth.
- Premium: STAFDA Channel Chat, Pt. 3: The Battle for Talent – Jan. 2
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1. The Power Balance Between Employers and Employees Has Permanently Altered
The labor market has changed, and it is here to stay.
The labor department reported the number of job openings (8.8 million), voluntary quits (3.5 million), unemployment rate (3.7%) in January 2024. The wholesale sector had 280,000 job openings in November 2023. This is the 23rd straight month overall joblessness has remained below 4%, according to a PBS report.
U.S. population growth rates have been slowing for several decades. The Bureau of Labor Statistics announced its 10-year forecast of the U.S. labor market in 2023, which estimates that employment growth will average 0.3% over the next decade (lower than 1.2% for 2012-22 decade). Real GDP is expected to grow at 1.9%, consistent with previous decades. This means labor productivity will have to accelerate.
Fundamentally, the power balance between employers and employees has permanently altered. Employers no longer has the power they used in recruiting talent. There is an economy-wide shortage of talent (especially skilled talent), and it will continue over the next decade.
The first mindset shift needed for distributors on recruiting talent should be: “We are glad you choose to work for us” versus “You should be glad to work here.” In today’s labor market, employees (and applicants) have choices. If you don’t treat them with excitement, empathy and respect, it will be hard to attract top talent. This starts with leaders setting the right tone for the managers, regular communication with employees/applicants and creating a culture of engagement and inclusivity. Communication, belonging, and trust are all important for growth. One area that distributors can improve on is with applicant experience.
Applicant Experience: Improve the applicant journey from the time a candidate applies through the hiring process and up to the first day on the job. Seek to improve this experience by making it easy to apply, increasing transparency in the hiring process (such as including the salary range), having better communication on the hiring timeline and showing empathy during the process. Consider reviewing your current recruitment process. Someone with a bad hiring experience may choose not to join you, even if you offer at the end of the process.
2. Understand and Meet the Needs, Wants and Aspiration of Next-Gen Talent
The pandemic created a paradigm shift in the meaning of a job, career, growth and success. Employees are recalibrating their work, life, family and wellness priorities. The needs, wants and aspirations of next-generation talent have evolved. Glassdoor reports that in 2024 Gen Z is poised to overtake Baby Boomers in the full-time workforce. The future of work has arrived. It is hybrid, creative, problem-solving and performance-focused.
The second mindset shift needed is for distributors to recognize the needs and wants of next-gen talent. Compensation, job titles and location are not the only factors in attracting talent. Next-gen talent is driven by purpose, focused on balance and prioritizes learning and development.
Next-gen priorities: To stand out, improve your recruiting message. Focus on your Employee Value Proposition (EVP). This is “why someone should work for you.” You can develop this messaging by doing a stay-interview of long-term employees, using your culture and employee development. This will be unique for each organization. Gen Z wants meaningful work, looking for a good culture/fit, clear career path, learning and development, recognition and appreciation. Discuss this on your website, recruiting materials and social media. Your recruiters, hiring managers and leaders should all use a consistent EVP when talking to prospective candidates.
3. Frontline Managers are Critical for Talent Retention
The median tenure of all employees in U.S. is 4.1 years. It’s 2.8 years for workers 25 to 34 years, according to BLS. Turnover is expensive. The cost to replace an entry-level employee is greater than 50% of their annual salary. It can be more than 100% for experienced employees. Talent retention is just as important as hiring. Retention helps develop employees with deep expertise, foster better customer relationships and builds a pipeline for management and leadership roles. Traditionally, retention improvements focus on implementing career paths, succession planning and competitive compensation.
Third mindset shift: Successful retention depends on frontline managers. The single most important decision companies make is simply whom they promote as a manager. Bad managers cost businesses billions of dollars each year, according to a report by consultancy Gallup. You may have heard the expression “employees join companies and leave a manager.” Frontline managers play a critical role in employee relationships, productivity, satisfaction, morale and retention. Distributors should educate, empower and hold their frontline managers accountable for talent retention.
Frontline managers behaviors: Frontline managers are the key to employee engagement. Here are four areas for micro improvements:
- Frontline managers should set clear goals, provide constructive feedback and create a culture of accountability.
- Create an inclusive culture. Managers should build trust by creating physiological safety, respect and transparency.
- Frontline managers should be better coaches. Recognize your team. Challenge your team. Advocate for your team.
- Train frontline managers have to have growth conversations. Frontline managers should be talent champions. Educate your managers to address perceived pay equity and equality issues.
The Final Word
Distributors should curate the right talent with diverse backgrounds to accelerate growth. Be open to these mindset shifts and focus on improving talent practices in 2024. Remember, your growth hinges on people.