Most in the property industry are well-aware of the increasingly challenging labour market, but in recent months, conversations with many small to medium-sized business owners has revealed a changing response to this stimulus.
Conversations centre on three main areas of concern – a shortage of skilled talent, evolving expectations from a new generation of workers, and constant demand for higher salaries.
And with these pressures seemingly cemented in, at least for the foreseeable future, many SMBs are considering downsizing as a strategic response - focusing on staying afloat and remaining competitive, rather than pursuing a growth strategy, despite being in an industry that shows strong signs of growth and stability.
Talent Shortages Impacting Business Operations
The skills shortage is not new but has increased in intensity in recent months. A variety of industries, including property and construction, are feeling the pinch, and this is exacerbated on major projects where a large number of positions need filling.
A shrinking pool of qualified candidates means many businesses are struggling to fill crucial roles, leading to operational inefficiencies, delayed projects, and, ultimately, loss of revenue.
Many SMBs also operate with lean teams and budgets which makes attracting top talent even more challenging. Unlike larger corporations, they often lack the resources to offer competitive salaries, comprehensive benefits, or extensive training programs. This disparity puts them at a disadvantage in a market where candidates hold more power than ever before.
The Rise of New Workforce Expectations
Simultaneously, SMBs are facing new challenges as they try to meet the demands of a younger, more dynamic workforce.
Millennials and Gen Z, who are rapidly becoming the dominant demographic in the labour market, bring with them different expectations regarding work-life balance, remote work opportunities, and company culture. These generations prioritise flexibility, meaningful work, and opportunities for growth and development over traditional metrics of success, such as salary or job security.
For many businesses, meeting these evolving expectations requires a fundamental shift in their operational model and culture, which can apply even more pressure to businesses already stretched thin by the talent shortage.
If businesses cannot adapt quick enough to the demands of this increasingly prominent workforce demographic, it can make it harder to not only retain existing staff, but also to attract new talent into the business.
New Demands, Yet Salary Expectations Remain
While Millennials and Gen-Z have often responded well to ‘non-traditional’ packages and rewards, the demand for high salaries remains a seemingly constant demand in the current climate.
The rising cost of living and inflation is applying enormous pressure on many individuals and families, and prospective employees are responding by demanding salaries that can help take the edge off.
In a similar vein, many businesses are also placing increased demand on productivity and efficiencies, with workers taking on more responsibilities or increased workloads to close gaps. With this often unspoken but real pressure to achieve more, many workers are demanding compensation that reflects these increased workloads, even when entering new roles (prospectively).
And, as skill shortages remain and competition amongst employers heats up in response, there may indeed be some legitimate leverage available for talent with in-demand skills or experience – and prospective employers may need to meet them.
Downsizing as a Strategic Response
With all of these pressure points in play, many SMBs are considering a pragmatic, but difficult solution to the challenges – downsizing.
By downsizing operations and reducing their workforce, businesses aim to lower operational costs and streamline their focus in order to drive efficiencies, possibly allowing them to be nimbler and more efficient in a challenging market, and retain profit despite a smaller team.
While downsizing certainly can overcome the challenges of trying to combat a tight labour market, it's not without its own set of related challenges.
Cutting workforce, particularly those that have been with the company for a long period of time, can lead to a significant loss of institutional knowledge and expertise. Not only is this knowledge often required to make individuals successful in their role, it often serves to help those around them be more efficient, too.
Reducing staff numbers can also impact company culture and morale, undermining confidence, creating negative sentiment and leaving the remaining staff feeling unsure of their future. At the same time, the reduction in staff often also means those that remain are put under additional strain as they have to pick up the additional responsibilities, potentially leading to burnout and turnover.
Downsizing can also negatively impact on the way that the business is perceived in the market, potentially compromising their favourability as an employer-of-choice when it’s time to start hiring again. If the business is viewed as being unstable or disloyal to its staff, this can make it even harder to recruit good talent into the business.
Navigating the Path Forward
For businesses facing these challenges and considering the merits of downsizing, it's important to consider all the potential implications, and tackle with a multifaceted approach. Here are some approaches we’d consider.
Invest in automation and technology
There are many ways that automation and technology can help mitigate the impact of talent shortages or free up capital to meet rising salary demands.
Whether its blockchain technology that can help automate contract building, software that can helps your team create 3D models and simulations to reduce errors and costs, automated pre-fabrication technology or any of the other available options, consider what options are out there that can help close gaps or reduce costs.
Strengthen your employer brand
The image that your company projects to both current and prospective employees is critical to both retention and the attraction of top talent – the same way any other consumer brand is.
Consider how you can shape and communicate the company values and beliefs, and where can you align the company’s values with those of your key talent demographic. For example, what do you stand for beyond the core business proposition, and can that help employees find meaning in their job beyond remuneration? For example, CSR initiatives.
Evolve with Expectations
Consider the Employee Value Proposition (EVP) at your company, and how you might meet these changing expectations. Are there ‘non-traditional’ options for rewards or compensation such as training and development opportunities, flexible working arrangements, or does your company break traditional work structures or provide other motivating opportunities?
Attract Diverse Talent Pools
Creating diversity in the workplace can not only open up the pool of available talent, but has proven value for a business.
Can you create a more inclusive workplace that encourages and attracts a more diverse range of talent? Are there transferable skills in other industries, or non-traditional backgrounds that may be viable solutions for your business?
To Downsize or not to Downsize?
Downsizing may offer a solid short-term solution for small and medium businesses who are finding the current environment hard to manage, allowing them to shore things until new programs and strategies can be deployed to tackle challenges.
What is clear, however, is that a strategic and balanced approach to the challenges is critical and will require adaptability and innovation, and consideration for both the short term and long-term needs of the business.
As always, though, good people will be core to helping your business get to where it needs in the short term or long-term.