CRE Workforce Dynamics & Hiring in 2022

Author: Forbes J. Rutherford, Principal, Rutherford International Executive Search Group Inc., Managing Director, NEXTalent Marketplace & Job Board, T: 855-256-5778 or Chat

In Q2/2020, Rutherford International canvassed the opinion of 204 senior multi-sector industry leaders within Canada’s commercial real estate industry about political, economic, social and technological threats through to Q4/2021. Respondents with direct or indirect authority over their human resource plans also provided details. The data collection phase was completed early on in the pandemic when no one foresaw an extended lockdown.

This article is the second of a three-part commentary that examines potential threats to Canada’s CRE industry, post-pandemic workforce dynamics and industry employment in 2022. This section of our paper highlights the long-tail impact of the COVID19 pandemic on the workplace and the trend toward distributive workforce design. Part three of the series will extrapolate occupier demand forecasts for commercial, retail, residential and alternative assets into a CRE employment forecast for 2022/23.

Pandemic Fallout – A Distributive Workforce is ‘The Great Reset‘ 

During the pandemic’s early phase, the economy entered a political, economic and social unknown bolstered by distributive “Work from Home” (WFH) decree. This mandate necessitated organizations reluctantly accommodating and integrating WFH into their hierarchical leadership structures. In a matter of weeks, we pivoted to a distributive workforce framework. The adjustment was admirable and due to successful scalability technology, workforce compliance and leadership agility. Where necessity is the mother of invention, organizational agility is its handmaiden.

Distributive Workforce – A Definition

The “Distributive Worker” describes a broad segmentation of workers. They could “work from home”, “flex-work” between home and office, otherwise known as a “hybrid worker.” They could “co-locate between offices or regions,” be “remote” or “nomadic,” never coming into the office. Also known as Gig workers, independent contractors can work in the office, but 80% worked remotely pre-pandemic.

Distributive Workforce – Isn’t a Pandemic Phenomenon 

Before the pandemic, corporations applied flex-work staffing solutions such as independent contractors or Gig workers by 40% of their talent roster. In 2019, 4.3 million American employees, or 3.2% of America’s workforce, worked from home at least half of the time. Long before COVID compressed the WFH concept into an unstoppable overnight reality, tech-savvy Gen-Y and Gen-Z employees were the primary cohorts lobbying for remote or distributive work/life balance.

Distributive Workforce – The Future is Now 

Fifty-nine per cent of survey respondents agree the long-term ramifications of employee expectations to work remotely will cause employers to embrace the idea of a distributive workforce and workplace automation. The worker’s motivation to seek a distributive work environment is mostly about balancing life and work. However, the employee should be careful what they wish for, as the employer has discovered the cost-benefit of contracting borderless offshore skills to reduce general and administrative expenses. What was once the purview of large companies, automation, and workforce distribution has quickly become cost-effective options for medium and even small enterprises. 

Not all high-performers have C-Suite career aspirations. An increasing number of Gen-Y and Gen-Z workers have opted to become independent consultants and contractors, often working for large consulting firms on contract. In the battle for scarce talent, a hired gun might be the brief skillset a company needs on a project or corporate development initiative. The probable outcome of this COVID19 induced workforce experiment will result in the selective hiring of independent consulting Skills-on-Demand specialists for one day to six-month specific projects. 

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Hiring Challenges in 2022 – Hiring a High-Performing Distributive Workforce 

Employers are adept at equating experience, education and skills requirements when judging prospective hires, but statistically, 80% of involuntary departures are due to behaviour. A statistic of this significance makes figuring out cultural fit the dominant hiring challenge in a distributive workforce. Hiring only for experience gets you average results. Hiring for performance and behavioural fit gets you 55% greater productivity and 25% greater profits than an average employee in the same role. 

Distributive workforce roles are nuanced, and each classification represents a different performance profile. Not everyone can work remotely, but far more can work in a hybrid environment. If working hybrid is the new normal, then the challenge for the employer will be identifying employees who have the behavioural profile to work in a distributive environment. 

