My podcast co-host is always saying that "experts" have a duty to predict the future. But since I’m not sure he’d be comfortable declaring that I’m an expert, I’m not feeling a whole lot of pressure here. Besides, these all seem a little like "Captain Obvious Decides to Start a Blog".
Whatever. I’m going to write about what I suspect most everyone is thinking. This is what I see happening in the near term.
Your biggest problem is finding good people. A lot of the really great ones are settled in at firms they love, they survived the pandemic effects on the firm, and they’d like to limit the disruption that would otherwise come with a job change. Others went out on their own and like it. They haven’t been doing it long enough to experience the inevitable "referral drain" that comes a few years later, so they don’t feel the tension of finding enough work. There’s plenty of work.
Your next biggest problem is paying them what they want. That’s an entirely separate thing, too. Getting great candidates to respond to your query is as likely as getting the neighborhood home improvement guy to show up on time, but paying them $75,000 right out of school—something unheard of 2 years ago—is starting to settle in. Experienced creatives are still readily available; experienced software engineers are not.
On the subject of pay, it’s going to move toward a geographically agnostic pay structure. In other words, all the old salary surveys are wrong, declaring that CDs, for example, are worth more because they live near and work for a firm in NYC. Having said that, I think CDs are worth more if they work for a more prominent firm, which might be tied to their location, but if principals are going to let people live wherever they want, they are not going to adjust that person’s salary over a decision for which they have no input. This obviously applies only to firms with a RW or WFH policy that allows it.
(Long term, I see the industry continuing its march toward less paternalist policies around benefits, too. Childless team members don’t understand the subsidization of the kid thing. I could be wrong on this; thus the parentheses.)
There will be unintended consequences for the firms that are spreading out. The firms who’ve long been set up as WFH will be fine, of course. They’re just smugly grinning. Those who are sticking to their guns in believing that physical togetherness matters are getting tested, both in their philosophical belief and in their ability to attract talent in this all out talent war. Those who are embracing remote work because of what they learned through the pandemic are still learning how difficult the transition can be. Not in allowing people who usually work together to now work apart, but in trying to build a community when someone has never worked together like that, with this specific team. Managing people in that environment is very different, and we don’t treat management all that seriously anyway. We have a lot to learn, here. One of many examples is this: I think that the portion of the team that is working remotely might not get the same career path opportunities as those who do work at the mother ship. Everything we’ve learned about this has been helpful, but unintended consequences from the folks who don’t know how to run WFH environments are still going to surface and will need careful attention.
Some firms are going to get a little clever and turn the tables, here. If they are sticking with the original plan of generally working together, they are going to claim it as a positioning advantage that remote firms don’t have, citing collaboration, communication, and creativity. I suspect they are right, but I don’t have any data to support it. I haven’t seen anyone do it overtly, yet, but it is coming.
So what do you do? How should you respond? This is what I would do in your shoes:
Turn work down before you agree to a permanent (and worsening) policy of paying what your firm cannot afford just so that you can keep saying yes. The supply side of the market is in charge, so act like it. It’s a seller’s market. Here’s how to determine what you can afford to pay.
Think as seriously about a marketing plan for people as you do about a marketing plan for clients. The positioning for that effort is your culture and the clients you get to work on and your ping pong table, of course (ahem). A great team member is harder to find than a great client, and the impact on your life is greater, too.
You cannot maintain your own pay and/or net profitability and at the same time pay people more unless you start charging more. It’s hard to find any reasonably successful firm charging less than $150/hour (which is quite low). It’s hard to find high performing firms giving time away, no matter how much higher their hourly rate is. And it’s impossible to find ultra high performance firms that don’t uncouple their rates from their time. You cannot paper this over like they did with the wall paper in your first rental—you must make more if you are going to pay more. (Unless you’re willing to make less.) That money you are saving from the former facility costs needs to be reserved to bring people back together at regular times every year.
But regardless of what you charge or where you focus, your enduring advantage is closely tied to how much those great people want to work for you and not one of your F1000 clients.
Look to solve this with unconventional hiring options. I’m talking about near-shoring, which is going to grow steadily for at least the next five years. I would also include unconnected contractors who regularly work together (à la Hollywood).
And finally, here’s a special note about the M/A market. Given how badly some firms are scrambling for help, quite a few are exploring an acquihire (which I do a lot of). The thinking is that "I get a bunch of people at once who have already bonded in a culture, and it shouldn’t cost nearly as much as an acquisition." Pensive principals don’t want to consider that, though, unless it covers some glaring challenge they are facing, which is usually new business. Hardly anybody has a new business problem, though, so the urgency isn’t there. It’s still a robust market, but the incentives aren’t aligned as they normally would be.