Tag: talent shortage

Mortgage Industry Trends Driving Layoffs and Five Tactics to Avoid Job Cuts

While nearly all industries are dealing with a talent dearth, the mortgage industry is faced with unprecedented layoffs. Rising interest rates, high housing prices, and a shortage of listings have cooled mortgage and refinance activity from the pandemic boom, leading mortgage lenders to cut thousands of positions in recent months that are no longer needed. Learn five tactics companies can take to remedy the layoff crisis in this blog.

Let’s take a look at the market factors that have contributed to the current situation.

The overall mortgage industry was ignited during the pandemic by two years of low-interest rates that somewhat bolstered originations. But the increase in interest rates early this year has since curtailed the short-lived volume increases, reducing the demand for both new originations and refinancing.

Dwindling demand has been exacerbated by the limited housing supply, skyrocketing house prices, declining home values, increase in frauds, a detreating secondary market, and uneven and untimely mortgage payments.

To better understand where the market is headed, we looked at the Annual Mortgage Origination estimate from 1990 to 2019 before the pandemic. The estimates in the chart below show that even if total new originations have increased every year, new originations and refinancing growth has been somewhat cyclical. The exception is the steep decline from 2005 to 2008, when the US mortgage industry experienced a financial crisis.

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Looking at the 30-year mortgage fixed rate, interest rates have been steadily declining over the past few years – until the sharp increase in early 2022, where rates were first hiked in December 2021 to 3.11% and steadily rose to 5.30% by the end of May 2022.  With US inflation at an all-time high of 8.26% in April 2022, the consequential rise in mortgage rates contributed to the purchasing power crunch and reduced demand for new originations.

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Mortgage industry trends contributing to increased layoffs

Faced with the combined problem of rising inflation and the corresponding mortgage rate increases by the Federal Reserve, mortgage companies have resorted to slashing an overabundance of positions that were added during the pandemic uptick.

This is not the first time the mortgage industry has faced mass layoffs. Recent estimates show that since January 2022, more than 10,000 employees in the industry have been displaced from their roles across enterprises and providers.

Mortgage industry experts, enterprises, service providers, and analysts cite the following factors for the recent job eliminations:

  • Cyclicity: The mortgage industry appears to go through two- to four-year cycles, as shown in the above graph. After the low-interest rates through 2020 and 2021 that propelled activity, the industry is now facing the brunt of less activity in early 2022
  • Limited housing supply: Given the limited availability of in-demand housing and the steady increase in new originations, house prices have shot up. This, in turn, is pushing home buyers out of the market
  • Uneven hiring: Companies increased their workforce strength exponentially during the pandemic to keep up with the home-buying surge. The Bureau of Labor Statistics reported that the US home lending industry witnessed a rise of more than 50% in total employment – from 130,000 workers in July 2019 to more than 425,200 in February 2022. Now, as the market is slowing and mortgage rates are rising, the industry is forced to let go of its surplus workforce
  • Macroeconomic factors: The impact of COVID, the Russia-Ukraine war, rising oil prices, and inflationary pressures have had an impact on overall consumer purchasing power, further impacting the mortgage industry
  • Services shift: Even though the volume is low, buyers are shifting their expectations and demand from originations to specialized services such as quality assurance (QA), quality control (QC), title insurance, securitization, and others. Enterprises solely relying on origination as their core services are faced with lower volumes, leading to increasing layoffs of employees working in areas with reduced demand. Providers need to acknowledge this shift in mortgage operations and plan their labor force accordingly. Watch this space for our future report focused on the emerging needs for specialized services in mortgage operations

Five remedies for layoffs in the mortgage industry

Despite the various factors that ignited the mass layoffs, companies can approach market fluctuations with the following remedies:

  1. Outsourcing: Instead of embarking on a hiring spree and allocating huge volumes of resources for specialized staff, mortgage companies should opt to outsource processes to established mortgage service providers. This can reduce fixed costs while using existing resources to the fullest and saving money by only paying for services they use. Through outsourcing, enterprises are shifting the onus to the service providers. Since providers bring experience in managing and redeploying employee pools across multiple industries and processes, they can often distribute and redeploy employees instead of outright firing them
  2. Develop adaptable and interchangeable skills: Service providers and enterprises need to align their labor force to industry needs, such as planning for the anticipated shift from originations to upcoming services like securitization and servicing. By developing adaptable and flexible skills, employees can find jobs in other industries and services if their positions are eliminated
  3. Upskill and reskill talent: Enterprises and service providers are providing the labor force with executive courses and mortgage-specific training to keep them on track with industry needs and requirements. Employees should complete internal training programs and seek external training to keep their skills updated so they are relevant to the company’s requirements
  4. Alternate hiring strategies: Instead of hiring based on the market ebbs and flows, companies should follow a lean approach and hire judiciously. Companies should implement hiring freezes for non-essential positions when there is a hint of a demand slowdown. They can also hire contractual employees when they anticipate a boom and make temporary positions permanent when the market stabilizes
  5. Digital transformation: To accelerate productivity and growth, it has become imperative for employers to leverage digital transformation. Digital tools can be used to automate mundane voluminous tasks, freeing employees to handle more analytical and important tasks, thus reducing the chances of hiring and allocating huge volumes of resources for mundane tasks

