Workforce retention is a top priority right now as we are in an employees’ market. At Magnet Culture, we teach there are numerous ways to attract and keep people without giving raises; however, now’s the time to discuss wages.
On this episode, workforce thought leader, Cara Silletto discusses the importance of investing and budgeting for competitive wages. If our ultimate goal is to achieve staffing stability for high quality care for our residents, it’s time for this important (and maybe difficult) conversation.
Welcome back to Bridge the Gap Contributor Wednesday, I’m Cara Siletto, President and Chief Retention Officer at Magnet Culture. Our company focuses exclusively on reducing unnecessary employee turnover for organizations across the country. And boy are our phones ringing off the hook. Right now outside of, of course COVID, turnover is the number one issue that most business leaders are talking about. And, you know, pre-pandemic, we built our business focused on culture, on organizational culture, creating places where people wanted to work, where they want to come back tomorrow or after their break. And creating leaders that people want to work for. In fact, I remember when I started doing programs years ago in the senior living space, I had folks tell me, “please, don’t come in and talk about more pay and more compensation because we just can’t do that. That’s not possible under our reimbursement systems.
And please don’t talk about that as a retention method, I need you to focus on the culture and the leadership and other things.” So, you know what I did? That’s what I focused on, was the culture and leadership. And back then there were studies, lots of research, all kinds of folks saying, and proving that staff would stay even for less money if they liked their boss, if they felt appreciated, if they enjoyed working with their coworkers, different things like that. But today things have changed. Things have changed, and I can no longer sit back and talk about retention without bringing compensation to the conversation. All right. I would love to tell you that we can just work on who we are and how we lead people and communicate better. And that, that will do the trick, but that is just not where we are. At this point, we have new generations in the workplace. We know that the millennials, for many years, of course, I happened to be one of the millennials. We know that the millennials really loved challenging work. Opportunities for advancement. They really clung to leaders that were authentic and they trusted and loved them. But now we have Gen Z coming in. And Gen Z, who is this group under 25, they are now listing on all kinds of research and studies that I’m seeing, they are seeing that pay has to be there. Yes, they also want a great boss. Yes, they absolutely want opportunities for advancement, trust, work friends, and all these other things. But now the tolerance for low pay is going out the window. And that is even trickling up to older generations and workers with many, many more years of experience who were called to serve, for example, which we’ll explain that in just a few minutes of what’s happened there. But, we’re even seeing this younger generation mindset of demanding more money and having less tolerance for inflexible schedules and less than stellar bosses and things like that.
We are seeing those expectations trickle up across every age and every demographic of our workforce today. I’ve been talking with some leaders about their environment. And if you think about it years ago, people were fine with working in a hot warehouse. I mean, that was the job. You got paid to go in, and it was fine most of the year, but maybe July and August, man, that is brutal to work there. And those organizations just like our staffing struggles, they’re also struggling to keep people who will not tolerate that type of work environment, even if it’s just short term. And of course now people have other options. They can absolutely go to some short-term option, such as DoorDash or Uber, and those types of jobs. They can go there for July and August so they can avoid working in the hot warehouse.
Now I’m talking to some of those leaders and they are deciding that they must invest in the air conditioning in that big warehouse, which is enormously expensive, right? That’s why they didn’t do it in the past. But now they can’t not have it. All right. So we have to look within healthcare and figure out what is unacceptable to the workforce now that we may have to invest. We may have to rethink some of the ways that we schedule, that we pay, that we do things that we do, right? The way that we operate. Today’s topic may sting a little bit. All right. I know this is not what people want to hear. I know it’s not what the owners and the CFOs really want to hear, but it is time to have a realistic conversation about raising wages and the impact that that is very likely to have on our profit margins.
Moving forward. What I’m finding is that with the labor costs rising at all levels, certainly with our CNA population and our all types of caregivers, aides, dietary servers and all of those folks. Not only are we seeing a massive shift in the market for those types of wages, but we’re also seeing the subject matter expert fees raise as well, right? How hard is it to replace a DON today? It is nearly impossible to find folks with that regulatory and compliance expertise that are not commanding higher wages if they’re going to bounce from one facility or community to another, right? We have to be really realistic about what future profitability can we glean and what is appropriate, knowing that we have to pour more money back into our labor costs. All right. So I’m not certain that our old business model and our old level, the previous decades, those levels of profitability are going to be achievable moving forward, but let’s keep things in perspective here.
