LEADING THROUGH THE LABOR BUBBLE

What happens when the newly empowered American worker meets a slowing economy? We’re about to find out.

BY DALE BUSS

RICHARD CAREY HAD A STRANGE EXPERIENCE RECENTLY: AFTER YEARS OF USING EVERY

possible tactic to recruit and retain scarce manufacturing employees, the CEO of Metal Ware laid off a handful of people when a supplier’s aluminum mill went down. Carey’s team ranked its employees and pared those with the shoddiest attendance and overall performance.

“There was somewhat of a fear factor there for employees,” says Carey, whose company, based in Two Rivers, Wisconsin, makes metal items ranging from food dehydrators to candle-wax pitchers. “But overall, it had a very positive cultural impact on the company, producing better attendance in general. It told people that we don’t forget about those who do come in when they’re supposed to, and that’s why they’re still here.”

That sounds like a company chief reflecting on a management tactic from the 1980s. But Carey didn’t come out of a time machine. After three years of coping with a poor hand in a labor-squeezed economy, which followed a decade of gradually deteriorating leverage, companies are seeing that this year’s slowdown may have nudged the pendulum back in their direction.

Daniel Greenleaf felt so strongly about this perceived change of fortune, he went public with a strange sort of victory dance. “Rising inflation and a market downturn guarantee layoffs,” the CEO of Denver-based Modivcare, a $2 billion health services company, recently scolded young workers on the opinion pages of the Wall Street Journal, commenting about the U.S. economy in general. “The days of expecting employers to be grateful for your application will be gone soon.”

Thousands of new layoffs at tech companies, not just the dozen or so at Metal Ware, seem to reinforce this notion. In Chicago, for example, online discounter Groupon recently laid off 500 employees, while Internet healthcare platform GoHealth stripped 800 of their jobs. Meanwhile, in Silicon Valley, Alphabet CEO Sundar Pichai warned staff of the Google parent to work with “greater urgency, sharper focus and more hunger than we’ve shown on sunnier days,” while Meta Platforms CEO Mark Zuckerberg vowed in July that the Facebook owner will “get more done with fewer resources.”

“Particularly in our business, there’s a shortage of qualified candidates, full stop. I haven’t seen the market changing at all.” —Tom Barry, Managing Partner, GHJ Many companies in the general economy are trimming as well, from Walmart, which quietly eliminated a few hundred management jobs, and Steelcase, which recently cut 180 salaried jobs amid declining orders and other woes, to Ford, which is phasing out thousands of positions. About half of respondents to a PwC survey of executives said they’re planning to reduce head counts. A recent rail strike threat, along with fledgling and abruptly rising unionization efforts at some high-profile companies, including Amazon and Starbucks, also lend the impression that corporate management now somehow has gotten enough of an upper hand to frustrate employees. Why else would workers be flirting with commercial unions after decades of decline in the labor movement? “The exuberance that got to a pretty significant level of companies fighting for talent and throwing a lot at that talent— that pendulum is swinging back to people realizing that it doesn’t go on forever, and maybe I should just stay where I am, because it’s less risky,” says Coco Brown, founder of Athena Alliance, a networking group for female CEOs.

Labor Days

But if you’re expecting a quick rebalancing of the relationship between labor and management, you’re likely to be disappointed. The reality is that the newly empowered American employee will remain the newly empowered American employee for some time, even if there is a slowdown in the U.S. economy.

“Lots of folks in leadership have a nostalgia for days when they had more leverage,” says Claire Deason, an employment lawyer at the firm Littler Mendelson. “But it would be a mistake—and a costly one—to assume that even if there are forces in the economy that benefit employers over employees, we will go back in time.”

Soberly, many CEOs seem to recognize Deason’s point even after the onset of a slowdown in 2022. Post-pandemic, pay has already skyrocketed enough to make discussion of minimum wage laws practically moot, but 59 percent of CEOs surveyed by Chief Executive in August said they’re upping employees’ base pay this year anyway, in an effort to retain top talent. Also, 54 percent are increasing access to upskilling programs, and 48 percent are enhancing sales commission rates.

