This article was originally featured in the Harvard Business Review, written by Joseph Fuller and Manjari Raman.
Despite all their efforts since the summer of 2021 to bring frontline workers back into the fold, companies are struggling to rehire and return operations to pre-pandemic normal. As a result, they have failed to deliver products and services, lost revenue, and disappointed their customers.
Supply chains remain snarled, with warehouse and delivery operations woefully understaffed. Grocery stores and pharmacies are unable to keep their shelves stocked. Restaurants can’t find enough cooks, cleaners, and waiters. Hotel chains can’t book to their full capacity because they don’t have enough housekeeping staff. Airlines have been forced to ground hundreds of flights.
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In 2021 companies convinced themselves that the labor shortages they were experiencing were a passing phenomenon, and in response, they trotted out the standard short-term fixes: raising wages by a few dollars an hour, awarding signing and referral bonuses, and even offering more flexibility in working shifts. But none of those measures were particularly effective.
So in 2022, with the labor situation worsening, some companies resorted to tactics that ran counter to their core strategies. CVS and Walgreens began closing stores earlier or shutting down on Sundays. Domino’s, unable to find drivers, reversed its focus on deliveries and instead offered customers a $3 “tip” if they picked up their own orders. Others took extraordinary measures to fill frontline jobs. When it didn’t have enough baggage handlers, Qantas begged senior executives to volunteer to sort, scan, and transport baggage for three months.
Companies blamed everyone but themselves for the labor shortages: The pandemic was a once-in-a-lifetime shock to the system that had provoked the scarcity. The government had exacerbated the problem by issuing stimulus checks. High rates of churn were a fact of life in the world of low-wage work.
But that thinking was misguided. After studying this topic for several years, as part of Harvard Business School’s Project on Managing the Future of Work, we have concluded that the real problem lies in the way that organizations mismanage their hourly workers: They are underinvesting in those employees and harming their own strategic interests.
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