Due to the stress of the skills and talent shortage, employers are making knee-jerk hiring decisions that are resulting in capability issues and overpaying employees, according to RMIT Online.

The effects of employers’ scramble to respond to the skills and talent shortage is starting to come to the fore.

RMIT Online’s recent Salary Trap report, which surveyed 800 employees and managers, found that 46 per cent of managers feel they’ve overpaid new hires in order to attract them to their organisations. 

What’s more, 40 per cent of managers are reporting that new employees are not up to scratch and lack the skills to perform their specific role they’ve been hired for.

“I think you can connect all of this back to the very low unemployment figures [which have only recently started to rise] and the sparsity of talent in the working economy,” says Julian Stevenson, RMIT Online Product and Workforce Development Director.

“Employers are making fast decisions that don’t necessarily give them the talent and skills they need,” he says.

Here’s how HR professionals can help their organisations respond to these challenges and adopt a more strategic approach.

Managers are over-promoting people

Not only do managers feel that their new hires don’t have the right skills, they also feel unprepared themselves. 

The report found that a third of managers who moved jobs in the last 12 months feel they don’t have adequate skills. Alarmingly, these people felt their skills deficit was so significant that it might prevent them from being able to continue performing their job.

Over-promotion isn’t a new trend, says Stevenson. But it might be that we’re seeing it more as employers engage in panic hiring behaviours in response to the unstable labour market.

Placing someone into an influential role, such as management, before they’re ready for it can have a negative ripple effect across the entire organisation. Mistakes can slip through the cracks, trust issues can emerge and those working alongside or beneath the person can miss out on critical development opportunities, which can hamper growth across the entire organisation.

“The opportunity for HR now… is to move this whole learning and development agenda to be a visible, core driver of business success, rather than something that’s tacked on.” – Julian Stevenson, Product and Workforce Development Director, RMIT Online

So what’s driving people to apply for these jobs in the first place? There could be myriad reasons: perhaps there is a gap between their confidence and competence; the job advertisement might not have been clearly communicated; or, as RMIT Online’s research suggests, they might be fleeing from less-than-ideal conditions in their former role.

The report found that respondents experienced a lack of appreciation (57 per cent), unsatisfactory pay (51 per cent), poor management (43 per cent) and a lack of career progression opportunities (41 per cent) from their previous employers.

The solution: HR managers need to have a clear framework of the skills needed for a certain role, says Stevenson.

RMIT Online suggests conducting a skills audit for new hires to ensure they have all non-trainable skills needed for the role, so HR/managers can hire with confidence.  (You can see leadership expert Liz Wiseman’s take on inherent versus trainable skills for star hires in this infographic).

“Build a really clear capability framework that allows managers to address the risk of over-promoting,” says Stevenson.

For example, you might say that the non-negotiable skills required to step into a leadership role are:

• High emotional intelligence
• Critical thinking
• Active listening skills
• Strong collaboration
• Relationship building skills

“Map those out, conduct assessments of individuals in the workplace or have them very clearly defined in the hiring process. That helps to protect a business [from over-promotion].”

Stevenson also notes that leadership support is critical when setting up a development strategy.

“That offers you a layer of protection around promoting people too quickly into roles where they might have too much accountability or responsibility… because you’ve got the oversight of experienced leaders [guiding them].”

Managers feel they’re overpaying people

In the last 12 months, nearly half of all respondents admitted to talking negatively about their role and pay to their friends. Managers were slightly more likely to do this (48 per cent) compared to non-managers (45 per cent).

This translated into managers being slightly more open to being poached by a competitor (53 per cent) compared to non-managers (50 per cent).

While Australian employees historically tend to value lifestyle benefits, such as flexible working, more so than competitive pay, this research suggests pay has been bumped up on the priority list, likely due to cost-of-living pressures and the aftermath of the pandemic.

When asked what would entice them into a new role, pay and career opportunities came out as the top two responses (see graph below).

Just over 60 per cent of employees would consider changing their job if they were to secure a $10,000 pay increase, and 28 per cent would move for a $5000 bump.

