According to SHRM research, nearly half of hourly workers in the U.S. are actively seeking new job opportunities. That statistic highlights the turnover challenges of employers who depend on these frontline employees for their operations. In this episode of All Things Work, host Tony Lee is joined by Kyle Holm, vice president of compensation advisory at Sequoia Consulting Group, to discuss what employers can do to both motivate and retain hourly employees.
According to SHRM research, nearly half of hourly workers in the U.S. are actively seeking new job opportunities. That statistic highlighs the turnover challenges of employers who depend on these frontline employees for their operations. In this episode of All Things Work, host Tony Lee is joined by Kyle Holm, vice president of compensation advisory at Sequoia Consulting Group, to discuss what employers can do to both motivate and retain hourly employees.
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Tony Lee:
Welcome to All Things Work, a podcast from The Society for Human Resource Management. I'm your host, Tony Lee, Head of Content here at SHRM. Thank you for joining us. All Things Work is an audio adventure where we talk with thought leaders and tastemakers to bring you an insider's perspective on all things work. Today we're discussing hourly workers and the many challenges faced by them and their employers. New research from SHRM shows that nearly half of all hourly workers in the US are looking for a new job. Stagnant wages, inflexible hours, a lack of work-life balance, including childcare coverage and talent shortages are prompting many frontline workers to jump ship when a better opportunity appears, which creates huge headaches for organizations that rely on hourly workers to drive revenues. Joining us today to talk about hourly employment is Kyle Holm, Vice President of Compensation Advisory at Sequoia Group in San Mateo, California. Kyle, welcome to All Things Work.
Kyle Holm:
Thank you for having me.
Tony Lee:
Well, we're pleased to have you with us. So given the SHRM research that about half of all hourly workers are job hunting, is low pay the primary reason in your view?
Kyle Holm:
Yeah, you really have to think about this in my mind in terms of why are they working there? There's the role, there's the job, there's what they're doing, but the why is pay. Because these jobs come with so little other things, it really is about pay, and in my mind, folks are really scrambling to find the highest wage they can find. So absolutely, pay to me is the primary reason you see so much turnover in this space.
Tony Lee:
Yeah. I was talking to a recruitment manager at a restaurant chain in Florida who said that a restaurant across the street from one of her locations raised their pay 25 cents an hour and 3 people left. I mean, it's amazing that it really doesn't take very much for people to shift loyalties, does it?
Kyle Holm:
Well, it's not surprising, and when you think about how little wage inflation there has been in these roles relative to other inflation we're experiencing, 25 cents can be a big increase.
Tony Lee:
Yeah. So let's talk about some other things that kind of motivate frontline workers. So scheduling flexibility can be an issue. So what role does a lack of scheduling flexibility play in the retention of frontline workers?
Kyle Holm:
I mean, most people in these jobs are juggling quite a few things, and so certainly scheduling flexibility is going to be front and center, especially for somebody who may have childcare needs for them to handle. And so I think that the ability to manage your own time is important, but again, I think pay is probably the primary driver. Companies that are able to provide the other benefits like flexibility are probably going to do a better job of hanging onto those employees, but not unless they're offering a competitive wage.
Tony Lee:
Yeah. Now a lot of these frontline workers are Gen Z, they're younger employees who are looking for the better pay, but work-life balance seems to play a role here too. I mean, we have seen some research that says that some workers would give up a little bit of pay if they had that balance, more flexibility. Is that a trade-off you see working or really is it all about the money?
Kyle Holm:
Well, I think when you get to a certain level, it's all about the money. Once you get to a place where you are able to meet the basic needs, that's where we do see things like work-life balance come into play. And you mentioned Gen Z. They really are a different generation when it comes to this in that their lives and their life does take priority versus what we've seen from other generations that were very driven by their careers. And there's probably a number of factors that play into that, but certainly their ability to not be at work and to be enjoying themselves is very much a motivator for that generation.
Tony Lee:
Yeah. So you would think that high performing frontline workers would really get special treatment because they're high performing, they seem to be loyal. What's stopping them from getting the promotional opportunities that they should be getting to keep them on board?
Kyle Holm:
Well, my view is that most companies that are employing these frontline workers are not doing the step that is done in typical corporate America, which is distinguishing between your high performers and distinguishing for performance. They do treat the workforce more in a mono-workforce, and think about things in aggregate, and it's less about the individual identifying folks that are great at customer service, identifying those great managers and really providing them the opportunities. There are examples of that, but it's few and far between for the frontline workers, where things like you mentioned, interpersonal relationship skills that are so critical to the success in that role are not necessarily valued or distinguished in how the rewards are distributed.
