Senior HR leaders across sports leagues and organizations are facing turbulent times. When it comes to building a high performing workforce, HR leaders are navigating unknown waters as the demands of the talent market seem to be perpetually shifting.
Rising compensation expectations in the market
Compensation in sport has seen a transformation in the role it plays in its ability to attract and retain talent at all levels. At the entry level, there used to be a “sports discount” on salaries due to the elevated demand for sports roles. However, as the desire for these roles has declined the talent pool has been compressed and salaries have ultimately shifted from “discount” to “market value” to now sports organizations paying a “premium”.
Attrition across global organizations
The job market has evolved and there is now more movement and attrition between industries than ever. According to the U.S. Department of Labor reports, more than 19 million US workers have quit their jobs since April 2021 and the number is continuing to increase. At a time where top talent may appear to be drawn to the highest bidder, employers are turning to “well-intentioned quick fixes” of bonuses and salary increases that aren’t solving the problem because they don’t understand the reasons for their employees leaving (McKinsey). While some level of turnover is healthy for an organization, the rise in attrition among mid-level management leaving for other industries means leaders have to be more aware of their staffing pipeline, especially when they have an aging workforce at the senior management level and high turnover in the group that is positioned to take over those positions.
Generational differences and workforce evolution
The generational differences that come from Millennial and Generation Z talent now making up ~50% of today’s workforce, is not unique to sports but is changing the sports talent climate.
Newer generations don’t view working in sports with the same historic appeal as previous generations. A study by McKinsey showed that “Gen Z also reported more unmet social needs than any other generation. These perceived unmet social needs, including income, employment, education, food, housing, transportation, social support, and safety, are associated with higher self-reported rates of behavioral-health conditions.” As a result, this group has set higher expectations on benefits and compensation and are willing to leave if not met, regardless of the industry.
Millennial and Generation Z employees are also more inclined to promote compensation transparency, sharing salary information with their peers. In some cases, states in the US have now implemented a legal requirement to post compensation for roles.
To explore these challenges further, our executive search team at Sportsology Group held a roundtable discussion with HR leaders from across the major US sports leagues and European Soccer with the focus of navigating the challenges that are associated with attracting, developing, and retaining talent in the current climate. As the compensation expectations continue to increase, we found that HR departments are seeing their salary budgets increasing, so alternative measures are being taken. Ultimately, when the compensation lever can no longer be pulled, organizations can still excel in this competitive talent market by employing alternative strategies.
HR Strategies to Respond
From the discussion and Sportsology Groups research, we have identified three strategies for HR leaders to pursue in response to the growing demands of the talent market:
Implement strategic workforce planning
Begin succession planning to prioritize talent development and key hires
Monitor and evaluate workforce performance to keep the strategy effective as the workforce evolves
Strategic Workforce Planning
Between turnover and fluctuations in the job market, knowing where to start when attracting new talent in an organization can be challenging, but HR leaders can position their organization competitively to attain talent by taking proactive steps through the process of strategic workforce planning.
Strategic workforce planning is designed for HR to assess the current, and forecast the future, quality and quantity of talent needed in the organization. HR Leaders can benefit from yearly workforce planning reviews to ensure that departments proactively plan for organizational needs and avoid disruption at key moments in the year. This can also help prevent organizations from employee burnout and minimize knowledge or capability gaps.
Reliable workforce planning allows organizations and HR to focus on building and growing talent, sustaining culture, reducing future costs, and allowing teams to continue driving towards strategic objectives without business disruption.
In order to plan effectively, HR leaders need three key pieces of information:
The organization's goals and objectives: Workforce planning starts with a clear understanding of the organization's short-term and long-term goals, as well as the skills and competencies needed to achieve them.
Benchmarking data on salaries within region and league: Utilizing a diverse set of data sources to make informed decisions about compensation and benefits packages to ensure compensation is appropriate for your market and target hires.
A current state workforce analysis: This involves assessing the current workforce to identify strengths, weaknesses, and potential skill gaps. This analysis should consider factors such as age, gender, tenure, education, and performance.
With this information, HR leaders can effectively plan and budget for the talent required to reach the organization's goals.