Mortgage industry outlook

While the layoffs and financial crisis have led to a negative sentiment of the mortgage industry among buyers and investors, service providers who are developing digital strategies and enhancing the customer experience can help change this perception. To learn more, see Everest Group’s recent report on leading service providers in the mortgage industry.

To discuss mortgage industry trends, contact Shrey Jain at [email protected].

Explore more of our latest insights in our blogs and webinars.

Diversity is Gaining Ground in BPS – Why Your Organization Should Care | Blog

While not new concepts to the services industry, the COVID-19 pandemic has increased the number of boardroom discussions on diverse hiring practices, especially with the ongoing talent shortage. Having a diverse workforce can provide numerous benefits, making it the way forward for the Business Process Services (BPS) industry. To learn more about why your organization should pay attention to supplier diversity, Impact Sourcing (IS), and Diversity, Equity, and Inclusion (DE&I), read on.

What do these terms mean?

  • Supplier diversity: Constitutes the percentage of diverse providers within an enterprise’s supplier portfolio. This overarching term means encouraging partnering with businesses owned by minorities, women, veterans and service-disabled veterans, members of the LGBT community, and other historically underutilized businesses, and small business concerns for business procurement
  • Impact sourcing: Socially responsible business process outsourcing that enables global companies to improve business outcomes by hiring and providing career development opportunities to people who generally have limited employment prospects
  • DE&I: According to datapeople.io:
    • Diversity is the demographic makeup of an organization’s workforce. The unique aspects that make one person different from another person is diversity, whether it’s gender, ethnicity, physical ability, age, national origin, socioeconomic background, religion, or a combination of any of those aspects (known as intersectionality)
    • Equity levels an uneven playing field by providing everyone with equal access to opportunity
    • Inclusion is the environment an organization fosters for candidates and employees. An inclusive workplace is one where all candidates and employees feel welcome. It provides all candidates with equal opportunities for employment, job success, and organizational advancement

Why should we pay attention?

Diversity is an important conversation happening right now because hiring individuals with diverse backgrounds and thoughts can result in greater innovation and more creativity. Bringing together different perspectives influenced by varied life experiences can enhance the creation, function, and delivery of products and services. Along with this richness in thinking come tangible financial benefits beyond lower operational costs. Thus, impact sourcing is impactful sourcing – for the bottom line too!

According to Everest Group research, hiring IS workers and having a diverse workforce can provide the following benefits:

Tangible benefits Intangible benefits
Lower Total Cost of Ownership (TCO) TCO for IS workers is 3-10%   less compared to traditional workers because of lower attrition costs Greater Employee Engagement – Having an involved and motivated workforce generates long-term savings as companies spend less time recruiting and training
Operational performance – IS workers have a track record of meeting target Key Performance Indicators (KPIs) Competitive advantage – Being viewed as a socially-responsible employer can help companies win business and attract employees
Multilingual/vernacular language services delivery – Diversity and impact sourcing help companies access a large pool of skilled, high-potential yet under-utilized talent Fulfillment of corporate social responsibility and diversity objectives – Companies can contribute towards their CSR goals by employing IS and diverse workers
Lower attrition – Attrition among IS workers is significantly lower than traditional workers Direct and indirect positive community impact – Five to six family members or related individuals benefit from every IS worker hired

Why now?

We’re seeing the Great Resignation and a talent war play out in the services industry. As companies reassess their talent and hiring strategies and working models for the future of work, they’re thinking about previously untapped talent in rural areas and tier-3 and -4 towns and cities. These locations have gained attractiveness due to the pandemic-induced mainstream prevalence of hybrid and remote working, ubiquitous high-speed internet, and infrastructure availability for a work-from-anywhere setup.

Hiring from diverse communities is a win-win for all, especially now. At the same time, establishing and practicing norms and values of inclusion and equity among employees will help foster more engaged and productive employees, lowering attrition and associated new-hire training costs.

Which service providers are actively focusing on diversity?

