BCG CEO on labor shortage: 'It’s a worker-driven economy'

Boston Consulting Group CEO Rich Lesser joins Yahoo Finance Live to discuss how the labor shortage is impacting businesses.

Video Transcript

AKIKO FUJITA: Record job openings across the US have led to big challenges for companies who are trying to fill these positions as they try to resume things post-pandemic. When you combine that with questions about vaccine mandates, it's been a bit of a bumpy ride for companies who are at least trying to get back to normal. Let's bring in Rich Lesser, the CEO of Boston Consulting Group.

And Rich, let's start with the labor shortage. We've heard two arguments here. On the one hand, those who say, look, it's just been a grind trying to find people to fill these spots, largely because some are more comfortable with the unemployment benefits that are out right now. And then we had some business owners that we've spoken to who say, look, if you go ahead and pay higher wages and offer up the benefits, you can be competitive in the market. What are you hearing from your clients?

RICH LESSER: Well, first, it's a great source of stress right now, so you're completely right to flag it. I mean, if you look at-- it is hard-- when we've had as much of a disruption to the economy and society as we've had over the last year, I guess it's not a surprise that coming out of it is hard. And you see it in supply chain issues and you see it in people issues right now. I think it's a worker-driven economy. Whether it will last, you know, for how long it will last, we don't know.

But right now, the challenge to get people across many businesses, and particularly in frontline workers, is quite challenging. And I think it's going to persist at least through Q3. Then in Q4, we'll see. As schools come back to more normal operation, as some of the extraordinary benefits that have existed wind down, those programs, then we'll see what comes back. But it is challenging for many CEOs right now. That plus supply chain does make it stressful, as you described.

ZACK GUZMAN: Yeah, I mean, the dichotomy between, you know, frontline workers and office workers here is pretty stark when you think about how they've weathered the storm here in the pandemic. And interestingly, too, business travel is one that we focus in on here, and you, as one of the big three there. I'd be curious to get your take maybe on what that's going to look like, business travel, and maybe the way that you guys have been having your own employees maybe not necessarily need to travel. What does that look like to you, and when do you start to see maybe a return to some of that getting back to normal?

RICH LESSER: So I think we're heading to a new reality, not the old normal. That's my honest sense. Certainly on a topic like business travel, every CEO I talk to is thinking that they'll need different models for how they think about travel. We're certainly believing that the model that we were in-- not for our clients, but many clients, where you had teams at the client four days a week, the-- our clients aren't even going to have their own people, and in many cases, four days a week. And we've all seen how effectively we can work, you know, without necessarily being in-person all the time.

So do I think we'll continue in the 2020 model? Absolutely not. But I don't think it's returning to the 2019 model, either. And we're expecting to have very different kinds of archetypes, where our teams are with our clients not necessarily every week in a month, but maybe several weeks a month, or we have part of the team there and part not, and that we engage with our clients on how they're bringing their own workforce back, and how their own people want to engage, and map how we work with them to that. So-- and but it's not just in my world that that's the case. I think every company is saying, we lost a lot of productivity with people traveling all the time. We need to do some of it. And in the short term, we may need to do a lot, just to reconnect in person. But in the long term, I think we'll see very different models emerging.

AKIKO FUJITA: Yeah, and if you can be productive while saving costs, too, with those flights, certainly you'd think that companies would choose the latter. On the issue of supply chains you just mentioned, though, so much of this is out of the control of these companies. We had the executive director from the Port of LA on last week, who said that he sees more bottlenecks coming because of what's playing out in China right now, and this additional wave that has now come in Southern China, especially. I mean, to what extent have these bottlenecks started to clear, and what are we seeing six months down the line?

RICH LESSER: So you've asked-- on your first question, I think the supply chain issues-- we just read about more chip shortages that are likely to occur-- I think across so many parts of the economy, we are feeling enormous stress right now around supply chain issues. But I would have to say, my expectation is, over time, those will start to-- we'll work through them. And so I think the next three to six months are going to be tricky for many places, but I do think that the supply chain issues-- we've just come back off of enormous disruption.