And when it came to cutting spending amid a recession, reducing headcounts ranked as only the No. 3 gambit anticipated by CEOs for the second half of this year, with only 23 percent of them planning such moves. Reducing capital expenditures ranked as the No. 1 planned measure, meanwhile, with 31 percent, followed by expected cuts in travel and entertainment outlays, with 29 percent.

There are several reasons for this less-seismic assessment by CEOs. One is demographics: The overwhelming statistics that led to today’s historic labor squeeze haven’t abated. Approximately 400,000 fewer Americans are turning 18 each year. Meanwhile, according to Pew Research, the ranks of retirees 55 years and older have grown by 3.5 million in the last two years, while during the previous decade that cohort grew by only about a million retirees per year.

Also, in the absence of a uniform and comprehensive recession, as in the early 1980s, many industries and companies will continue to experience insatiable demand for labor even as some other sectors leak employees. That’s part of the continued flywheel of momentum from the overwhelming labor shortage birthed during the pandemic. Pundits talk about the current “full-job recession” in contrast to the “jobless recovery” of 2009 to 2011.

Personal Priorities

Today’s employees are different, as well as scarcer. Facilitated by government financial largess during Covid and freed from former routines by remote technology, workers are increasingly willing to “stick it to the man,” and more willing to bet on themselves for the long term.

“They aren’t necessarily as interested in the career aspect of things,” says Brian Niccol, CEO of Newport Beach, California–based Chipotle, the fast feeder where

there have been rumblings of a unionization drive. “Generally, it’s much more like, ‘What’s the job right now?’ And they’re very much into making a living to support their lifestyle and experiences versus making a career.”

Katherine Saunders, executive vice president of Development Counsellors International, an economic-development consulting firm, attributes this to “personal reflection. People are talking about what they really want out of their jobs. They had a moment to pause, and now they maybe don’t want to work 80 hours a week.”

Indeed, American workers seem to be more fragile these days. The American Psychological Association says they’re experiencing levels of stress across races, genders and economic groups that haven’t been seen before in the 15 years of a survey it conducts. “Data suggest that we’re now reaching unprecedented levels of stress that will challenge our ability to cope,” warns Arthur C. Evans Jr., the group’s CEO.

Understanding the mindset of young workers is especially crucial for CEOs.

“Coming out of the pandemic, they were worried about lots of things, and now they worry about civilization changing, with global warming, Ukraine, Taiwan—people are asking more questions about what they are doing that is meaningful,” says Patrick Manzo, CEO of Kazoo + WorkTango, an employee-recognition software platform.

One manifestation this ferment is known as “quiet quitting.” It’s become a huge social-media theme that reflects workplace realities as employees materialize for their jobs but only mail in their performance. More than half of workers surveyed recently by Gallup who were born after 1989 reported being “not engaged” in their jobs, and said they will show up to work and do the minimum required but not much else.

A Union Revival

Unionization is another major arena where some young Americans are working out their angst. For instance, the worker-organized Amazon Labor

