Inflation And War Will Damage Recruiting, Retention And Productivity

Distractions like high commute costs and the Ukrainian war lower productivity and hurt retention/recruiting.

We now know all too well how external factors like the pandemic can dramatically impact the people management practices of all organizations. However, few currently realize that the rapidly rising cost of living is already distracting and stressing your employees. And that will lower team productivity.

Especially empathetic employees will be distracted during work whenever the plight of the millions of Ukrainian refugees rises to the top of their thoughts. This distraction is made stronger every day because employees are bombarded with constant news updates about this war, those killed, and the horrendous plight of refugees.

Plan On Facing More Difficulty In… Recruiting

  • Distractions will reduce innovation – nothing stops employee innovation faster than burdening distractions. So if you expect to have anything about zero rates of innovation, your company and team will need to take action to minimize distractions. 
  • Distractions will also reduce productivity – unfortunately, these multiple distractions will worry and stress your employees. Will lower their engagement and lessen their focus on producing quality work. And that distraction will likely increase every time they hear news about another rising inflation and gas costs. And finally, realize that employees are focusing on their search for a new job. They will naturally be less productive because of their time away interviewing and reduced focus on their current work. 
  • Added stress will increase accidents and errors – a rising cost of living and increased political turmoil close to the elections. Will at the very least distract and stress your employees. And that stress and distraction will likely increase work errors and on-the-job accidents. And eventually, more accidents will increase your insurance costs. So it became necessary for managers to emphasize quality control, safety training, and closer observation to minimize these problems.
  • Prepare for an increase in absenteeism – expect more employee absences for various reasons. First, their stresses and distractions may cause some employees to skip a day of work periodically. While others may miss occasional days just to save commute costs. Also, expect an increase in absenteeism when more of your team’s employees miss partial or complete days when they are off looking for a new job.
  • With more employees involved in job search, productivity will be reduced – with a combination of even higher employee turnover and slow recruiting facing teams. Managers must plan on losing productivity because many of their team’s jobs will be open for many more days than before. These “vacancy days” are when no one is working in a team’s position. Due to more resignations and a slow process for hiring replacements. And finally, expect additional lower productivity as each job vacancy will be much longer because a higher percentage of open jobs will never be filled. 
  • Plan on a lower workforce ROI rate next year – it’s true that team labor costs will increase due to the added costs of employee churn. Which requires a larger investment in off-boarding, recruiting, and onboarding/new hire training. And with the lower level of team productivity as a result of all the factors listed in this section. The combination of less output and higher costs will mean that the Talent Management team will have a measurably lower ROI rate next year. 
If you can only do one thing© – conduct a short survey of a sample of your workforce to identify the significant outside of work issues that distract, stress them, or cause them to want to quit. Then, executives, HR, and workers need to work together to determine how much your organization can minimize those issues.

Final Thoughts

Traditionally, managers and HR professionals don’t need to pay much attention to external factors beyond the average unemployment percentage and the “quit rate.” After years of struggling in our constantly changing VUCA world, managers must realize that certain aspects of the external environment need to be monitored constantly. And currently, the highest impact external factors to track are inflation, skyrocketing commute costs, high housing prices, and a faraway war. Now, managers need a plan to handle each of these issues to minimize their negative impacts on retention, recruiting, and productivity. And BTW, there is no time to waste.

Author’s Note

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About Dr John Sullivan

Dr John Sullivan is an internationally known HR thought-leader from the Silicon Valley who specializes in providing bold and high business impact; strategic Talent Management solutions to large corporations.

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