As you rightly point out, the pandemic is not over. It will hit different parts of the world in different ways. That will create future disruptions. It's going to take a while to navigate through it. And frankly, the faster we get beyond this pandemic, the faster we get back to what feels like a more normal environment, including in our supply chains, which is part of the reason that all of us, and certainly the US government, should be working incredibly hard to try to get this pandemic behind us as soon as we possibly can.

ZACK GUZMAN: Yeah. When you pair kind of the supply issues there with the labor shortages and talk about kind of rising costs for a lot of producers, I mean, it's been a long time since we talked about wages going up in a meaningful way, and now seems like a lot of power has shifted to workers maybe not only just quitting in record numbers, but also maybe waiting a little bit longer to get back into the jobs that they might eventually take up. I mean, what does that start to do if we think about the current debate right now when it comes to inflation, in your mind, when you kind of pair both of those pressures?

RICH LESSER: Well, so I would-- we continue to be on the more optimistic side around inflation. We've had a multi-decade inflation regime that we've been able to manage through. This is certainly among the most challenging short-term periods we've seen, and the pressures that people are feeling in supply chain, in wage levels are quite real, but the odds of us breaking that regime and moving to sort of a systemically higher inflation for an extended period of time we would say are still less likely to occur, rather than more likely.

But I do think you're right to point out that, in parts of the economy, the pressure on wages are quite real. It's interesting because, at the beginning of the year, I think people assumed if there was going to be pressure on wages, it would come from raising the minimum wage. That is-- you know, that might happen eventually, but that's certainly proven to be quite difficult politically. But what has happened in this incredibly rapid return post-pandemic, combined with, you know, more support for workers who are unable or don't want to return, has put a pressure on wages that we haven't seen for quite a long time, and a reset at the bottom end of the scale that may be positive.

Most businesses thought minimum wage levels should go up, if you go back to the conversations we were having earlier. Maybe not to the level that some were proposing, but to some degree. So it will be pressured in the near term. I think we're still more optimistic around inflationary pressures in the medium and longer term.

AKIKO FUJITA: And Rich, I know you don't like to always talk about yourself, but we should note that you were just ranked as the top CEO in a GlassDoor survey, Employee Choice Awards. 99% approval from your employees. And I raise this obviously because I think it speaks to your leadership, but also, you know, this comes at a time when we're seeing a record number of Americans who are quitting their current jobs. And as you think about how to be in this-- how to lead in this position, what would you say is the key to retention, the key to keeping employees happy when so much has changed in terms of office dynamics over the last year?

RICH LESSER: Look, there's parts of the leadership that are timeless, around authenticity, around empathy, around showing that there's real purpose inside the organization that you're driven by. Those things, good times, bad times, they're right thing to do. I think, right now, so many people are still feeling enormous stress-- physical stress, in some cases, emotional and mental stress, in many cases-- still disrupted lives. And frankly, anytime there's such a severe disruption, people think about things. And I think a lot of people have had a lot of opportunities to think about their lives, what they're looking for from their careers.

And it is incumbent on employers right now, for their own benefit as well as for their workforce, to be thinking about the employee value propositions that they're creating. People are looking for balance and sustainability. They're looking for fulfilling jobs, to be learning really quickly, to be having an impact in their careers. And that mix is hard to get right, and to recognize that for each individual it might be a different mix. For some people, it may be all about making hybrid models work for them. For other people, it may be about just getting balance. For some people, it's about getting back to be with their colleagues, and apprenticeship and learning.

And so I feel like it's partly about the overall employee value propositions we create, but it's to an even greater degree about our ability to engage with each employee as a human being, and understand what matters to them and design ways to make it work for that individual. And I think many employers are going to be feeling the pressure to do that in the short term because many, many people are thinking about their lives very carefully right now.

AKIKO FUJITA: Yeah, no question that discussion is happening in the C-suite across the country. But 99% approval, Rich, pretty high praise there. Always good to talk to you. Rich Lesser, CEO of Boston Consulting Group.