There are endless psychological tools used for behavioural assessment. Few, however, are capable of associating behaviour to specific career functions. A person may have a solid behavioural orientation to business as a Chief Executive Officer or President but lack the critical traits to high perform as a CFO. The same is true for a remote working Corporate Consultant or a sales representative working from home.

Many behavioural assessment tools explain their analytics to the layperson by placing the test subject into a personality quadrant of types with sub-categories to allow for variation. Advanced behavioural and hiring science is not that simplistic. People are complex. Their Personality DNA has eighty-five measurable traits, with each attribute contributing to a complex behavioural helix. The combination of these measurable traits and competencies are highly subtle. High-performers in each of our functional benchmarks have twenty-two to twenty-three of the eighty-five characteristics in common. For instance, a high-performing real estate lawyer and a high-performing litigator may share the relative scores in eighteen of the same traits and competencies but vary in scores for the remaining five. It is these five traits that may be better suited to their chosen legal discipline.

In the past, access to the actuarial science necessary to calculate an individual’s potential for success was limited to the executive suite of the Global 2000 companies. Today, with algorithmic machine learning and AI analytics, science-based hiring can be a standard hiring policy for the smallest of enterprises. Employers can be more accurate in hiring for ‘fit,’ and individuals can be more predictive in choosing careers where they’ll be most successful and satisfied.

To Learn More About Rutherford International’s Approach to Hiring a Distributive Workforce

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Hiring Challenges in 2022 – Understanding Hybrid Workers’ Behaviour 

Assuming education, skills and, where possible, experience is equal, an employer should weigh their prospect list using the candidate’s POS (Potential of Success) score. This POS score is a benchmark that compares the prospects eighty-five Personality DNA traits to the twenty-three traits high-performers will share in a comparative function.

However, when considering candidates for a distributive workforce, the hiring manager would be wise to include traits and competencies that support the nature of the working environment. The two most admirable qualities required of an effective WFH employee are related to achieving goals. They are conscientiousness and industriousness. The additional characteristics we seek in a hybrid worker are Common Sense, Communications, Reflectiveness, Responsibility, Versatility, Written Communication, Tact, Constraint, Drive, Initiative, Goal Setting, Cooperation, Empathy, Humour, Community, Fraternity, Service, Learning, Purpose, Stress Tolerance and Family. 

Hiring Challenges in 2022 – Distributive Workforce Leadership 

Much has been written about Hybrid Work-From-Home employees and, less so, on what leadership traits are necessary for managing within this workplace environment. Unfortunately, the data is rudimentary, primarily anecdotal, often leaning to the “How to” of motivating and engaging as opposed to knowing if the manager has sufficient leadership agility to adjust to WFH employees capable of “self-motivation” or “self-engagement.” 

At Rutherford International, we evaluate seven leadership styles when assessing executive and managerial talent. They are: Agile, Inspirational, Entrepreneurial, Utilitarian, Directive, Administrative and Collegial. Research suggests that most leadership styles are personality-based at their core. This interpretation means, if you leave it to the “average” manager, they will rely upon their familiar or default interpersonal or personality type while managing. Which mean, when a problem requiring leadership arises, this “average” manager doesn’t have the means to double-clutch or adapt their leadership type to fit the circumstances.

For example, consider the manager with a default “Directive Leadership” style. A Directive leader does not feel the need to consult employees. This management style will expect employees to follow orders and willingly receive “constructive criticism” without discussion or reciprocal feedback. This commanding leadership style tries to set up an environment that motivates by creating a structured set of rewards and punishments. Whether on-site or hybrid, this style is antithetical to managing a post-pandemic team.

Most leaders and managers do not have a single dominant style but are more undifferentiated. They score equally in all said styles and struggle to know which kind to apply to a situation. A leader with multiple types scoring high in two or three with little differentiation has a repertoire of leadership styles that can adapt to the problem at hand.