Let’s step outside of our world and keep in mind that industries like grocery stores, they operate at a 2% to 3% profit margin. That’s it. Which is why they have to play the volume game. They have to have multiple locations to get buying power. They have to have regional leaders that cover multiple locations and things like that. And in many cases, we’ve gone to that model within senior living as well. But we may not be able to get the high profit margins that we had previously, and we may have to look at something much more realistic as we plan our budgets for 2022 and beyond. In fact, I was just talking to a senior living leader the other day, who said they are for the first time ever budgeting for excessive overtime in 2022. They just know that that is inevitable. And with the current COVID situation and the current workforce crisis we have, they know that in the next 9 to 12 months, they are not going to be able to become right-sided with their staffing stability.
So they are budgeting for that and figuring out how to manage. Now, they don’t want to budget for that in the future beyond 2022. But right now, they know that there’s no getting around that. So, I would love to hear from you, by the way, your organization, what your plan is for next year, how much are you budgeting for excessive overtime, excessive temp agency use, right? The things that we don’t want to be stretching that far in those places. And yet, we know the reality is that that’s here to stay in the short term. All right. Now I was just presenting on a program recently with a University of Michigan economics leader. And I won’t hold that University of Michigan thing against him. But he had some really great information about the workforce. And we’re going to put in the show notes on the Bridge the Gap website, this beautiful graph that he shared with us about lower wages and how for years after the last recession.
Okay. So from 2011, 2012, 2013, 2014, for years, we were keeping the lower wage pay increases as low as possible. And they were all the way down between 1% and 2% in many years. And yet, the other more professional, higher paid roles, more skilled roles were increasing, maybe 2% to 3%, a little bit. Well just in the last five years, because of the battle for talent for the lower skilled, and lower wage positions, because the competition got tough, you see on this graph, that all of a sudden the lower wage pay increase percentage rocketed up, up above 4%. And so for the last few years, just across many industries and across the country, we’re seeing kind of the great reset in wages, pay, expectations. And it’s mostly driven right now by the competition. It doesn’t matter whether the federal government mandates a $15 an hour minimum wage, if everyone else around us in retail, hospitality, food service and warehouses, if they all go to $15 an hour, then that impacts us as well.
Right? So it doesn’t necessarily matter about what is regulated or legislated to us as much as what’s happening with the competition right now. Something to keep in mind is that a lot less work today is what I considered ‘tethered work.’ Years ago, I had one of my first virtual assistants who, she worked in Montana and I’m in Indiana. And I taught her how to be a virtual assistant. Because she had been an executive assistant for a big corporate group out in Montana. And when I hired her, I taught her, “hey, we can actually do this remotely.” And I gave her some software and the right tools and she had a laptop and I taught her how to make that work. So she went and got some other virtual clients to serve as their virtual assistant. And then one day I was talking to her about, “hey, how is your business going?
Did you get some more clients? And how’s that working out for you?” And she said, “I love it. And I have a realtor, an insurance person and another business person. She had all these clients she was serving. But she said, “I have this one client that needs me to pull a report from my computer at my home, because I have to be on a certain level of internet, and I have to go through a VPN connection and all of this.” And she said, “I have to be at home to pull this report at four o’clock every day for this client.” Well, I knew how Sherry was. Sherry sometimes worked during the day. Sometimes she’d take the day off, but work in the evening. And I remember calling her at two o’clock one day, just to ask her a quick question.
And she said, “hey, I’m out shopping for school clothes with my daughter, but it’s two o’clock and I’m out right now, but I’ll be back at my computer by four.” You know? Because she thought I needed something that was computer-based. And so she was explaining to me how she had to be back at her computer at four every day. And I told her she needed to charge more for that. Now this was years ago, this was pre- pandemic. And years ago, before most people even had an option or ability to work from home. And I explained to her that if someone is tethering her to a specific time and a specific location, she needs to charge more for that. Because the work she did for me was very flexible. It was of course, on her time, on her own schedule. I didn’t even care what hours it was, and she could do it from anywhere.
So when she wanted to leave early on Friday and go to her lake house, which had spotty internet, but it did have some internet, enough to do emails. She could do that and still do some of her work for me. But unfortunately, because of this one particular client where she had to pull this report from her home at four o’clock, she was getting frustrated that she couldn’t leave for the lake before four fifteen on a Friday. Now I bring up this particular example because it’s really been coming to mind for me a lot lately. Any time workers today must be tethered to a specific shift at a specific location, we have to understand that that is worth more. That is absolutely something that people are sacrificing for other things. They’re missing their child’s two o’clock little kindergarten play, or they are missing out on shopping in the stores for Christmas before the crowds get there after five. Just little things. The doctor appointments and whatnot throughout the day. We’re asking people who…now I get it.