Tony Lee:
Yeah. And you're absolutely right, interpersonal skills, so many frontline workers are interacting with clients and customers every day yet probably don't get much training in how to work well with clients and customers. Is that a real hole? I mean, should employers be investing in more training for these employees?
Kyle Holm:
Absolutely. I think that the company that figures it out, that training and investing in their employees and not just a 25 cent increase in their hourly rate, but really investing in their employees and showing them that their career trajectory and personal develop is important to that company are going to be the ones that actually provide what they're trying to provide, which is great customer service. And if you're able to retain your employees, you'll be able to actually build into your customer service model something that employees and customers will all be able to feel and experience.
Tony Lee:
Yeah. And again, research has shown that to retain employees, you've got to engage employees, and that by training them, you increase the level of engagement because they feel like, "Okay, they're investing in my career, they're helping me to succeed." So let's flip the script a little bit here and focus on the people who manage frontline employees. A lot of the managers in this world had been hourly employees who got promoted because they were good, and now they're expected to manage other frontline employees often without any training. I mean, so what's the answer there? Do you see companies realizing how important training of managers is?
Kyle Holm:
Yeah, I mean, it's just like we're chatting about interpersonal skills. I mean, managing is a skillset, and just because somebody's a great individual contributor or great at customer service doesn't mean they're going to be great at managing and it is not necessarily an instinctive skill. So it needs training. I think a lot of companies providing this "opportunity" to a high performing or an employee that's excelling that they can now go into management can at times actually feel demotivating because they haven't been given the skills to actually manage people and learn how to have hard conversations with folks, how to motivate them. And so you end up a lot of times making an employee who was someone you identified as real leadership and a star, but without training, you now make them feel unsuccessful and you may even lose that employee, which was just the exact opposite that you were hoping to do. Training is just absolutely critical for managers.
Tony Lee:
Yeah. Are you seeing examples of managers who are being selected because they are potentially a good manager as opposed to being someone who is a great frontline worker and gee, it's time for a promotion. Where else can we put them?
Kyle Holm:
Yes, I think that's where that training comes in, but it's also where the evaluation of your employees come in. You've got to be able to look at different skill sets and value them in different ways and make sure that you know the difference between somebody who's great at customer service versus somebody who can motivate other employees and really supervise and manage.
Tony Lee:
Yeah. So listeners to this who have a lot of frontline employees may be thinking, "Okay, we've tried many things. We've had some success, but not a lot of success." Can you cite examples of companies that have a program that have really worked well in terms of advancing the career as of frontline workers, keeping them engaged and retained?
Kyle Holm:
Yeah, I mean, I think In-N-Out Burger is fairly well known for having a very effective frontline worker approach. People join that company in the very entry level job, cashier, working in the kitchen on the fries, knowing that they have a chance to grow. And their approach is to start all of their new associates with a competitive wage, basically signaling, even if you look at their marketing materials, that those employees are important to the company. And then of course, they have all kinds of other things that come with performing there as part-time, full-time benefits, they have flexible schedules, they have paid vacations, there's free meals. They do have a comprehensive training program, and they even have a 401(k) and they're open and public about it. So employees know that they're going to start at a competitive level and that the company is very interested in making sure that they grow and stay with them.
I think if you're open and honest about that and you're willing to make that investment, you can then have that customer experience that many of us have experienced in In-N-Out, which is you feel like you're valued when you walk into that store.
Tony Lee:
Yeah, I think Chick-fil-A is another that has a wonderful reputation along that same line. But let me ask you this. So you're a compensation expert. How about case studies of companies that are doing compensation right? I mean, is there a structure of frontline employee compensation that seems to work better than the typical start at minimum wage and work your way up type of approach?
Kyle Holm:
Yeah. It's funny because In-N-Out is that as well, and why I say they are that is they are very ... You can make very good money relative to the competitive marketplace for a fast food frontline worker, significantly more than the others. And to me, the training is there, but the compensation and the ability to earn compensation that's significantly above market, they go hand in hand. So when I say value the employee in that example, I really am saying dollars and cents value as well as training value.
Tony Lee:
So if you don't mind, let's dive a little bit deeper there. So is the compensation good because employees know that if they work a certain period of time or to a certain level, they're going to get a raise? Is it that they know that there's a bonus every period of time? I mean, what specific compensation strategies seem to be working for frontline employees?
