We speak with Jim Buchanan, the CEO of Cadient. Their software is designed to meet the needs high-volume, hourly industries like retail, restaurants, hospitality and healthcare. We’re going talk about how high-volume hiring has changed over the last two years, and the challenges employers face, on this edition of PeopleTech.
Transcript
Mark:
Welcome to PeopleTech the podcast of the HCM Technology Report. I’m Mark Feffer.
Mark:
Today, we’re going to talk to Jim Buchanan, the CEO of Cadient. Their software is designed to be meet the needs of high volume hourly industries like retail, restaurants, hospitality, and healthcare. We’re going to talk about how high volume hiring has changed over the last two years, and the challenges employers face today, on this edition of PeopleTech.
Mark:
Jim, thanks for coming in. Can you tell me a little bit about Cadient? Just who are your customers and what kind of job seekers they’re looking for?
Jim:
Sure. We are a recruiting solutions company. We have an ATS, we have onboarding, we have ancillary products that are complimentary to the recruiting process, like texting with candidates, employee referral solutions, those kinds of things. So we’re really all about helping companies to find and hire the best quality employees. If you look at our data, about 97% of the applications that we process are for hourly employees. The typical customer for us is a company that has a high contingent of hourly employees, and they have distributed locations across a wide geography, where they’re trying into hire employees for local operations and they typically have a local manager who makes the hiring decisions and runs the process. So some of our larger customers, we have Costco, in both United States and Canada, PetSmart, in both the United States and Canada, so larger retailers who have a large footprint.
Jim:
We do a lot in business services, also in healthcare, and it tends to be mostly for the hourly employees. As you know, Mark, the recruiting process for hourly employees is quite different than it is for a salary employee. So our system is designed to do that recruiting activity for those hourly people in the most efficient and straightforward process, so that these local managers who are not recruiters, per se, but recruiting is a part of their responsibility, they have a system that they can use. It’s effective, it’s easy, and that’s kind of where we shine.
Mark:
Now, there’s been a lot of talk lately about knowledge workers returning to the office, whether they should, whether they shouldn’t, how it’s going to be. But what’s happening with hourly workers in terms of starting to get back to something like normal?
Jim:
Yeah. It’s an interesting contrast because hourly workers, for the most part, if you’re in retail, healthcare, to a lesser extent, business services like a call center and things like that, but for the most part, people have to go to a physical location to do their job in many cases, if you’re an hourly worker. There are exceptions, but… So there’s really not a remote, work from home option for them. So that brings into play a lot of different factors. The work environment, is it safe for the worker to come back? The situation at home, you may have school school-aged children who have not been going to school. They’re pretty much back to school now, but for a long period of time they were not in school. They may have people in their household that are sick with COVID and they have to attend to that, and they may be concerned about getting infected at the job site and bringing that home to their families.
Jim:
So it is a situation where remote work with our clients is just not an option, and so employers have to deal with that. They’re trying to create a safe work environment, and you have employees who aren’t sure that they really want to go into that environment and they have other things on their mind. So it’s really been a problem for clients that we deal with.
Mark:
Is that the major reason that these companies are having so much trouble finding hourly employees?
Jim:
I think it’s a big part of it, but you also have a… Here’s what I hear, Mark. When I talk to a client or a prospect, I often hear, “We hire everybody who applies for a job.” That’s the market that they’re in right now. That’s what they say. Our data doesn’t really support that. It shows that there still are a lot of people applying for jobs that they don’t hire, because we see all the applicants and we onboard everybody, so we know who applied and who you hired. As I look across the different industries, every industry that we service has seen a decline since pre-pandemic. If you go back to 2019, if you look at the applicant-to-hire ratio, every single industry has seen a decrease.
Jim:
Some have decreased more than others, but they’re still getting… Typically, our average client, and I would exclude people like Costco and PetSmart from our average because Costco and PetSmart both get a hundred people to apply for every person they hire, they’re a very attractive brand. People want to work there, so we get lots and lots of applicants. But if you leave those out, then people are getting 10 to 20 applicants for every hire that they make. They were getting that, pre-pandemic, and now they’re getting somewhere between eight and 14. So it’s gone down, but you still have some people that you could hire. So that leaves a question as to, “Why do you take the position that you hire everyone who applies, and why do you still have so many “now hiring” signs out and you’re trying to attract people?”