The leadership competencies we consider necessary for managing a hybrid workforce are: Sustains profitability, Seeks Innovation, Embraces Change, Thrives in Chaos, Drives Achievement, Communicates with Clarity, Maintains Accountability, Builds Consensus, Communicates Strategic Vision. 

Rutherford International Succession Planning Program for a Post-COVID19 World

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Hiring Challenges in 2022 – Hyper-Retirement, a Systemic Exodus

Out of 65 possible threat scenarios, approximately seventy-six per cent of respondents described talent quality and scarcity as ‘somewhat likely or likely’ for 2021. They were classified as emerging threats, implying respondents guessed they had a runway of three or four years to manage the impact of retirement driven vacancies. Workforce effectiveness was ranked higher by eighty-three per cent of respondents. However, none made it into the top thirty of our heat map.

Unbeknownst to all of us, COVID19, a Black Swan, arrived with a thud, shaking the employer/employee social contract to its core. One critical knock-on effect was the hyper-advancement of the Boomers (and early Gen-X) retirement timeline. Those who can retire are not returning to full-time work. The industry should expect a higher-than-normal spike in Q1/22 retirements once STIP and LTIP compensation programs are received. This compression of four retirement years into one will likely compound the industry’s challenge to retain institutional knowledge and find quality talent through 2022/23.

Given pension fund portfolio weighting, this challenge to the industry risks being longer if inflation, broader public sector entitlements and early retirements negatively affect pension fund’s ability to meet annual retiree distributions. If the government had the will, it would revisit the idea of resetting the retirement age back to age sixty-seven to offset pressure on the pension plans and keep the labour supply intact. Such a public policy shift would result in a political backlash from senior voters; however, those directly affected would be the long tail of the Boomer Generation. The majority of the Boomer cohort has already surpassed age sixty-seven. 

Succession Planning and Retention of Generational Knowledge

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Hiring Challenges in 2022  – The Scarcity of Productive Workers 
Returning to the Status Quo isn’t a Panacea 

Workforce engagement and productivity have always been challenging, leading to a bevvy of employee engagement programs. COVID has added another dimension to this grand corporate I/O Psychology experiment to encourage workforce productivity. And yet, statistically exact though understandably provocative, pre-COVID research determined that seventy-three per cent of employees were unhappy with their job.

How do you motivate a dissatisfied employee?

And yet, further studies applying productivity metrics suggest employees working from home since the COVID lockdown has increased their productivity. These were metrics worthy of further investigation when recent research implied that a third of WFH employees hold a second job.

Productivity improvement in a distributive workforce? 

Why is productivity similar or higher for distributive workforces? Perhaps a segment of the 73% of employees claiming job dissatisfaction before COVID changed their minds by working from home for eighteen months. Add this group to the 27% cohort of employees satisfied with their jobs, and the calculus adds up to increased productivity. Whatever the reason, employees have learned the escalated value of WFH on their quality of life. No private-sector employer should be surprised if their staff return to the pre-COVID19 in-office status quo unwillingly.

Public and private sector employers should not be naïve about employee engagement. Working from home or hybrid may reduce the percentage of employees dissatisfaction but only marginally. For many, working from home has reinforced their job dissatisfaction, which may explain why one-third of WFH employees have found a second job. Although productivity numbers have stayed even or improved, companies should realize some members of their workforce want to work remotely “to avoid working.” However, an even more significant segment of employees, “the social ones,” prefer being in an office environment, the same ones who typically engage in unnecessary social interaction at the expense of maximizing their performance. 

It may seem counterintuitive, but the most effective employee engagement program is helping an employee understand why they seem disengaged. This can be achieved with the help of a science-based behavioural assessment. Once completed and the decision is made for the employee to remain with the firm, the next step is to leverage the assessment findings and chart a custom career development plan for the employee that is designed for success.

No one aspires to be average. Often, dissatisfaction occurs from not charting the right path early in one’s career. It is not uncommon for a person to choose a career to satisfy someone else’s aspirations. The best post-secondary gift one can receive in life is to learn what careers they could pursue, where they will high-perform. Many psychometric tools claim this predictive utility; however, only two such global tools are worthy of the claim.

