Public Employers Need to Improve Their ‘Brand’ to Compete for Talent

Howard Risher has 40 years of experience as a consultant and HR executive with clients in every sector. He has published frequently in HR journals and websites.  He is the author or co-author of six book and a growing list of ebooks. The most recent is Building the Workforce Government Needs.  He is associated with Grahall Consulting Partners.

There was a time when both public and private employers could simply post job openings and wait for applications. Through history there were always more unemployed workers than the number of vacancies. After the Great Recession in 2008-9 the ratio was 6 to 1. Over the decade prior to COVID-19, the ratio declined steadily to 2018 when for the first time there more job openings than unemployed workers.

In 2020 there was a blip when millions lost their jobs but in the most recent government reports, there are 5.7 million people looking for jobs and 10.7 million open jobs in the U.S. The problem is captured in the data for “Not in the labor force” — that is people who ‘dropped out’ and are no longer working or looking for work – where the total increased by almost 5 million.

From 2019 to 2021, the age 25-54 dropouts – the prime working years – increased by roughly one million. The age 55 and older – the Baby Boomers — increased by 3.5 million. Year-end totals for 2022 have not been released but monthly data indicate older worker dropouts will be still higher. Significantly, the 55 and older dropouts account for over 95 percent of the increase.

Demographic data highlight the country’s problem — Baby boomers are dropping out at a time when fewer young people are entering the workforce. The result — the vacancy problem is projected to get worse.

For public employers, the combination of the best retirement benefits and an older workforce – close to 30 percent of government workers are 55 or older – should make the vacancies and loss of talent a priority.

The basic problem is that the worker scarcity enables job seekers to be highly selective in looking for jobs. Workers naturally opt for employers that have a good reputation, offer attractive work opportunities with fair pay and career prospects, and present themselves in an employee-friendly way.

An employer’s reputation is referred to as its brand. Public employers need to recognize their brand is not competitive. And they need to be open to emerging ideas for attracting fully qualfied applicants. The fading public trust of government has an unfortunate impact on recruiting young graduates. Recent reports claim even the graduates from the better public admin programs see consulting firms and other not-for-profit organizations as better career opportunities.

It Starts with Base Pay

Recent surveys consistently show a high percentage of workers continue to look for better jobs. Among the reasons for the change, career advancement with higher salaries is always prominent. One 2022 report shows the average increase for workers who changed jobs was 14.8 percent. The same report shows wage increases for the year averaged 5.8 percent.

In the private sector, pay increases are driven by economics – the supply and demand for worker skills. Jobs that are in high demand command the largest increases. That’s the reason of course technology specialists have enjoyed above average increases for decades.

Sketchy pay data show starting salaries also reflect the reputation of degree programs and worker skills. Graduates from the best college programs often earn higher salaries throughout their careers, sometimes despite mediocre performance. Workers in ‘knowledge’ occupations benefit from larger increases than those in low skill jobs. Better performing companies often pay above average wages to attract better talent. It’s economics and staffing strategies.

Starting after World War II, when unions gained bargaining power in the private sector, private sector pay levels started pulling ahead. From the earliest surveys in the 1960s, the salaries of college graduates working in government have been lower than in the private sector. Manual and office support jobs, however, are often paid better and that’s attributable to the continuing influence of public unions. Critics sometimes argue the costs of government’s ‘rich’ benefit packages should offset higher cash pay but following their logic would make salaries even less competitive.

Those are generalizations. Local wages and salaries depend on the industries, the financial success of local companies, local demographics, laws governing union-management relations, and influence of unions. Each local labor market is somewhat different. Living costs are often mentioned in bargaining but although highly correlated, costs are not a driver of salary increases.

Far too many public pay programs have been essentially unchanged for years. At the federal level, the only significant change in over half a century was the switch to locality pay in 1990. Companies modify their programs as needed to attract talent. Today’s corporate pay practices look very different than a decade ago.

Government pay programs generally differ from those in other sectors in five key ways.

  • First, and possibly most important, there is broad coverage of occupations, with lower pay support jobs as well as those requiring degrees – that is both exempt and unexempt jobs — paid under the same program.
  • Second, the politics of funding increases makes it difficult to gain support to stay competitive in years of higher market increases.
  • Third, pay programs are often dictated by statute. It’s rare for politicians to agree on necessary changes.
  • Fourth, political considerations cap the pay of elected officials and executives, creating compression as the salaries of managers and professionals increase over time.
  • Fifth, the core program philosophy treats all workers the same, which precludes granting higher increases to workers in high demand jobs.

