Challenges and Strategies for Small Business Owners
Professionals, like myself, who work alongside small businesses run the gambit of topics when talking with clients, prospects or those in our business networks. It could be the local sports team, where someone went on vacation or a myriad of business topics. One recurring topic regarding business is the lack of workers – especially younger workers.
Root Causes of the Worker Shortage
While the pandemic played a significant role in how and where people work, the truth is that worker shortages were already increasing beforehand. You can add in changes such as two working parents learning how to get by with one primary job due to daycare issues (the second often working in the gig economy or a traditional part-time role). Additionally, the overall increase in non-traditional jobs and industries such as Uber, delivery services, grocery shopping services, and cannabis jobs.
I believe the largest factor regarding the growing worker shortage is pure demographics. The declining birth rate since the 1970s has led to a steadily decreasing working-age population. From 1973 through 1989 (current 35- to 50-year-olds) we averaged about 1.7 to 1.9 children per couple. To put that in perspective, we need a fertility rate of 2.1 to maintain our population. The result is a steadily decreasing working-age demographic.
This trend is mirrored in my own family, where each generation has had fewer children. My parents, born in the 1930s, were part of two families where they averaged 5 children. My family (me and three sisters born in 1958 through 1965) averaged 2.25 children. Our children (9 of them in their 30’s and early 40’s) have only 7 children (0.78 per sibling) amongst them, though we’re hoping for one or two more! It's a pattern seen across the country and globally.
Think about your own family, or of your friends’ families. Is the situation similar to what I described with my family? Likewise, the trend is significantly worse in South Korea, China and Japan and similar to European nations. There is no evidence that this trend will change in the near future. In fact, current data shows the trend worsening.
Strategies for Small Business Owners
Knowing these facts, what can we as small business owners and leaders do about it? Here are several items to consider:
- Automation: Review options for automation when relevant. Getting more out of a shrinking labor pool will become necessary if it already isn’t.
- Employee Retention: Review and improve your retention capabilities. Are you doing what it takes to retain your best employees? Compensation and benefits are important, but so is culture and flexibility. Consider that young workers now may not have attended their senior year of high school in-person let alone many or all of their college level classes. They had to learn to adapt to this new environment. Forcing them into our previous environment may not be the best practice. There’s no one right answer, but at least review your current situation and get feedback from your leaders and best employees on how you should be set up going forward.
- Recruitment: Review and improve your recruiting practices. Craft a compelling story that showcases your company culture and the benefits of working for you. It’s the old adage; “what’s in it for them?”
- Long-term Planning: When considering a new product or service line, look at the long-term viability where our world has fewer people and an aging population. Do the demographics match your long-term plans?
- Flexible Hiring: When hiring, what options may be available other than a full-time traditional employee? Consider older workers, look at options for “work from home”, look at part-time alternatives or contract/fractional solutions.
Adapting to Future Workforce Trends
Demographic shifts will reshape our business landscape. We’re small business owners and our flexibility to change with the times is a huge advantage over the Fortune 1000 companies. Let’s use that advantage!
As small business owners, navigating these shifts requires proactive strategies. Embrace automation, refine retention efforts, and explore flexible hiring practices. Amidst these changes, consider leveraging the expertise of a fractional CFO. They provide essential financial guidance and strategic foresight, empowering businesses to thrive in a changing labor market.
Jeff Farrington is an Area President for FocusCFO in West Michigan. He has nearly 30 years of leadership experience. Jeff’s experience extends from recruiting, sales, budgeting, operations, and public policy.
