Julia Lamm is a workforce transformation partner at PwC, and in her role she hears executives' thoughts on strategies and their concerns related to talent management.
Lamm joined the Journal of Accountancy podcast earlier this month to discuss recent PwC data related to talent — developing it, potentially reducing staff numbers, and more.
What you'll learn from this episode:
- Lamm's explanation of workforce strategy.
- An overview of recent PwC surveys related to companies' talent strategies.
- What executives learned about talent during the onset of the COVID-19 pandemic.
- The definition of "labor hoarding."
- The percentage of human resources executives who say their companies are offering early retirement packages as a strategy to reduce workforce.
- Recession concerns and also signs of optimism from executives surveyed by PwC.
Play the episode below or read the edited transcript:
— To comment on this episode or to suggest an idea for another episode, contact Neil Amato at Neil.Amato@aicpa-cima.com.
Neil Amato: Welcome to the Journal of Accountancy podcast. This is your host, Neil Amato. This episode is going to focus on the topic of workforce strategy, whether that's retention, whether that's motivation, what employees are looking for out of employers these days. We're going to touch on all of those topics with Julia Lamm. Julia is a workforce transformation partner at PwC, and you're going to hear that conversation right after this word from our sponsor.
Again, our guest is Julia Lamm of PwC. Julia, thank you so much for being on the Journal of Accountancy podcast.
Julia Lamm: Thanks for having me, Neil.
Amato: First I want to ask you about a PwC video I saw. It was in 2021. You were in it. It was about reinventing workforce strategy, and one thing you said was this: "It's critical that the business owns the workforce strategy from the top-down and understands the implications of the decisions it is making on talent." First, what is workforce strategy to you?
Lamm: I get that question a lot because I think whenever you start talking about strategies, sometimes it seems very amorphous and not really specific. But fundamentally what workforce strategy is: It's about how an organization right-sizes and chooses the type of talent it's going to have that's going to deliver on the business strategy. So if your business is not fundamentally making major changes year over year, your strategy might be something like reward our employees financially, give them learning opportunities, make sure we have the right number of people in the right locations to execute what we have promised to our customers.
It gets really tricky when you start thinking about organizations that are in a major state of flux, so you're hiring more employees, trying to attract more talent, you might be using a lot of contract labor. It's really looking at that mix of the type of people you have, what skills they have to fundamentally execute what you're trying to do as a business.
Amato: How would you say workforce strategy has changed as we're recording here in early December 2022 but as we're looking ahead to 2023?
Lamm: Last couple of years, I'd say, I've been a lot busier because suddenly many companies are really concerned about attracting and retaining talent. Obviously the Great Resignation has been a big topic changing financial situations. Companies are trying to attract talent with higher compensation. While others are saying, gosh, I'm struggling to even pay the compensation that my employees are at right now. How do I compete with those new strategies with companies being able to work remotely and have employees all over the country or even in some cases using digital nomad visas and things like that to work from other countries.
Lots of changes over the last couple of years. When we look forward to 2023, we're seeing a lot of companies be more conservative about their growth plans, but the majority of executives we survey anticipate that there is going to be a recession. The debate is really around how deep and how long the recession is going to be. But they're starting to have much more conservative plans around growth.
What does that mean for talent? It means you may have less transformation initiatives underway, you may be focusing more on efficiencies, driving costs out of the organization, anticipating some upcoming cost pressures, maybe starting to manage out talent, performance management processes that you didn't do during the pandemic because people were so anxious about getting talent in the door. Lots to come in the next year or so, but I think we'll continue to see companies be much more conservative around their talent hiring as they start to anticipate less growth.
Amato: We'll come back to some of those topics that you touched on in future questions. In the fall of this year I guess, the initial dataset that PwC put out as part of a pulse survey on U.S. business leaders, one of my colleagues at the Journal of Accountancy wrote about the survey. He coined the phrase "the great rebalance." At least he thinks he coined it. I don't know if that's true or not. But anyway, in that survey 81% of chief human resource officers [CHROs] reported implementing at least one tactic to reduce their workforce. But in the same survey 44% of executives said they plan to hire specific areas to drive growth in the next year to year-and-a-half. So what do you make of those data points together?