Kyle Holm:
Yeah. So new associates, they start above market for an hourly worker in that same role. There are then opportunities to get into management, to get into all of the training that don't exist at most other frontline places. And the compensation is very well known and communicated, it's extremely transparent. So it's not only you start at a fair or above market wage because you're valued, but the opportunities that present themselves within the company are also above market and are transparent.
Tony Lee:
Yeah. So you're talking about the carrot of compensation. Of course, there's the stick side as well. We've seen some examples of companies that have done training and then say, "Well, if you leave after three months, you're going to have to repay for the training, or we paid you this bonus, a sign on bonus, and if you leave, you've got to repay it." Does that work too, or is that kind of an anachronism at this point?
Kyle Holm:
I think it doesn't have the same impact because it does feel much more transactional. And that means, "Okay, I'm going to stay and now do I now start looking at the calendar and figure out this is the date that you wanted me till?" So I do think it works, and I know it feels less risky to the company to put those kind of timelines in or clawbacks, but I don't know that they're super effective, or at least it does, in my mind, lessen the impact that you're trying to make by telling employees that you want to train them and make sure that you uplevel their skillset.
Tony Lee:
Yeah. So competition is pretty fierce for hourly employees. Do you see any changes coming ahead that are going to change that or do you anticipate it staying as competitive as it is?
Kyle Holm:
No, I don't see the market getting less competitive. I think employees in that space are going to have more and more leverage in terms of that competition. I think companies are going to, albeit maybe slowly, figure out that retention and retaining your employees and investing in the retention is going to be a better approach than kind of basically telling yourself that 40% turnover is normal. So my expectation would be that this marketplace is not just all of a sudden going to have a big supply of frontline workers and companies are going to, like I said, slowly figure out that the emphasis should be on retaining those employees and not servicing a high turnover environment.
Tony Lee:
Yeah, it's funny you say 40%. I've spoken to some restaurant management folks who say a 100% is a target for the year. It's very challenging in a competitive environment. But you mentioned compensation, how critical it is, but compensation is more than pay. I mean, you've talked about some of the other ways that companies have rewarded hourly employees. Have you seen success with other ways of compensating these employees?
Kyle Holm:
No. And to your point, I think if an employee is looking at their paycheck, you've already lost the battle. If that's the only thing that's keeping them there, then they're probably not going to keep them there much longer. So I do think it's really important to emphasize those other things, whether it's training, culture, flexibility, benefits, all of these other tools that companies have at their disposal should be the ones that they're focused on because the compensation tweaks here and there, as long as you're competitive shouldn't be an issue. But you're only going to really enhance the retention for hourly workers by the things that are outside of the hourly wage.
Tony Lee:
Yeah. We haven't chatted about this, but unionization. I mean, it's really kind of kicked up lately, especially for frontline employees. What's your thought on the impact of unionization on the opportunities for frontline folks?
Kyle Holm:
I actually think it's probably somewhat overdue that the frontline employees are starting to have those unionization discussions. I think there is great power in the ability to unionize and bargain as a group. I do know that a lot of the unions that have been around weren't as appealing to Gen Z, but now that they're in workforce in mass and are starting to see some of the benefits of collective bargaining, that by extension will most likely lead itself to a new approach and new unions. So it's not surprising. And some of the great strides we've even seen this year have been through the power of unions.
Tony Lee:
Yeah, no, it's definitely a phase that seems to be gaining more steam and we'll probably see more of it. So as we're wrapping up on time here, what else would you recommend to HR to think about when they're thinking about their hourly employees, both in terms of recruiting them, retaining them, engaging them, what else should be top of mind?
Kyle Holm:
Well, honestly, I would love it if companies thought about their hourly employees as employees and take away the hourly and think about them as employees and treat them like you want them to be around. I think the hourly connotation sometimes really has this, "Oh, well, this person is here temporarily" or "Oh, this person isn't as committed" or "Oh, this job isn't as important." And none of that as we've kind of outlined today is true. These employees are as important or more important than some of the executives at the company when it comes down to the experience with the customer and the companies that really show that and show that to their employees and to their customers that they really value those people that are helping us every day, I think are the ones that are going to really win in the marketplace as some of the changes that we've discussed start to take place.
Tony Lee:
Well, very good. Well, that is going to do it for today's episode of All Things Work. A big thank you to Kyle Holm for sharing his insights on frontline employees. Now, before we get out of here, I want to encourage everyone to follow All Things Work wherever you listen to your podcasts, and also listener reviews have a real impact on a podcast's visibility. So if you enjoyed today's episode, please take a moment to leave a review and help others find the show. Finally, you can find all of our episodes on our website at shrm.org/podcast. Thanks for listening, and we'll catch you next time on All Things Work.