Here are some ideas for CEOs to navigate an empowered workforce and a simultaneous slowdown in the economy: Watch for more shifting. The Great Resignation is waning, but the changes aren’t over. “People who switched jobs for monetary reasons are starting to say, ‘Did I make the right choice for my life, and is this job aligned with my values?’” says Tom Barry, managing partner of GHJ in Los Angeles. “People are making more critical assessments of their long-term commitments.” Score productivity. Digitization has meant greater ability to track productivity; eight of the 10 largest private U.S. employers do so, according to The New York Times. They even include Amazon and others that are unionized or where unions are nibbling. At the same time, some workers are revolting at Big Brother–style monitoring. Project concern. “There’s a desire for people to feel like leadership can see them, understand them and are concerned about them and their pains,” says Jeff Jolton of Spencer Stuart. Failing on that front may prompt workers to seek a place where they will be recognized. Display empathy. “That creates the kind of workplace that employees can be loyal to today,” says employment attorney Claire Deason. “Assume no one is going to work for you just because they have to or because they feel like they owe you something, and instead think, ‘Would I want to work for me?’” Replace labor smartly. “Our clients are looking more at labor augmentation and replacement technology as they grapple with challenges on the labor front,” says Matt Armanino, CEO of Armanino, an accounting firm based in San Ramon, California. Look in new places. Salt Lake City–based Teem partners with Brigham Young University Pathways to contract college-educated students who live in Argentina, Brazil and other countries. They’re top earners in their home countries, but these knowledge workers cost employers only one-third to one-half of their American counterparts “while bringing diversity of thought,” says Teem CEO Cory Pinegar. Use generosity. Medical-equipment maker Medtronic just agreed to pay all undergraduate college tuition costs for employees in the U.S. and Puerto Rico. More than 1,100 of its 44,000 staffers expressed interest. Consider spot bonuses. “We prefer to reward people in the moment,” says Antonella Pisani, CEO of Eyeful Media, a digital-marketing outfit in Dallas. “I think it’s more meaningful. People feel we actually care about them as a human and about their good work, versus an annual cycle where it feels like you’re going through the motions.” Go back to the basics. Reignite manager training, mentorship programs and positive feedback, which were mostly lost during the pandemic. “They go a long way toward building a new version of loyalty,” Deason says. “You want folks to wake up in the morning and at least feel okay about going to work, and there’s no substitute for positive feedback.” Give voice to workers. Create worker councils and even put employees on boards. “That’s a way to have workers ask questions about issues and raise concerns,” says MIT labor professor Tom Kochan. “If workers feel employers are responsive over time, that reduces the incentive to organize. But if workers don’t feel they’re adequate, history shows they increase in stronger forms and lead to unionization or some other mechanism.”

Layoffs at Metal Ware ultimately had a “a very positive cultural impact” on the company, says CEO Richard Carey. Union won representation at an Amazon warehouse in New York City last spring and now is trying to unionize other warehouses. And just since 2021, Starbucks has seen employees at more than 200 cafes voting to join the Workers United union, with employees of another 50 cafes voting against, out of 9,000 corporate-owned Starbucks in the U.S.

The International Brotherhood of Electrical Workers recently succeeded in unionizing the 350-strong workforce at Colectivo, an Upper Midwest coffeehouse chain of about a dozen locations headquartered in Milwaukee. Stiff efforts led by CEO Dan Hurdle couldn’t head off the effort.

The sniffing around collective bargaining at these companies underscores one important dynamic of today’s workforce: There is a bifurcation between knowledge workers and transactional workers. The latter haven’t kept up financially, experts say, despite recently fast-rising wages after decades of income stagnation. That exacerbates the well-documented dismay of rank-and-file workers with skyrocketing executive pay.

“People are getting left behind, and on top of that you have inflation that’s significant,” says Prasanth Nair, founder and CEO of Double Gemini, a productivity consultancy. “Years ago they may not have noticed these things, but now in New York City you can’t order a single meal for an office for under $30.”

In their incipient consideration of union representation, young Americans are also showing CEOs the flip side of their embrace of corporate purpose. “Workers are sending the message that they just don’t trust managers,” not just on wages and working conditions “but on a wide variety of issues of the firm living up to its espoused values,” says Tom Kochan, a professor at MIT Sloan School of Management.

Says Jeff Jolton, the managing director of research and insights for Spencer Stuart, “Before, it was, ‘How do I fit the company’s values?’ Now, it’s ‘How are my values being reflected by the company?’ And if the company is making money, they want to make money.”

Generation Z, the source of an increasing share of transactional workers, is more politically progressive than its predecessor, and some experts say its members agitate for union representation following the lead of high-profile liberal politicians such as U.S. Rep. Alexandra Ocasio-Cortez, the Democrat from New York.