Traditionally, most jobs had to be done at a certain place at a certain time. And there were normal nine to five shifts everywhere. But now we have so many other options. Again, DoorDash, Uber. But even just work from home positions. I mean, my neighbor is a call center worker that works from home now. And they have gone permanently to working from home. So she has that ability to throw in laundry in between calls and, and little things like that. So I just bring this up as a realistic perspective from the employees view right? We can look at it as employers and business leaders all we want. But until we step back and look at our jobs and our expectations from the workforce standpoint. Look at the options they have. Look at why they would want to come work for us versus somewhere else. We also have had a lot of conversations with people now who have worked their way up the chains in senior living.
And then when I ask them how they got started, they say, “I was a CNA.” I started my career, 20 years, 30 years, 40 years ago as a caregiver. And then I would say, “well, why did you do that? What got you into the business?” And some people, maybe their mom was a nurse or they had other exposure. Maybe their grandmother was cared for in senior living. And so they visited there and then they volunteered and then they became a caregiver, right? There’s different reasons. But I got to tell you that I’ve heard from multiple people. Well, I became a CNA because it paid $2.00 or $2.50 more than any of the places around us. The retail, food service, other unskilled positions, right? So they went and got certified to make that to $2.00, $2.50 an hour more.
But now we’re not staying up with that trend. We’re not really considering ourselves skilled workers. We’re paying the same for people who have a certificate even. We’re paying the same as they can get at unskilled jobs. Which then allows for way more job hopping. Because remember back then, if you got your CNA certification and you were making $2.00 more an hour, you couldn’t just quit and go somewhere else to make the same amount of money because you weren’t skilled at other things, right? You had to go back into the unskilled labor pool at that point. Well, now the unskilled prices, they have caught up with us. And so I want to ask as well, do we consider our caregivers and our frontline workers? Are they truly skilled positions, or are we considering them unskilled positions? And what does that competition look like? If I’m an employee, a candidate, a worker out in the field, not at your company now, am I going to look at this position and see it as just another unskilled position?
Or am I going to really feel like that is a stepping stone in the right direction? And I have to get more education to get more pay. All right. We have to think about that type of competition as well. Right now, another thing we’re facing is that the participating labor force continues to shrink. That’s part of what’s causing a lot of these problems. And right now, I’m not sure if you already knew this, but we lost 3 million women from the participating labor force in 2020, because of the schools shutting down and folks, some were fearful of COVID, some needed the childcare at home. They had to provide that themselves. Lots of different reasons. Some folks lost their jobs from different industries and then decided to just take themselves out of the participating labor force and stay home. So many of those are not coming back because they have reprioritized their lives.
They have reprioritized their financials to make it work with one income, for example, or other arrangements. And so that hit us pretty hard. Then we had about 2 million baby boomers retire earlier than expected. Earlier than what the projections showed of boomers leaving the workforce. We lost an extra 2 million who also walked away from that participating labor force. And then we also have a lack of immigration for the last few years. Actually, we’ve seen less and less folks coming here to work. And so we have that lack of participating labor force increase that we were used to having that has pretty much halted, particularly during COVID right now. So I am actually seeing some organizations work with international agencies and working on how can we properly bring in more foreign born workers to come in and fill some of these shortage gaps that we have. But just to know that our general immigration has slowed and even halted this past year.That has a big, big impact again, on the competition and who’s out there and available.
All right. Now I mentioned earlier this concept of being called to serve. And oftentimes particularly with, with my friends who run nonprofit buildings, they often will focus on, “we need to hire people who feel called to serve.” But we’ve gotta be really careful with that recruiting model. Okay. We know that it is less and less effective almost every year right now. And that’s for several reasons. One is that we do know younger generations are leaving organized religion. And so if you look at the numbers of people who go to church regularly, who are members of churches, who even identify as religious and or a certain denomination, for example. We are seeing less and less of that within the United States. So, for organizations who’ve really hoped that, “I can’t pay the wages that our competitor organizations can, but you’re called to serve in this industry, right?”
This profession is full of people with such huge hearts. And we are here for that reason, to make a difference in the lives of those that we care for. Right? That is fabulous. And I am behind that 100% for anyone who wants to push their career toward their calling. Okay. But from a demographic standpoint, we’re going to have less and less people in future years that feel the urge to serve even if the pay is not going to put them at a living wage, or the pay is not going to allow them to have disposable income, to put their kids in extra sports and activities and things. They’re going to live at or below the poverty line in order to serve. e’re just not seeing that that’s the case. With Gen Z in particular, and even many millennials that are deciding, “you know what? I don’t have to serve from nine to five, or I don’t have to serve through my day job.