Jim:
As we study this, and we think about this 24/7, “How can we help our clients?”, and so we talk to both employers and candidates. What we hear on the employer side is exactly what I just said, “I can’t find enough people. I hire everybody who applies.” What we hear on the candidate side is, “I’ve applied to a whole bunch of places and I haven’t heard anything back from any of these companies.” So there is a disconnect there that’s taking place in today’s market. A lot of people have different opinions as to why that disconnect exists. One opinion is that employers haven’t adapted to a current environment. They still are very rigid in terms of what shifts they’re willing to hire for, how they’re willing to hire for those shifts. They don’t want to accommodate people’s schedule as much. “You’ve got to work evenings, you’ve got to work weekends,” whatever the requirement is for that business, and they haven’t adapted to this current environment.
Jim:
I think there are other opinions out there, where people say, “Look, the level of service in these organizations has just gone down. The customer experience is not what it was, pre-pandemic.” For example, I’m an empty-nester. My wife and I dine out frequently. So it’s not as bad as it was, but there, for a period of time, almost every restaurant we would go to, somebody, the server, the manager, someone would come to the table and say, “Hey, please bear with us. We’re short staffed today. I’m very sorry about that, but can you just please be patient? I should have more people in the kitchen and I don’t have as many people as I need.” Okay. I understand that. I’m going to be kind to this server. I’m not going to complain. I’m going to see what happens. It’s going to take a little bit longer.
Jim:
I think we’ve kind of grown accustomed to that, so I was curious, I looked at public company restaurants. I wanted to see, “What’s the financial situation with these public company restaurants, with their latest reporting, their latest SCC reporting?” Their labor, as a percentage of revenue, has gone down almost across the board. I just took a sample of 10 well-known restaurants that are public. Their labor, as a percentage of revenue, has gone down about 2% over the last, looking at year-to-date for whatever they’re reporting. So they’re getting by on less labor costs, the revenue has gone up because they’ve increased their prices.
Jim:
In a restaurant, you’ve got prime costs. You’ve got food, the food and beverage costs, and you’ve got labor. Those two together can comprise the prime cost. Their food costs have gone down about one point, as a percentage of revenue, which only can mean, with the inflation that we experience today, can only mean that they’ve raised their prices in order to cover that. So they’ve been able to achieve a one point game on that prime cost of good sold, but they’ve achieved two points on the labor cost. So I don’t know that would, this is a theory, I can’t prove this, but that would make you think that maybe they’re just not hiring as aggressively as they could, because they have some candidates coming in, and, “I have a better profit margin right now.” The profit margin, the operating income margin on these restaurants has gone up dramatically over the prior year, which a lot of that was revenue related.
Jim:
It’s a mystery, Mark, in terms of what’s happening there. How do you reconcile people who say, “I’ve applied to all these places and I don’t hear back,” to all the “now hiring” signs that you see? I think that it’s just going to be something that will work itself out over the next few months, and I think we’ll see people start to demand better customer experience, which will mean that they have to hire more aggressively. I think you see more and more people coming back into the labor force.
Jim:
Number one, because all the stimulus money has run out, and just the work environment is going to be considered to be safer. Already, in January of 2022, we’ve seen the labor participation rate go back up to 62.2%. Before the pandemic hit, it was somewhere in the 63+ percent. So it’s getting back to normal. It was down in 61-something, 61-point-something, so I think we’re going to see the labor market, and the labor supply, and the demand come back into equilibrium, hopefully sometimes soon in 2022. But it is such a complex, and it’s a kind of fascinating issue right now, as to why is this happening? I think that there’s some reasons on both sides, both employers and employees, as to why it’s kind of a mixed up market right now.
Mark:
You touched on this before, but I want to ask the specific question. Is this whole situation, the disconnect, as you’re talking about, is this a short term consequence of the pandemic, or is this more of a restructuring of the labor market?