One of the complications is that many public sector jobs are unique to government. The ‘market’ pay data for these jobs is limited to other public employers. Averaging the two worlds leads to below market increases for some and above market increases for others. It’s mixing ‘apples and oranges’.

Despite the problems, the first step in understanding and addressing the vacancy problem is developing credible market pay data for the “benchmark” (or commonly defined) jobs found in pay surveys. In the end, pay planning depends on judgement.

Employee Benefits Are Very Different Today

Half a century ago the common benefit package was the same in every sector. It included a defined benefit pension plan, life insurance, medical insurance and paid time off for vacations and holidays. In the 1970s employers began adding savings plans but a few years later they dropped or froze their defined benefit plans to cut costs.

The career model in that era was also very different – workers in both the private and public sector took their first job after completing their education and stayed there for the next 40 years until it was time for them to retire. They got their gold watch and a small gathering on their last day wished them a happy retirement. “Retirement” meant they stopped working; it was earned by years of ‘hard work’.

That model no longer exists in the private sector. Careers are very different as well. The differences make comparisons of private and public sector benefits virtually meaningless. The differences in accounting and taxation add to the interpretation problems.

To highlight a core difference, the cost of a 401k or savings plan depends completely on employees deciding to have funds set aside each pay period. Many in lower pay jobs cannot afford to have regular savings deducted. The projected cost also depends on the vesting schedule – there is no cost when an employee quits before they are vested. That’s very different than a defined benefit plan.

Some years ago a “total compensation’ report from the Congressional Budget Office claimed “Average [federal] benefits were 52 percent higher for federal employees whose highest level of education was a bachelor’s degree”, and 93 percent higher for workers with only a high school diploma. The CBO author contends that should justify paying federal employees less. Conservative politicians must have liked that conclusion. The gaps would be higher today.

That argument ignores a couple of key points – (1) the typical government employee has longer service with the same employer and that drives up the actuarial costs, and (2) the traditional recruiting focus is on young workers who are far more concerned with being paid fairly than their retirement benefits. The argument also focuses on accounting costs, and ignores the problems and added operating costs when an employer has numerous job vacancies. Limiting costs is not the goal of effective recruiting.

More importantly, the past few years have seen a lot of innovation in employer-provided benefits. The changes were accelerated by the COVID crisis and working remotely, and are getting attention because ‘benefits’ are seen as tools to help with recruiting. The newer benefits include flexible work hours, childcare assistance, parental leave, employee discounts, free or discounted meals, commuter benefits, sabbaticals, nap rooms, gym memberships and others. The goal of course is to attract the best qualfied recruits.

There is no obvious answer for public employers. Benefit costs are high. But in the private sector millions of retirees now live with financial insecurity.

The key point — public employers cannot expect to attract the better qualfied applicants if salaries are limited by benefit costs.

video presentation

A relatively new strategy focuses on strengthening an employer’s brand as an employer.

HOWARD RISHER

A Private Sector Advantage

Public employers sometimes overlook the importance of good performance to workers. They want to work for successful, highly regarded organizations. They take pride in where they work, and that contributes to their commitment. NASA is consistently ranked as the best place federal agency for that reason. When groups of workers achieve their goals, they enjoy celebrating together.

There is a long history in business of rewarding employees with cash awards. It started years ago with executives and over time cascaded to lower levels. It’s the linkage to results that defines an incentive – and attracts the better perfomers.

That’s effectively a universal practice in the private sector. Incentives are also common in healthcare for executives and managers. Well managed incentives are an integral component of the pay package.

There are a few public employers that have adopted team or group incentives. The Denver Peak Performance program shows effective incentives are possible in government. It’s based on sharing savings with team members. Team-based incentives are possible in many work groups. Enabling employees to benefit from their hard work is important to maintaining commitment – and to attracting top talent.

For reasons that are not clear, market pay analyses in government typically ignore ‘extra’ cash payments, which understates worker pay in the private sector.

The Importance of Employer Branding

A relatively new strategy focuses on strengthening an employer’s brand as an employer. The goal is to enhance how job seekers perceive the company’s values, reward opportunities, and work environment. It includes everything a company is doing to promote its unique identity as an employer among current and potential employees. The goal of course is to be seen as a good to place work.