Learn More About Rutherford International’s NEXTpath Career Diagnostics

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Hiring Challenges in 2022 – Unintended Consequences – Lawyering Up 
Codification of Hybrid/Work-from-Home/Remote Employment Clauses 

A hybrid flexible workplace is now an employee expectation, and a new covenant with high-performing employees is required. Subject to the nature of the position, high-performing employees will take advantage of increasing talent scarcity and expect workplace flexibility codified into the hiring agreement. Moving forward into 2022, employment agreements, especially with high-knowledge and skilled employees, will require some form of hybrid WFH/remote clause to ensure their retention or acquisition.  

With hybrid WFH/remote clauses codified into future hiring agreements, knowing if the candidate or manager can work in a hybrid workforce environment is essential. There is no sense in hiring an employee whose Personality DNA doesn’t conform to the direct manager or the firm’s culture. Everyone thinks they can work remotely, but not everyone can. Nor do all managers have the leadership agility to manage a hybrid or distributive workforce. Managers with a “Utilitarian” and or a “Directive” leadership style prefer to seek environments where they can exert power. Such a leadership style may not conform well with a hybrid employee who responds better to inspirational, entrepreneurial or collegial leadership.

Prepare for Severance Clauses in Key Employment Agreements 

Employers sit upon the horns of a dilemma over COVID vaccination mandates. Life/safety and liability insurance underwriters demand vaccine mandate compliance of their insurers regardless of distributive workforce solutions, natural immunity, home-based testing, and soon to be announced therapeutics. The governments and health authorities have distracted corporates into implementing a self-guidance patchwork quilt of protocols.

It is a challenge worthy of Soloman with the unintended consequence that workers are unlikely to have confidence in government labour regulations and collective agreements to protect their future employment interests. This socially sobering realization by the workforce will be evident in future collective bargaining agreements with organized workers. Employment lawyers will be active in amending employment contracts with pre-determined severance clauses for all full-time hires. 

The idea of a prospective employee negotiating their exit in parallel with their arrival may leave the hiring manager questioning the reliability of the new hire. Still, they must recognize that COVID19 has changed the rules of engagement. Inserting a severance clause in an employment agreement, which executives have been doing long before COVID19, may mean nothing more than this future hire is prudent with a low-risk tolerance and a strong need for security. 

Alternatively, it may also mean, especially if it is common knowledge via, that the hiring company marched a long-term employee out the door over a vaccine policy. The unintended consequence of enforcing arbitrary decrees without a hybrid accommodation will irreparably break the circle of trust productive employees seek from their employer concerning job security.

The philosophy of lifetime employment with an employer was destroyed in the early 1980s when organizations opted to follow management scientists theories to flatten their organizations. The unintended consequence of this organizational strategy obliterated the idea of a “Company Man” and gave oxygen to the recruiting profession and wholesale movement of human capital. I believe, this patchwork application of COVID mandates by corporations in 2022 will have a similar impact on the direction of Gen-Y and Gen-Z human capital, leading to further scarcity of talent quality interested in aspiring to full-time leadership positions. Some of the brightest will embrace the Gig work lifestyle.

Hiring Challenges in 2022 – Scarcity of Talent Quality is the Problem  
“Peter Principle Writ Large” – Hiring One Level Above the Candidate’s Competence 

One only needs to run a job ad on mainstream job boards or social media sites for professionals to understand a scarcity of applicants is not the primary threat to the CRE industry. The danger is the scarcity of ‘quality and institutional knowledge.’ In the current market, an increase in retirements compounded by market demand has allowed average performers to advance one or even two positions above their competency. It is the ‘Peter Principle’ writ large. 

The consequence of pushing talent forward above their competence without adequate mentorship or a job shadowing program will translate into shorter tenure in higher positions, more frequent terminations and unnecessarily harmed careers. Today’s jobs require greater competency than ever before, and the consequence of incompetency is becoming too great to tolerate within the past range of performance mandates.

