How Much Is the Skilled Labor Shortage Really Costing You?

How Much Is the Skilled Labor Shortage Really Costing You?

As business leaders, cost is on our minds all the time. Its an essential part of the job. However, sometimes we can overlook the true costs of our hiring approach when we’re focused on the urgent problems of today. The immediate problem is the lack of skilled workers, but oftentimes the real problem is what its costing you to not solve it.

There might be more costs than you realize with your current methods of tackling the trade gap in your business. Time invested in internal recruiting teams to locate, review, interview, and train new hires is a big one—especially if the new hire doesnt stick around. There are also hidden costs: lost opportunity, inefficiency in the workforce, and the strain on workplace culture.

Every company is different, and when we at Skillwork sit down with companies to learn about their unique situation, we come with a listen-first mindset. There isnt a one-size-fits-all approach. We recently worked with two companies that couldnt be more different: one is a large distribution company, and the other is a local auto business.

They were both experiencing the high cost of the skilled labor shortage but in vastly different ways.

Case #1: Huge company with facilities nationwide

They couldnt find the workers they needed, but they were also trapped by inefficient processes

One of our clients is a very large distribution company with roughly 40 facilities nationwide. They came to us because they were struggling to find warehouse workers, forklift operators, and mechanics. However, as we continued through our discovery process with their head of HR, we quickly saw another problem. They had inflated their HR budget and team of internal recruiters but still werent finding the people they needed.

Many companies increase their HR spend with little to no results

We talk about this more in-depth in a previous podcast episode, but the fact is that companies across the board are spending more on HR but expecting to see little to no results from it. And were not saying this has anything to do with the talent of HR professionals—far from it. Oftentimes, they just arent equipped to find the highly specific tradesmen needed, and recruiters can only do so much if the people arent available in the local labor pool.

Decrease fixed overhead and partner with Skillwork

The old model” this company was using to find and attract talent added significant fixed overhead and simply wasnt adequate for todays marketplace. Traditional hiring methods no longer work as well as they previously did to find the craftsmen companies need. For this distribution company, they recognized that they could decrease their overhead costs by diverting some of that resource to a partnership with Skillwork. It solved their immediate needs and reduced costs.

Companies similar to this one might consider transferring the risk of finding their own talent, which can cost up to $10,000 for one bad hire, and let a company like Skillwork find the people needed so they can get back to focusing on their core business.

Case #2: Smaller auto care company with a few local locations

A smaller, local auto company couldnt find the people they needed

Another client that we met with was a local auto care and customization company that partners with dealerships for auto care services (window tinting, clear coating, etc.). Their immediate problem was that they didnt have the workers they needed to get the job done—but they were also concerned about the cost of partnering with us.

Through our conversation with them, we realized that the opposite was true: they couldnt afford not to hire us because the cost of their current solution was actually more.

The high cost of lowering the bar

Like many companies who cant find the tradesmen they need, this auto care business had lowered their hiring standards in order to get the people they needed. Unfortunately, lowering the bar created inefficiencies in their day-to-day processes and was costing them significantly.

For example, an inexperienced worker could do one installation per day, whereas their more experienced workers could do three or more in the same amount of time. On top of that, the less experienced worker would often need help, taking additional productive time away from the veteran installers. There was a 66% output difference between a new person and someone with 2+ years of experience, which was adding up to a lot of lost profits.

The truth we shared with them was this: under-performers are costing you. In this companys case, it was costing them a significant amount of money, whereas Skillwork could actually provide quality people for a small fraction of the cost.

The stakes are too high

Take an honest look at your hiring costs and successes

When it comes to the skilled trade shortage and all the challenges it causes, its necessary to look at the true costs of your current approach. The reality is, it takes time, energy, and resources to find the specific hires that you need—and they might not be in your local labor pool at all. So thats a sunk cost with little to no return on investment.

In the event that you are successful finding the talent you need with traditional hiring methods, it will cost an average of $4,129 and 42 days, according to a recent study for Human Resources Management. And thats assuming that they are a good fit,  have the skills needed to do the job correctly, and wont cost your company in lost productivity or quality down the line.

Additionally, you might find that your current approach is stifling the growth of your business. Do you have the talent that you need to meet increased demand or capacity? While it might save you in the short term to continue with the status quo, it will likely cost your business in the future.

As both of the companies discovered, the stakes are too high to assume your current method is the most efficient for your business. Its vital to invest in good hiring practices for the longevity of your company. Not only will it improve your ability to meet your goals and objectives, but also promotes a healthy workplace culture without the strain on morale. When you have committed, quality workers, you reduce turnover and create a stable workplace culture.

Dialogue with Skillwork. Risk-free.

We would love the opportunity to talk with you about the real and hidden costs of the trade gap in your business. Our number one goal is to understand your problem and then work together to make a solution that can help. We dont show up with a pre-determined solution but rather, ready to listen.

Our consultations are no-cost, no-obligation—just a conversation. 

You can click the button below or give us a call at 402-447-7058 to talk with a Skillwork Recruiter today and learn more about our solution to your labor shortage problem.

Talk to a Skillwork Recruiter

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