“Young workers are more interested in unionization than their older counterparts, and they watch each other through social media and social networks,” Kochan says. “Success breeds imitation.”

Industrial unions used to be the key to the overall success of the labor movement, and Big Labor has made some waves in factories. Nearly 700 workers at CNH Industrial went on strike in Mount Pleasant, Wisconsin, in May after the UK-based maker of agricultural equipment boosted health-insurance costs and cut retirement benefits without increasing wages.

And workers at Kellogg’s Zanesville, Ohio, factory, which produces Morningstar Farms meat analogs, are seeking to unionize, fighting mandatory overtime and other concerns, according to the Bakery, Confectionary, Tobacco and Grain Millers International Union.

But it’s not exactly Industrial Workers

of the World days. For example, the United Auto Workers has continued to fail to organize new automotive plants such as those run by Tesla, and Volkswagen’s, in Chattanooga, Tennessee. The vast corruption at the top of one of America’s premier industrial unions hasn’t helped.

Many manufacturing CEOs are attempting to get ahead of concerns about workers, unionized or otherwise, by automating everything they can. Milwaukee Tool, for instance, has been aggressively automating factory operations over the last several years and eliminating low-skill jobs. At the same time, the company has been investing heavily in hiring more engineers and software developers who are helping move the company into a more electrified and connected market.

“It’s because of availability of labor and also [increasing] throughput and the kind of product we get as an end result,” says Steve Richman, CEO of the Milwaukee-based maker of power tools. “The world isn’t black and white. We evaluate where it makes sense to automate from a quality, consistency and performance standpoint, with balance from an operational standpoint.”

As managing partner of GHJ, an accounting and financial-advisory firm based in Los Angeles, Tom Barry is cleareyed about the employment landscape. “There are lots of opportunities available for qualified folks, and we’re still seeing the market frothy with people moving,” he says. “Particularly in our business, there’s a shortage of qualified candidates, full stop. I haven’t seen the market changing at all.”

Indeed, more than one-third of finance professionals are recruited more than three times a month, says a study by Emburse, with the cream of the crop being recruited seven times or more each month. Those who move on cite lack of growth opportunities as the biggest reason.

So, GHJ continues to bend over backward to accommodate remote work at the same time the company tries to make its required in-office time productive, with opportunities to “come in and learn culture and together build the culture and collaborate,” as Barry puts it. Once a quarter, GHJ requires people to come in for team building and training, flying them in from all over the country. “We make sure we invest in the times we’re together, and we’re intentional.”

It isn’t clear whether CEOs will gain more leverage with their workforces unless the economy really stalls. Elise Freedman, a senior client partner with executive recruiter Korn Ferry, maintains that “quiet quitting” will be hard to do for very long. But Jolton counters, “The job market is still much more open than it ever was. People will have mobility in the short term, and if the recession ends, they will be in that war for talent regardless.”

BRINGING THEM BACK

Flexibility about where work gets done remains a huge consideration in how workers feel about their jobs—and their employers. The typical worker equates the value of working from home to a pay raise of about 8 percent, according to a 2021 study led by Stanford University researchers. For companies that want to lure workers back to the workplace, here are some strategies that may help: Sell the comeback. With so many workers expecting to stay hybrid or fully remote, ordering employees back “because ‘that’s what we want you to do’ isn’t going to be particularly successful,” says Kazoo + WorkTango CEO Patrick Manzo. “It should be more like, ‘We think it’s important we spend some time together, because it’s the most efficient way to help you profitably develop and perform better and prepare yourself for the next role.’” Tread lightly. “What the subconscious wants more than anything is comfort and familiarity, and that’s what workers became accustomed to in two years,” says CEO strategy adviser Roger Martin. “Slowly get them into a new habit. Attract people back to the office with well-curated experiences. That will be a new skill of CEOs.” Pitch it as a career-builder. “People will say, ‘Why come into the office to sit in a cube and do work I can do just as well at home?’” says Armanino CEO Matt Armanino. “The answer is that there isn’t a good reason. But we say to them, there’s an element of your job that requires team-based work, and we want to train and develop you.’” Rethink the return mandate. “Really talented people—the ones who produce outside value for companies—can operate anywhere they want,” says Double Gemini CEO Prasanth Nair. “And if you’re one of those people and applying for a job, why apply for a job at a company that will have a location bias?”

