It’s no secret that the past two years have brought about changes the world wasn’t ready for. The pandemic incited record job losses, retirements among baby boomers, a mass exodus of women from the workforce, rapid adoption of remote work, and so much more. Yet while people and businesses scrambled to adapt to so many changes at once, technology advancement skyrocketed.

By mid-2021, the vaccine was widely available in the U.S. and many businesses have resumed operations. Employers are on a hiring spree, but new challenges have arisen. The workforce exodus of 2020 has accelerated a previously impending shortage in the supply of skilled workers to meet the surge in hiring demands.

Combining a smaller pool of available workers with a growing number of open jobs means today’s job seekers are empowered with more choices and better bargaining power. They are commanding higher wages, improved benefits, flexible schedules, remote work, and other incentives, and employers are paying attention.

Amid a lack of skilled workers, many employers are taking one or both of the following actions:

Offering better incentives — Increasing spending to offer higher wages, sign-on bonuses, and other incentives to compete for talent; and/or
Implementing automation faster — Adopting automation rapidly to cut costs and supplement operations that previously relied on people

Both actions have benefits and drawbacks, and success depends on the organization’s ability to maximize the positive aspects of both. Implementing automation requires investment by the employer and employees that goes far beyond purchasing the tech itself. Substantial time, effort, and thoughtful planning are all required to make automation work for the company and its employees.

Incentives vs. Automation

Today, many companies are facing challenges as the number of available jobs skyrockets amid a smaller pool of available workers. Job seekers are commanding higher wages, improved benefits, flexible schedules, remote work, and other incentives.

To address the lack of skilled workers who are willing or able to work in conditions that were standard before the pandemic, many employers are responding by offering better incentives, implementing automation faster, or a combination of both.

Offering Better Incentives

Demand and competition in the market have caused many employers to invest more time and resources into accommodating the needs and wants of their employees. Many employers have responded by increasing spending to offer higher wages, sign-on bonuses, and other incentives to compete for talent.

This can be mutually beneficial because when employers take time to understand what employees are looking for, they can substantially improve recruitment, retention, and employee satisfaction. And the benefits for the employees are clear.

However, without extensive efforts to understand employee needs, employers risk burning cash on the wrong incentives with little or nothing to show for it, especially when competition is high. This response runs the risk of causing negative effects like wage inflation within an industry, loss in profitability, and other issues that negatively impact employers and employees.

Implementing Automation Faster

The same demand and competition have also caused many employers to consider lower cost options such as automation. Pre-pandemic studies suggest automation trends have been gaining momentum for years, but the pandemic has accelerated adoption as employers urgently search for solutions to their talent challenges. In 2017, McKinsey estimated that as many as 375 million workers could be displaced by automation and need to find new jobs by 2030. Today, employers are increasingly opting for automation to decrease costs and supplement operations that previously relied on people.

The risks of automation to workers have been widely dramatized in the news, media, and TV/film for decades. For some, the thought may provoke images of job loss, massive unemployment, and even robot world domination. Some of these risks are more realistic than others, but as daunting as automation can seem, proper implementation can lead to major benefits for employees. When employers automate repetitive or dangerous tasks, employees can enjoy more cognitively engaging work, among other benefits.

Maximizing Automation for Employer and Employee Benefit

According to Daron Acemoglu, an economist at MIT, firms pay around 25 cents in taxes for every dollar they pay workers, compared with 5 cents for every dollar spent on machines because companies can write off capital investments (source: Wall Street Journal). In other words, automation is viewed favorably by businesses because it can lower costs in the short-term (such as reducing the need for sign on bonuses) and in the long-term (such as reducing taxes).

When a company leader is weighing the costs and benefits of employee incentives versus automation, automation may seem cheaper and less risky. The good news is that incentives and automation can be combined to produce cost savings while retaining and advancing talent, which benefits employers and employees.

With proper planning and implementation, automation in the workplace can increase productivity by automating mundane or dangerous tasks while decreasing costs and creating better opportunities for people to grow and use their skills. With a combination of cost savings and increased revenue resulting from improved productivity, employers can choose to invest more in their employees by offering more competitive pay, learning and development opportunities, and more fulfilling jobs.

Christine Chow, director at Global Tech and head of Asia and Global Emerging Markets at Federated Hermes, has highlighted the importance of companies taking a coordinated top-down/bottom-up approach to incorporating automation into their systems. Intel, Microsoft, IBM, and Google are all good examples of such an integrated approach. These companies have focused on creating forward thinking teams that incorporate employees on the frontlines of the company with those in the executive suite. These teams look at how automation can be used in their company, how it will affect employee tasking, and how automation can elevate service to its customers.

Case Study — Restaurant Industry

According to the 2021 State of the Restaurant Industry Report by the National Restaurant Association, 2020 was the most challenging year ever experienced by the restaurant industry:

Restaurant and foodservice industry sales fell by $240 billion in 2020 from an expected level of $899 billion.
The eating and drinking place sector finished 2020 nearly 2.5 million jobs below its pre-coronavirus level.

Coronavirus impacted all industries, but the restaurant industry was among the hardest hit. Restaurant owners and operators across the U.S. dealt with a plethora of issues ranging from the health and safety of employees and customers to supply chain shortages and new ways of operating.

Case Study (hypothetical)

Consider the thought process for a restaurant CEO whose national chain experienced a 25% decrease in revenue in 2020.