The HR office usually takes the lead but an organization’s reputation as an employer is affected by all the facts and rumors that are known by the public. That includes statements from leaders, commitments to popular ideas (e.g., the commitment to Diversity, Equity and Inclusion), treatment of employees by managers, company policies affecting employees, and rumors in media reports – everything.

A classic recent example is the Elon Musk statement that Tesla workers have “to return to the office at least 40 hours a week or resign.” There have also been reports Twitter employees are bringing their own toilet paper to work as Musk keeps ‘cutting costs like crazy’. His statements triggered mass resignations and undoubtedly will adversely affect recruiting for the foreseeable future.

It’s easier to understand the importance of employer branding if we think of employers with great reputations. Comparative data are not readily available but it’s widely accepted that companies recognized as a ‘Great Place to Work’ do not experience high turnover or jobs that remain vacant for extended periods.

It’s almost impossible to miss the frequent columns on the importance of maintaining a positive work culture. That’s been a theme of experts and business writers for more than two decades.

For reasons lost in history, even the best public admin programs downplay the importance of effective workforce management. Typical of many programs, the Harvard Kennedy School offers more courses on human rights than on human resources.

Going forward there are two solid reasons to refocus on work management. The most obvious is that worker costs – payroll, training, time committed to recruiting, supervision, etc. – are the largest line item in the typical government budget. Additionally, agency performance depends on its employees. That’s too often forgotten in the public sector. Both need to be managed.

The benefits of maintaining a positive employer brand are several:

  • Possibly increase the applications from well qualfied job seekers,
  • Reduce applicant delay in responding to job offers,
  • Improve worker comments to friends and neighbors away from the workplace,
  • Improve retention since employees value healthy workplaces, and
  • Where that commitment exists, organizations can expect improved performance.

To quote from a McKinsey column, “Employers can’t fix what they don’t understand.” The employer brand idea is relatively new to the public sector but employees always know how their employer is seen by friends and contacts. To borrow another McKinsey recommendation, “. . . don’t think through your next moves in a vacuum; include your employees in the process.” Relying on what are referred to as Employee Resource Groups (ERGs) to discuss the issues serves two purposes: it tells employees their employer is concerned and it provides an initial no cost step to begin understanding what needs to change. Employee feedback would help agencies develop plans to fill vacancies.

Looking to Retirees to Fill Vacancies

The mounting vacancies highlight a fundamental shift in the relationship between employees and employers. Employees and job seekers now have an advantage in gaining job offers on their terms. The best workers are able to secure far larger pay increases than the average.

With the current talent shortage, employers have to be thinking about both filling vacancies and retaining their more talented people. The Great Resignation has not ended. The problem has opened the door to creative work arrangements that meet the needs of individuals.

Older workers have not generally been the first choice or even considered in filling vacancies but there are reasons to look to them today. It’s likely that many recent retirees are having second thoughts and could be enticed to ‘unretire’.

In 2021 when the Dow Jones rose almost 20 percent and housing prices increased 17 percent, making  dropping out – the Great Resignation — more attractive but stock prices have fallen, inflation is again a concern and there is a possible recession on the horizon. Retirees on fixed incomes may think differently now. They may also have gotten tired of watching TV all day.

Studies show older workers are more productive than their younger co-workers. They have a better work ethic. Plus, their experience enables to work with less supervision, reducing payroll costs. Replacements will need time and training to develop the same capabilities. All of which reinforces the point – former employees are the best option.

The popular 2015 movie, The Intern, starring Robert De Niro and Anne Hathaway, is a story that would not have been made 20 years ago.

A problem in many states is that government retirees who return to their former agency or sometimes any government agency have their pension docked. The “double dipper” issue may have made sense half a century ago but their talents now are too valuable to deter their re-entry. The advantages of rehiring workers with proven skills and problem solving abilities should override those old concerns.

Significantly, pay is not seen as the highest priority by many retirees looking for work although they certainly want to be paid fairly. Far more important is being to offer work arrangements that meet their personal needs.

The rigid workforce management systems common in government make it difficult to offer jobs that meet the needs of retirees. Surveys show they are looking for schedule flexibility, opportunities to work a portion of the week at home, and the respect their experience warrants. They need to find the prospect of returning to a former employer attractive. It’s a significant change in management philosophy but retirees and their skills are the best near term option. They can be productive on their first day.

For many agencies, rehiring retirees may be the most practical way to fill mounting vacancies.

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