But relying on pay increases as an attraction strategy will only have short-term gains. 

The effects of a pay rise are usually short-lived. That’s why concepts such as The Great Regret have emerged at the tail end of this year – people jumped ship wearing their rose-coloured glasses and now they’ve removed them, they see that their reality isn’t what they’d hoped for.

For example, they might have jumped at the chance for a $10,000 pay increase without considering if they were aligned with the company’s values, or if it was doing enough to create a high-quality hybrid work experience.

The solution: Focus on the overall employee value propositions (EVP), says Stevenson.

Think holistically about your offering. For example, the graph above shows other key interest areas that could help to retain existing employees, such as offering paid study time or more streamlined and effective hybrid work arrangements.

You could also consider:

• Progessive leave options
• Offering services to working parents (childcare subsidies/on-site creche etc.)
• Setting up mentoring opportunities with influential figures in the workplace
• Moving beyond the constraints of 9-5 to give employees more flexibility
• Giving employees access to cutting-edge technology
• Opportunities to reskill/hone existing skills

“Businesses that invest in their staff and weigh up their entire employee value proposition – whether it be through formal training, work projects, or on-the-job skills – will ultimately attract and retain key talent,” he says.

Conflict between new and old hires

Employers paying more to secure new hires is not only potentially putting unnecessary financial pressure on organisations (especially if their new starters can’t immediately add value), it’s also driving a wedge between new and existing hires.

Thirty five per cent of managers and a quarter of non-managers reported that new hires were making the most money in their organisation, which is leading to internal friction.

This has the potential to lead to internal conflict, claims of favouritism and a lack of collaboration between teams.

“As people are fundamentally rethinking their careers, now more than ever, they want to contribute and feel valued. If businesses don’t adhere to internal fairness or equal remuneration principles, it can result in feelings of dissatisfaction and devalue the contribution they make within the business,” says Stevenson.  

Research has even shown that unfair treatment in the workplace can lead to employees taking more sick leave, lowered loyalty and increased risk to overall wellbeing.

The solution: Stevenson says it’s really important to home in on your existing workforce. It costs more to hire someone than it does to reskill an existing person.

“Hiring new staff is not always the solution – both in terms of bridging our skills divide and creating friction with the legacy team.

“[This research] is highlighting the risks of the mindset of ‘We need new skills, so we need to hire new people’ without first looking at your current employees.”

While he says remuneration will always be a key driver to attract talent, RMIT Online’s previous research demonstrates that many people prefer upskilling benefits, on-the-job training opportunities and new career pathways.

“Earlier this year, we found that 20 per cent of people would prefer training over a pay increase. That’s not a huge number, but it’s still significant.”

He adds that learning opportunities need to be “contextualised and meaningful” in order to have any benefit.

“It also needs to be easily applied to the work employees are doing, and recognised as valuable by the organisation.”

Rather than jumping to a knee-jerk reaction and giving existing hires a salary bump to match that of the new hires, and risk adding more financial pressure to your business, strategic organisations would reassess the EVP for existing staff. 

What else can you offer them to make them feel valued, challenged and engaged in their work?

Read HRM’s guide on developing personalised EVPs for more advice.

What’s next?

Organisations need to embrace this new reality, says Stevenson, as it’s unlikely that the world of work will simply snap back to ‘normal’.

“There’s a lot more hunger for moving careers and this leads back into organisations having clear career pathways. Otherwise people will leave and go elsewhere,” he says.

“Everyone is feeling the effects of the skills deficit and the talent shortage. It’s a complex problem and one that’s evolving very rapidly. Offering better remuneration as the sole response to talent shortages is a short-term solution to a more complex and far-reaching challenge.

“The opportunity for HR now, as a core function of the business, is to move this whole learning and development agenda to be a visible, core driver of business success, rather than something that’s tacked on. HR can help to solve problems for businesses and the Australian economy.”

Learn how to manage the talent lifecycle – from identifying top-notch hires to learning how to set up effective succession plans – with this short course from AHRI.