Lamm: The names have been a lot of fun. I've heard the great rebalance, great regret, great reset, Great Resignation, obviously. This has been fun to see all the creative things people are coming up with. But just in terms of that data, what we're really seeing is similar to what I was describing around anticipating slower growth. That doesn't mean that the capabilities companies are trying to provide to their customers are changing, and, actually, given that it's slowing down the growth, as well as the volume of hiring. Companies are being more conservative, and so they're saying, hey, where are the specific areas we really need to be investing in in order to be competitive in the future? Some clients are going through deals and maybe merging to build that capability. Others are trying to build it themselves. A great example is cybersecurity capabilities.
We've got a lot of clients and individuals — I'm sure you're getting notifications in your personal life around changing passwords and things like that — but companies are starting to really bolster their cyber capability, and so everyone is looking for people who are able to build that, make sure that their infrastructure is secure, drive some of the behavior change amongst employees, making sure they're not succumbing to phishing scams, things like that, to make sure the organization is fundamentally secure from an IT perspective. So that's one big area we're seeing our clients make investments in. In other areas, they are actually shrinking their footprints. Maybe they've gone through a finance transformation and put in a new system that allows for optimization of processes and automation of some manual tasks. Now they're starting to say, hey, let me look at my finance workforce. Can I shrink that down? Because now we've gone through this transformation and are starting to reap the benefits of process efficiencies, things like that. So we're seeing companies in aggregate, they're still investing in talent. But overall their numbers they expect to be a little bit lower, but bigger in some strategically critical areas.
Amato: What to you are the trends around what the HR executives are reporting regarding their workforce reduction tactics?
Lamm: We're seeing the majority of organizations are taking some action to shrink their workforces like we were just talking about. Noting that some of them are doing this already or they're planning to take one of these actions. We're seeing some creative tactics like voluntary early retirement packages; 43% of the executives we'd surveyed, the HR executives, said that; 41% said they're reducing headcount from a performance management perspective.
Now that means a lot have stepped away from their traditional performance management processes. Where they may have exited the bottom 5% or 10% of their workforce, now they're actually going back to that because they've done a pause during the pandemic when they were struggling to get talent in the door. Thirty-eight percent of CHROs said they're not replacing employees who leave the company and 35% said they're undergoing hiring freezes. That would say anecdotally, those organizations, many of them say the hiring freezes are in pockets and it's not an aggregate over the entire organization.
Amato: What lessons do you think were learned by companies that when the pandemic hit and they didn't know how long that downturn related to the pandemic was going to last, they may have laid off, in too large a number, some workforce and now are finding a hard time maybe reputationally recruiting talent back?
Lamm: Yeah, it's been really interesting to watch that. Speaking of the great regret, a lot of executives had said they do regret having steep layoffs in the beginning of the pandemic. But others took different strategies. Some stopped increasing compensation and basically said, hey, we don't know what the future holds. We don't want to have layoffs. Instead we're going to just slow the amount of money we're giving back to employees. It was pretty quick that things rebounded. I think many people were surprised about how quickly growth resumed as people started to shift their buying habits and look more at buying physical things versus the experiences while we remained in lockdown. So really interesting to watch.
Fast-forward to today, one behavior we're seeing is something called labor hoarding. We're seeing executives who are basically saying, look, gosh, we made such a big mistake the first time, now we're seeing negative forecasts going forward, potential recession. Pretty much a lot of confidence around that recession, the markets are responding accordingly. Maybe we should just hold our talent and not actually let them go. And is the cost of carrying that talent over the next six to 10 [or] 12 months, is actually going to be so much larger than actually reducing talent, the blow from employee morale perspective that drives, and then started to rehire all of these individuals back into the organization.