I can serve through my hobbies, through my church, on the weekends, and other times,” right? So for example, I have a staff member who absolutely loves theater, and she would be an actress if she could make a living and not have to be a starving artist doing it. But she wants to have a stable paycheck, and she wants to have a good level of living and a good lifestyle and things. So instead she has a day job working for me and, and loves what we do. We’re passionate about reducing turnover to provide better quality care. We have a mission as well. But she does theater on the side. She does theater and works through her talents and her passions. She gets that fix on the weekends and at night when she goes to rehearsals and things. So just think about that if we have this recruiting model of, “we have to pull in people that are called to serve.” Now, people are saying, “I’m not going to sacrifice financially for myself and my family just to serve my day job when I can serve on the weekends, or I can lead my Bible study on Wednesday nights and serve my community and my church that way.” Okay. So we do have to be really, really careful about focusing on that recruiting strategy, because I think it’s going to get harder and harder, which is why we’re having this difficult wage conversation right now. That we have to talk about increasing wages. We have to figure out how to get the proper competitive pay out there. And we need to continue to invest in the culture and the management, because it has to be a combination my friends. The new workforce has no tolerance for crummy bosses, for lack of good communication.
They have no tolerance for an unappreciative workplace and a culture that does not suit them. So now we have got to have the conversation moving forward, where we get wages, where they have to be to compete, and that we have invested in our leaders, which helps us create a place where people want to work. All right. Now I’m seeing lots of really innovative, creative ways. I love that Bridge the Gap is constantly interviewing really innovative minds in our space of what they’re doing. I just spoke to a gentleman recently, Joe Valdermann out of Florida, who is the Director of Innovation for his senior living group. And he has talked to me about putting in salad vending machines so that their staff don’t have to make all the custom salads. And they’re using all kinds of robotics and different ways of building efficiencies through technology, through software.
And he was quick to tell me, “oh, we don’t buy all of it. We really have to find the ROI.” Some technology, some software, it’s just not worth the investment. But his job is to really critically look at how can we bring our staffing requirements down for their job descriptions, or the number of heads that we need in that department? Because we know we’re going to continue to have this staffing shortage. We need to look at investing in different software and different tools, robotics, and things like that. Not that that’s ever going to replace our workforce. I’m not saying that at all. What I’m saying is we need it to supplement our workforce because we are going to continue to struggle getting enough bodies in our building to care for our residents and to serve our meals. Okay. So we have to look for new efficiencies using technology, and we probably need to start adding new revenue streams for our business models.
If we want to get back to a previous profitability levels. So I know folks on my team have researched and found different things that senior living groups are doing all around the country, such as renting out more space for community events and utilizing their space in a more revenue generating way. Also creating memberships for the community around them, right? Their town, their county. You can create memberships for your amenities on your campus. And that way we can bring in non-resident revenue in a new way. So I know a lot of you were thinking about that stuff. If you listen to Bridge the Gap, you’ve heard the podcast specifically about these different models, wage conversations, compensation analysis, and all of that. So I just wanted from the retention expert here, I wanted to make sure that before my the time this year on these Contributor Wednesday sessions is up that I address the fact that we really have to have this pay conversation.
If we want to get the staffing stability that we need to provide the greatest quality care. So I’d be happy to talk with you about this anytime. Reach out if you want to schedule a call or a chat. I’d love to hear what innovative things you and your leadership team have come up with, or continued challenges that you want to talk through and brainstorm our way out of the rut that we might be in and toward greater solutions for retention. All right. I do wish that I had more optimistic news to share today and a topic that was a little more fun and, and positive. But we’re going to have to get through this great reset together. A lot is changing. We’re going to have to recalibrate our expectations, recalibrate our pay, and recalibrate a lot of the way we’ve been doing things in the past.
So hang in there, friends. We’re going to talk more about workforce and leadership next month. I hope that you have caught all the episodes we’ve done thus far, talking about onboarding, generations, and specific retention strategies. So go back and catch those if you’ve missed any. And if you need more retention strategies before our next episode, don’t forget to grab a copy of my book, ‘Staying Power: Why Your Employees Leave and How to Keep Them Longer,’ on Amazon or Kindle.. My name is Cara Siletto, and I want to sincerely thank you today for listening to this week’s Bridge the Gap Contributor Wednesday. Don’t forget to connect with me at btgvoice.com if you haven’t already. Take care friends.