Jim:
I think it’s a combination of the two. There has been some permanent restructuring. You’ve seen people who are at or near retirement age who have retired early. They’ve left the labor market, they’re not coming back. In 2021, they had a year where the stock market did well, housing prices went up. They may have just decided, “Look, I’m going to cash it in. I’m going to sell my house. I’m going to downsize. I’m just going to retire because I’m in my late fifties and this seems like a good time to do it. I’m not coming back into the workforce.” So I think you’re going to see a permanent shift there. However, if we talk about the hourly market, not as many of those people work in hourly jobs. Hourly jobs are typically held by younger people who are getting their career started, trying to get some experience in the workplace.
Jim:
I think it is more temporary with those people. I think that they’ve had a situation, whether it be financial, “I got some money I didn’t expect from some of the stimulus benefits that were offered by the government,” or, “I had a situation where I just didn’t feel I could work because I had needs at home,” whether it be children or family members who have become ill with the virus. I think those people are coming back. I think you’re seeing that now, they’re coming back. I think that the applicant-to-hire ratios that I mentioned, I think we’ll start to see those go back up toward where they were pre-pandemic. I do think that it’s going to be a sufficient supply of labor for many of these companies in the future.
Jim:
They may be struggling right now, but I think it’s going to get more plentiful for them. But another permanent change is they’re going to have to look at the process differently. They’re going to have to figure out how to engage with these candidates very quickly and effectively, because as these people come back onto the market, they want to get a job, they need a job, and they’re going to apply. The world today is such that you can go to a public job board and you can apply to 10, 12, 15, 20 places at the same in time. Those 20 people are going to be contacting the same candidate and employers have to be ready to pounce on that the minute you get that application. You’ve got to move through the process in a matter of hours or days, not weeks. That is also, I think, a permanent shift that we see.
Mark:
So my last question is, how do you think this plays out? If you look at the labor market in three to five years, for hourly employees, are the dynamics going to change? Are they going to be pretty much the same as they are now?
Jim:
I don’t think they’re going to be the same as they are now. I don’t think they’re going to be the same as they were pre-pandemic. I think they’ll be closer to the pre-pandemic days than they are in the moment that we’re living in right now. I think you’re going to see a workforce that is much more fluid, you’re going to see people that are jumping around changing jobs even more frequently. The world that we live in today is a very high turnover world anyway. Hourly jobs tend to turn over at a much quicker rate than salary jobs. I think that you’ll see that continue, it may even accelerate as people go from job-to-job and just try something new. A lot of these people have rethought their life and their career, “What do I want to do? Is my job that I currently hold, is that really fulfilling to me? I’m going to try something else, if it’s not.” There is an opportunity for people to go do different things.
Jim:
So I think the other factor there is that a lot of companies are thinking more and more about automation. If you look into the restaurant situation, you already see it. You have seen it now for a few years on places like McDonald’s, who almost insist that you come in and place your order on a kiosk rather than talking to someone behind the counter, or they strongly encourage that, anyway. You’re seeing companies testing robotic devices in the kitchen. White Castle has a trial going right now where they have a robot that is flipping the burgers and putting the fries in the deep fryer, and you’ve got pizza places that have robots putting pizzas in and out of the oven.
Jim:
I don’t know how far that’s going to go, but I think it will… It’s like anything else in technology. Eventually over time, the cost, the unit cost, is going to go down to the point where it’s going to be more affordable for people to be able to do that. So I think that the days are going to be gone in the next five years, where everybody is fully staffed back up to the point that they were pre-pandemic. I think they’ll have a lot of employees, but if you had a business where you had a hundred employees in the past, you might have 80 employees going forward. Just my speculation. I don’t have anything to base that change on, but I think you are going to see more automation. You’re going to see less reliance on labor going forward. There will still be plenty of hourly jobs, but some of that workforce won’t come back. So I think it will even out over time.
Mark:
Well, Jim, thanks very much for taking the time and talking to me today.
Jim:
I appreciate it, Mark. I enjoyed chatting with you.
Mark:
My guest today has been Jim Buchanan, the CEO of Cadient, and this has been PeopleTech, the podcast of the HCM Technology Report. We’re a publication of RecruitingDaily. We’re also a part of Evergreen Podcasts. To see all of their programs, visit www.evergreenpodcasts.com. To keep up with HR Technology, visit the HCM Technology Report every day. We’re the most trusted source of news in the HR tech industry. Find us at www.hcmtechnologyreport.com. I’m Mark Feffer.
Image: iStock