CE

Taking Sustainability to the Next Level

Buoyed by constructive state government and a goal of helping customers become more efficient, one company is doing well by doing good.

IT IS FAIR TO SAY that Florida Power & Light Company (FPL) is not a company that sets modest goals. Most recently, in June, FPL, along with parent company NextEra Energy, threw down the gauntlet in the utilities industry by announcing a game-changing climate goal: “Real Zero” by 2045. Rather than promising to simply reduce emissions and purchase credits to offset usage, as many companies have done, FPL aims to completely eliminate carbon emissions from its operations.

It’s a tall order, to be sure, but pushing the envelope is in the company’s DNA, says FPL Chairman and CEO Eric Silagy. “It’s not easy, but we have visibility into how we’re going to get there because of our experience, particularly in migrating off fossil fuels to cleaner fuels, as well as with renewables.”

Indeed, FPL has set ambitious goals numerous times and managed to achieve them. In 2001, for example, it was the largest consumer of oil in the country. “That year we burned 41 million barrels of oil,” says Silagy. But the company grew uncomfortable with the volatility of oil prices, as well as the fact that they were importing oil from countries who were not allies of the U.S. They began by modernizing or replacing decades-old plants in order to move to natural gas—though not without a challenge. “We had many, many detractors, groups representing industrial customers and retail customers opposed to tearing down the old plants for a variety of reasons,” says Silagy. “But we stayed the course.”

The result? A 99 percent reduction in oil consumption. “Does that change the world? I don’t know—but it’s $4 billion or $5 billion a year in fuel that we’re no longer sending to countries that aren’t always friendly to us.”

Plus, the more efficient power plants have allowed the company to pass on some $12 billion in savings to customers. “We’ve been able to generate the same amount of electricity, but using less fuel.”

In 2019, FPL again made headlines, announcing it would install 30 million solar panels by 2030. “We are five years ahead of schedule,” says Silagy, “and not a single project has been over budget.”

Now that FPL has gone through this process and made the investments in green technology—including around $7 billion annually for the last six years, all while keeping customers’ bills well below the national average for more than a decade—they are in a position to help other companies figure out how to cut dependency on oil and improve energy efficiency, says Silagy. “We bring to our customers that kind of spirit of innovation and determination, and the track record of being able to figure out how to get there.”

Being located in a state that boasts a similar can-do spirit has been a big help. “We’ve got a very constructive regulatory environment here,” says Silagy. “Our permitting system is designed to help people get things done. It doesn’t start with ‘No, no and no’—it starts with ‘Wow, that’s hard. Okay, how do we get it done?’”

Like FPL, Florida has been motivated by economic reasons to focus on environmental issues. With one in eight jobs tied to tourism and 127 million people visiting Florida each year—making it the No. 1 tourist destination in the world—keeping the beaches pristine is critical. “It’s the right thing to do for future generations, but it’s also just really good business,” says Silagy, who notes that the state has worked to make sure that environmental strategies are affordable. “If it’s not affordable, it won’t be politically sustainable.”

The Sunshine State also offers a slew of other advantages to business, including economies of scale, multilingualism, low corporate taxes, no state income tax, and a higher education system that has been ranked No. 1 in America by U.S. News & World Report for the last five years. And at a time when companies are struggling to attract talent, being able to offer access to mild weather year-round is a bonus, says Silagy. “If you like the outdoors, this is a really great place to live.”

“It’s not easy, but we have visibility into how we’re going to get there because of our experience, particularly in migrating off fossil fuels to cleaner fuels, as well as with renewables.”

—Eric Silagy, Chairman and Chief Executive Officer, FPL