Why economics, not marketing should support your new talent strategy

We’ve seen for the past few years that recruitment is marketing. That the solution to our talent problems lie in articulating to the candidate market our CVP (candidate value proposition), EVP, (employee value proposition), and all the other VP’s there are.

We’ve been told the last few years that by aligning our engagement and communication strategies to reach our target market, that if we “sell” our companies well enough, the candidates will come.

Well guess what…. That ship has sailed, and we now need to redefine the talent problem.

Typically, I think of talent problems falling into one, or a combination of 3 buckets – supply, demand, or brand.

• Talent supply = not having enough talent
• Talent demand = limited talent supply + a lot of people want it
• Brand = what you’re selling, the talent market doesn’t want

What if I told you that talent acquisition isn’t just a reactive function to be brought in when people leave… no, no, no, that would be undervaluing what we do, but I think the order in which we are engaged is waaayyyy off, like, way off.

I also don’t think “strategic” conversations with TA should just be around the annual people reviews and discussing high potential talent, or even around things like succession or diversity initiatives. Don’t get me wrong, they are great initiatives, and yes, we add extreme value here too, but again, this is a proactive, reactive solution. (Yes, that is a juxtaposition, but bear with me)

I see talent as a commercial and economically driven problem organisations need to solve for, just like they would if they were solving for issues with procurement, or technology, operating costs, or project delivery. Basic economic problems include what does a company want to produce, how do they produce it, and who can produce it. (see where I’m going with this!)

There are always precursors, or markers that arise that indicate a change is coming, or BEFORE the problem arises. Meaning, if we pay attention to conditions A, B, C & D, we can understand what implications this will have on W, X, Y & Z down the line. No problem just appears, there are signs.

We just need to know what to look for.

I did economics at university (but the maths bored me so I switched to HR!) but for me the basic premises of economics can also be applied to talent in the same way they are applied to the general market. Certain economic conditions cause certain situations which impact the recruitment industry.

Overall economics is based on maintaining equilibrium, or the balance of limited resources to achieve maximum economic output. There are two main lenses in how to view economics:

Macroeconomic – the total spanned view including on the organisations, countries, or markets

Microeconomic – the view on an individual, household, or single event

The basic concepts to economics include:

• Supply and demand
• Scarcity
• Opportunity cost
• Value for money
• Purchasing power

So, remembering that economics is based on balance or equilibrium, relating to recruitment, this would be the balance of talent supply and talent demand, coupled with organisational production intent and their reliance on resources to produce it in a cost-effective way.

For example, yes, we can pay attention to unemployment levels, but what’s driving unemployment levels – well, for example wages growth, levels of underemployment, interest rates, inflation, labour costs, international markets, politics. Good recruiters will pay attention to these markers to try and see around the talent corners and what this will mean for their organisations, and the talent market conditions BEFORE it happens and develop strategies in preparation for markets to change.

The RBA is predicting that unemployment levels could fall to 3.75% by the end of 2023 (ABC News, 2022 - https://www.abc.net.au/news/2022-02-02/how-is-the-unemployment-rate-falling-to-such-low-levels/100796028) which is the lowest levels since 1974. (yup, a 48-year low)

 So why is this happening, and what should we pay attention to? A few key ones for me include;

• Wage growth – this has been minimal over the last few years (I know, I know – but Covid salary pressure Jess I hear you say…even when you average this out, it still only lends itself to an average 10%) and this growth will continue to be slow growing
• Inflation – this is a massive precursor to employment levels and policy changes and interest rates
• Disposable income and CPI – again, this drives economic growth and what impact spending levels will have on the economy (this drives behaviours like discretionary spending habits on travel, retail, shopping, logistics etc)
• Labourforce participation rates – this is measures the % of the population that want to work
• Full employment levels (yes, this is different to unemployment figures) – this is the true figure of the number of people 15 + in Australia engaged in some form of work
• Underemployment levels – of those in work, they are working less hours than what they want to be
• Policies such as border controls – hello closed borders and a closed off international talent supply
• International COVID responses
• Cycles and seasonality
• Industry specific trends – e.g., COVID impact on shipping and logistics

Now recruiters don’t need to be, nor should they be economists (we deal with the people side of things), but the reason for me economic understanding is so critical is that by understanding what drives our market, we can then look at what impact this will have on our organisations and our talent economics (supply/demand/production) and create strategies to capitalise on opportunities when they occur, and likewise, create strategies to circumvent.

 You can steer the ship away from the rocks or use the waves to propel you forward!

We all know we have those hiring managers that still think it is up to TA to just “find me people”, irrespective of what is happening in the market, and I sure have had quite a few conversations trying excruciatingly to explain the market conditions to hiring managers and what this means on their hiring strategies (or even just encouraging them to have one!)

Understanding market conditions can help us as recruiters predict the talent market movements and have proactive, constructive, commercially led discussions with the business (note I said with the BUSINESS) and advise them on how best to prepare for the upcoming talent changes.

So, you see recruitment isn’t just marketing. Recruitment is commercial, its economics, its marketing, it isn’t a function to be brought in at the last minute when someone leaves and there is a vacancy.