It takes longer to onboard, especially in hybrid working environments and remote working environments. There's a lot of people who've onboarded over the course of the pandemic because there's been a lot more turnover and movement from one organization to the next. I think we're seeing a lot of executives who are just really anxious about that from a tactical, what's the impact to the business? Am I even going to be able to find this talent perspective? And also thinking about the hit on morale that it takes.
Amato: You said that organizations aren't necessarily looking completely at their workforce, but in pockets. So related to that, in pockets of industry, is there anything in the financial services industry or other industries you'd like to talk about specifically approaching growth-driven hiring?
Lamm: Financial services have been pretty interesting. I think that generally speaking, it's considered a more stable industry right now. Obviously, we're all reading news of the layoffs happening in the tech sector. You look at the hospitality and retail industry and you see the challenges they are having around talent. As we watch the employee preferences shifting a lot, generational preferences, but also just preferences that have unfolded over the course of COVID, people are saying they're looking for some stability, and it seems that the financial services industry is providing that.
You're seeing executives in that industry be more optimistic about their ability to attract and retain talent. Thirty-one percent in our last survey said, they feel confident about that relative to the rest of the industry is 27% in average. We see they're also more likely than other industries to say they're planning to hire in specific areas.
Financial services says it's 50% versus 44% all. While all of this is going on, they agree that the recession is likely in the next six months, so they're being more cautious, but we're definitely seeing that be a benefit for them as some of these other sectors, I see a lot more flux. Tech talent, for example, the market for tech talent is starting to open up. Banks and insurers as well as managers are able to find better quality talent because of what's happening in the other sectors.
Amato: Putting this altogether, the talk about a likely recession, but then also people having hope that they can meet their near-term growth goals, what do you think the survey results signal for the workforce and for those responsible for managing the workforces for their organizations?
Lamm: A lot of leaders seem to be very optimistic. So 81% of the respondents said they thought it'd be a recession in the next six months, and 77% of our executives who responded said they think they can meet their near-term growth goals. There's something not quite adding up there in the data, but I do think we've seen many companies have made some real and significant plans around how they're going to navigate a potential recession. Whether that's already looking at headcount reductions — we've seen some of those things in the news. Whether that's revising their growth projections, rethinking if they're going to launch new product, enter a new market, make big changes like that. They're being a little more cautious around those types of investments.
But really I think they're looking at the bottom line as well. Trying to drive out cost. Do they have the right infrastructure in place to support them? Looking at automation, looking at doing more work in a smarter way, and to try to drive efficiencies. We're still seeing that across the board, across industries, is companies rethink how they're going to navigate the next couple of months. From the perspective of attracting talent, we're also seeing a lot of companies really be thoughtful around how they're building an adaptable workforce that can flex amidst all this change.
Rather than having employees who end up leaving an organization, giving them opportunities internally, it could be a stretch opportunity, could be a rotation. But the types of experiences that create a more well-rounded employee who also has a fondness for the organization, they trust their employer. We know organizations are where a lot of employees find their trust these days versus the government, media — sorry, Neil — other areas. Really seeing companies take a look at their talent, trying to build a resilient workforce and an organization that has a culture that's based on trust. That's where we're seeing companies think about their talents, direction, their workforce strategy over the next year and change.
Amato: Julia, this has been great. I've learned a lot. I think our listeners have, too. Anything you'd like to add in closing?
Lamm: Well, Neil, I think the key takeaway for your audience — and thank you so much for having me — is it's not all doom and gloom. Obviously, there's a lot of anxiety that comes with a recession when you're reading about layoffs. But we are seeing most companies try to avoid that and use layoffs as a last resort. We're seeing them make real investments in their employees. We're seeing them find opportunities for their employees to continue to develop, lots of investments and employees getting new skills and having a very marketable skill set. I'd encourage your listeners to look for those opportunities and just keep calm and move forward.
Amato: That's great. Julia, thank you.
Lamm: Thank you.