When the company was forced to close its dining rooms across the U.S. in 2020, its CEO realized they needed to pivot the company strategy to survive the changes. Together, the executive leadership team decided to partner with a service to offer on-demand delivery, and over the course of eight months, increased revenues back to pre-pandemic levels. Today, nearly all locations are hiring, but few can find talent.

The restaurant CEO is faced with a difficult decision. Pre-pandemic, the company had increased its minimum wage to $13.50 an hour, which was competitive with peers at the time and drew skepticism among some of the board members. Times are different now, though.

Should the company offer sign-on bonuses to new employees? That may attract more people, but will they stay? What will the workers who stayed through the pandemic think when new employees are making more than them? Will they need to offer a bonus to these employees for their loyalty? Should they raise the company’s minimum wage again? Would that mean they would need to increase the price of their products?

These options could offer some benefit, depending on employee need. But they are all costly and high risk. Margins are slim in this company’s restaurants, which offer high quality ingredients at a competitive price. If the CEO raises the minimum wage to the maximum level possible while maintaining profitability, a competitor could offer $.50 more per hour and poach their talent, leaving the company worse off and putting employees at risk.

After carefully contemplating their options, the restaurant CEO decides to partner with a company like Miso Robotics to automate specific tasks in the kitchen, those that are the least safe and appealing to her employees—like managing the timing of the fry baskets and cooking burger patties. She learns that automating these tasks would save her money on incentives in the short-term, taxes in the long-term, and would allow her to retain her current staff while increasing the training budget so some can train to operate the new equipment.

With the increased output from the automation and more employees focused on customer service, she will be able to serve more happy customers, revenue will increase, and she will be able to hire more employees.

This may be best case scenario for this restaurant CEO. Introducing automation in the workplace takes time, effort, and thoughtful planning to make it work for the employer and employees.

Decision Phase: Incentives, Automation, or Both

Companies contemplating the future of their workforce strategy can get started with these five steps:

Analyze company finances and compare revenue trends with costs. Identify any sources of funding that can be devoted to addressing talent issues.
Identify urgent hiring needs, capacity, and gaps. Assess current talent attraction and retention strategies to determine which efforts have been successful or unsuccessful.
Conduct an internal SWOT analysis and choose strengths to amplify through talent attraction, focusing on the company’s unique value proposition as an employer.
Use hiring needs assessment to explore automation potential for positions with an urgent talent shortage.
Compare the anticipated risks and rewards of incentives vs. automation, and prioritize implementing the lowest-risk, highest-reward option(s).

Implementation Phase

Once the company has developed a plan and is ready to implement, it must prioritize the following:

Obtaining buy-in at all levels, starting with company leadership and a select focus group of employees who can advise and raise concerns early in the process.
Developing a comprehensive plan with clearly defined metrics and methods to measure outcomes.
Create a plan for communicating early and often with employees.

Executive Takeaways

Companies today are facing challenges as the number of available jobs skyrockets amid a smaller pool of available workers. Job seekers are commanding higher wages, improved benefits, flexible schedules, remote work, and other incentives.

Many companies are responding by offering better incentives and/or implementing automation faster. There are benefits and drawbacks to each. Companies like Miso Robotics have been refining revolutionary workplace technologies that offer solutions to these emerging workforce challenges. Incentives and automation can be maximized together to produce cost savings while retaining and advancing talent, benefitting employers and employees.

The following five steps are essential to making a decision about whether to invest in incentives, automation, or both:

Analyzing company finances and talent budget
Assessing hiring needs and practices
Conducting an internal SWOT analysis
Exploring automation potential
Weighing risk and reward to make a decision

Once a decision is made, companies must shift their focus to implementation:

Obtaining buy-in at all levels, starting with leadership
Developing a comprehensive implementation plan with KPIs
Communicating early and often with employees

With proper implementation, incentives and automation can be deployed independently or together to maximize benefit for employers and employees.

Workmorphis provides a full suite of services, including strategic advising and implementation, to help employers implement better technology and maximize opportunities for the company and employees.

Meet the Authors

Emily Fabiano (Author) is the founder of Workmorphis, a cross-sector workforce consultancy helping organizations build a more resilient workforce to thrive in a changing economy. Fabiano has deep experience in workforce transformation at the government level, working at the cross section of workforce strategy, economic development, and public policy. With a keen understanding of the unique challenges facing today’s and tomorrow’s workforce and the ability to communicate across sectors, Fabiano brings a new level of understanding and collaboration required to address the necessary changes to better connect industry and education to prepare people for jobs.

Workmorphis provides a full suite of strategic workforce solutions to industry, education, and government in the Midwest and across the country.

Dr. Molly Liechty (Contributor) is a Human Factors scientist with expertise in human/machine teaming and automation adoption strategies. To better understand how technology can be incorporated into a working system, Dr. Liechty relies on task analyses and human performance assessment—applying scientific principles to optimize performance and support worker capabilities. She has a special interest in developing human capital metrics that go beyond simple accuracy and efficiency to demonstrate the adaptability of our workforce in complex and dynamic environments. Dr. Liechty recently moved from the Virginia/DC area and currently works for Leidos at Wright Patterson Air Force Base with the 711th human performance wing.

Resources

Automation in the Age of the Sign-On Bonus: Maximizing Results for Employers and Employees