Succession Planning to prioritize talent development and key hires
HR leaders are experiencing a need to fill important talent gaps as attrition rises. A McKinsey survey identified that of the employees who plan to leave their jobs in the short term, “the main reasons are the same across age groups: inadequate compensation, lack of career development and advancement, and uncaring leadership.” When there is high turnover among employees sitting in mid-level management, there is no one to fill the roles of senior leadership as they exit the organization. Employers then need to fill these gaps either with strategic hires or through their existing pipeline of talent. Ideally leaders can turn to existing employees who have been developed within the organization to reduce the loss of intellectual property associated with key-person risk. Key-person risk is when significant organizational knowledge, visibility, status or performance rely on a single individual, so when these senior leaders retire or leave their roles a high burden is placed on the broader organization.
Succession planning is a critical component for the growth of any organization as they look to protect against this risk and the resultant loss of IP. According to Sportsology Group data, for the past five years the average rate of annual turnover for a C-level executive within the major US sports leagues (NFL, NBA, NHL, MLS and MLB) is around 10%, which is nearly half the average annual rate of turnover for Fortune 1000 companies in the same period (~19% according to recent BoardEx data). Sports franchises are facing change in senior leadership less regularly, but should still be just as prepared to navigate the risk of key talent departures.
To mitigate this key-person risk, sports organizations should implement effective succession planning, provide opportunities for growth and advancement of junior employees, and ensure that leadership pipelines are robust and frequently reviewed.
Develop an experienced-hire recruitment strategy: Once the organization has identified its workforce needs, it can develop a plan to attract and retain the right employees. This could include developing a compelling employee value proposition, creating an attractive employer brand, and scorecard of key skills required.
Develop a retention strategy: In order to avoid a transactional relationship a retention strategy should be created and implemented. Strong retention strategies include tying the company’s purpose to employee performance and inclusive benefits (e.g. baby’s at work programs, fertility benefits, caregiver benefits, LGBTQ+ benefits and coverage) to keep employees engaged through the various stages of their careers.
Train strong managers and leaders: Employee satisfaction starts with their direct manager. In an American Psychological Association survey, 75 percent of the participants said the most stressful aspect of their jobs was interacting with their immediate boss. Implementing standardized manager training and manager accountability measures can help organizations avoid the common sentiment that “employees don't quit their jobs, they quit their managers.”
Invest in employee development programs: In a Handshake survey of Gen Z professionals in the early stages of their careers, respondents were asked what would make them apply to and stay at a job. “71 percent of respondents expected to be promoted between 6 months to 1.5 years.” To increase successful internal promotions, HR leaders can engage emerging talent with development programs. The best development programs include mentorship with senior leaders, employee resource groups (ERGs), emerging leaders forums, continuous management trainings, and sponsoring external certificates, certifications, or degrees. Not only is this a key factor in an employee’s decision to stay with their organization, it is also a safety net for IP retention and consistency for the organization.
Monitor and evaluate workforce performance to keep the strategy effective as the workforce evolves
Generation Z employees may be the most junior employees in organizations today, but they will soon be the mid-level management and then senior leaders. Therefore, their increasing expectations for employers need to be tracked and addressed to ensure a healthy employee lifecycle now and in the future.
The most successful organizations keep a nimble approach to their HR strategy while maintaining the strong foundation of workforce and succession planning.
Continued benchmarking: Collecting current and accurate compensation, benefits, and performance data reports should be used for ongoing validation of the strategy.
Solicit feedback: Many organizations fail to directly ask their employees what they want, so they make assumptions which can waste budget and time. Soliciting feedback can help HR leaders create a targeted retention strategy for their workforce. Engage junior, mid-level, and senior employees for feedback on benefits, compensation, employee development via anonymous surveys and leverage exit interviews with churned employees to understand their priorities and expectations for their employer.
Stimulate employee sense of belonging and purpose: In a study by Great Place to Work, “only 79% of millennials say their work has special meaning, compared with 90% of baby boomers. For millennials (and Gen Z), purpose affects how they see their future. They’re willing to walk away from jobs that lack meaning.” Establish a team to define your organization's purpose statement and create a roadmap to align employees around the statement.
Adapt the workforce plan as needed: Workforce planning should be an ongoing process that is regularly reviewed and updated to ensure it remains relevant and aligned with the organization's goals and objectives.
Lasting Competitive Advantage
HR leaders within sports can distinguish their organizations from others during this inflection point in the job market. While there are a number of ways to work through today’s compensation challenges, simply increasing salaries is not always feasible or necessary. Through strategic workforce planning, succession planning to prioritize key talent development and thoughtful iteration on the strategy, sports organizations can better work through today’s challenging talent crisis and maintain a competitive advantage as the market changes in years to come.
Author: Alex Gakenheimer
Co-Authors: Emma Schilling & Pien Gillhaus