Learn More About Rutherford International’s Mentor & Coaching Program

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Confirmation Bias – Mistaking Confidence for Competence 

Regardless of function, a talent pool’s performance potential is determinative. This fixed potential means that when setting up a project team, an employer needs to hire talent whose performance exceeds the talent pool average. An employer should always seek candidates in the top 35% of the industry’s functional cohort.

For example, consider a national cohort of 1000 Project Managers. Remember, the performance potential of the talent marketplace is statistically determinative, meaning 8% are Excellent, 10% are Very Good, and 13% are Good. Sixty-nine per cent are “Average, Low Average or Low” in their potential to perform. Subject to the scope of the project and the succession plan for the role, employers can get away with “High-Average” but should not settle for anything less in performance potential.

Put in the context of software development. “It took 600 Apple engineers less than two years to develop, debug and deploy OS X, a revolutionary change in the company’s operating system. By contrast, it took as many as 10,000 engineers more than five years to develop, debug, deploy and eventually withdraw Microsoft’s Windows Vista.” 

The search engine algorithms of mainstream job boards are optimized to sort and rank candidates based on the relevancy of their skills and education to the posted job. As a result, when interviewing a person with a high skill ranking from a traditional job board, it is not uncommon to confuse confidence in the interview for the implied competence on the job. However, with the assistance of our hiring science, it is possible to know if you’re interviewing a candidate who sits in the top 31% or the bottom 49% of their professional cohort.

Employers are relatively good at sousing the level of a candidate’s education and skills but can be somewhat hasty in assessing fit. Eighty per cent of ‘involuntary’ departures are due to poor behavioural fit. Both Rutherford International and our NEXTalent Marketplace & Job Board restrict candidate representation to individuals who benchmark in the top 35% of their professional cohort – Above Average to Excellent.

Learn More About Rutherford International’s NEXTalent Job Board

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Hiring Challenges in 2022 – A Kinetic War for Talent 
Winning the Battles: Trolling Job Boards Rarely Land Big Fish

Before COVID19, the war for talent was transparent for many years, but no more. We believe 2022/23 will mark the time when a kinetic war for talent becomes asymmetrical using unconventional talent strategies, science-based assessment and acquisition tactics. Dragging a hook through a social network talent pool in the hope of snagging a big fish is a reactive and unsatisfactory acquisition tactic. Acquiring talent begins by proactively targeting and assessing the high potential prospects in advance of an opportunity.

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The NEXTalent Marketplace is an online community of real estate owners/developers, finance, construction and property service professionals.
Winning the Talent War: Measure Twice, Hire Once 

Winning the talent war is measured by the success of the hiring outcome on productivity. The future calculus for a successful outcome won’t be based on Time or Cost per Hire but by Revenue per Hire ratio analysis. Revenue per Hire is a measure that few employers have applied to date using past hiring methods, and yet, is an effective metric for incentivizing corporate performance.

Companies will not have the luxury of building a trial period into their offers of employment for above-average employees. Just as companies are moving to AI for business advantage, it is now possible to incorporate machine learning supported by AI analytics for estimating the long-term impact of a successful hire on corporate development. To hire successfully is to know in advance the prospect’s potential for on-the-job effectiveness. The relationship of forecasting on-the-job performance with behavioural profiling science has made great strides since industrial psychologists measured human potential seventy years ago. 

Today, it’s possible to empirically predict a person’s potential to high perform as an employee, manager or executive compared to their functional peers. This same due diligence details the prospect’s succession potential, their default leadership styles and what areas of personal development will have the most significant impact on their future effectiveness as an employee and executive leader.

Rutherford International and our NEXTalent Marketplace & Job Board are committed to building a CRE community of investors, developers, builders, financiers, thought leaders, advisors and mentors who recognize the benefit of using 21st Century AI analytics to foster project teams and nurture high-performing industry talent. To learn more about our services, don’t hesitate to get in touch with us at 855-256-5778 X101

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