Growing numbers of providers are making this area a priority. Since diversity has been around for a long time, large BPO firms such as Startek, Sutherland, and Teleperformance, among others, have been focusing on diversity for its direct and indirect benefits. Smaller providers also are leveraging diversity and impact sourcing as the cornerstone of their talent strategies. Some examples include:

Supplier diversity:

  • Alorica – The largest minority-owned BPO and a global certified Minority Business Enterprise. It is also certified by the National Minority Supplier Development Council (NMSDC) and the Southern California Minority Supplier Development Council (SCMSDC)
  • GlowTouch – A Women’s Business Enterprise National Council (WBENC)-certified woman-owned enterprise
  • Triple Impact – Through its alliance with the Military Spouse Employee Partnership (MSEP), it has access to a vast talent pool of military spouses

Impact sourcing specialists:

  • Humans in the Loop – A social enterprise powering the Artificial Intelligence (AI) solutions of the future, with a mission to improve the lives of conflict-affected people through the use of technology and innovation. It works with refugees and asylum seekers in Eastern Europe and the Middle East
  • Vindhya – An India-based company that employs and empowers people with disabilities, women, trans individuals, and others from marginalized communities, providing contact center support, data management, and accessibility testing services
  • Televerde – Empowers incarcerated women in the US and UK by providing training, education, and jobs to help them re-enter their communities and build meaningful and rewarding careers

DE&I:

  • Employee-led groups – Companies such as [24]7.ai, Cognizant, Comdata Group, Conduent, Datamatics, EXL, Infosys, NTT DATA, Qualfon, Sitel Group, TCS, Teleperformance, TELUS International, Transcosmos, TTEC, VXI, Webhelp, WNS, and Wipro have D&I committees, diversity councils, and employee groups
  • Partnerships – Genpact has multiple partnerships with organizations such as Coqual, Moving Ahead, and 30% Club to promote diversity
  • Company initiatives – Accenture is making progress toward its goal of having a “gender-balanced” workforce by 2025 and Mphasis is creating an Alumni Club to gradually integrate second-career women back into their offices

Does it work in the real world?

Impact sourcing is making a meaningful difference for people with limited employment opportunities. One example is Teleperformance, which hired more than 70,000 IS workers last year alone and employs 40,000-plus workers without secondary school education at their offices across the globe.

Teleperformance started hiring IS workers in South Africa in 2013-14, primarily for domestic delivery, and has consistently found these individuals achieve the same performance levels as traditional workers, according to an Everest Group study conducted with Teleperformance in 2016. Encouraged by these positive experiences, the company worked with a training academy to train and hire IS workers specifically for its international BPO operations.

Our interviews with other market participants indicate that even companies that do not measure the performance of IS workers have reported lower attrition among IS workers, and there are multiple instances of these talented workers growing their roles to senior and managerial positions.

Positive Outlook

Customers want to interact with organizations that have employees who look like them, and people also want to work for companies that care about their communities. While diversity and Environmental, Social, and Governance (ESG) present challenges such as inadequate data disclosures, “greenwashing,” and difficulty in calculating estimated Return on Investment (RoI), they can be a vital part of a company’s Corporate Social Responsibility (CSR) policy. They are thus becoming increasingly important as an enterprise procurement requirement.

We believe that good social practices should be embedded within work rather than be a separate undertaking. Diversity is not just beneficial for companies commercially but also reaps huge non-tangible benefits in terms of improving brand image, increasing employee retention, and generating goodwill – making it the way forward for the services industry.

To learn more about impact sourcing, read this related blog. If you are interested in discussing these topics, reach out to [email protected] or [email protected].

How Companies Can Find Required Skills despite Acute Talent Shortage | Blog

Companies today face a global acute talent shortage for the next three to five years. The pressing issue in this situation is finding or accessing the necessary talent to meet a company’s business needs. We at Everest Group launched an ongoing initiative to research and understand the different techniques and channels for talent acquisition. This blog explains some of the techniques that we uncovered.

Read more in my blog on Forbes

Talent Shortage Driving Return to Campus-To-Work Pipeline Model | Blog

As I blogged previously, companies now face an acute talent shortage for the foreseeable future.  Two factors causing the demand/supply gap (especially in engineering and IT) include the post-COVID economy rebound and, in the US, the “Great Resignation” of workers retiring early or switching jobs or careers. Another factor is the proliferation of digital platforms, as companies recognize that they can compete much more effectively and create new value for customers and employees, but the platforms require ongoing engineering and IT skills as they evolve. How can companies access the skills they need despite the acute talent shortage?

Read more in my blog on Forbes

The 2022 Key Issues Study – It’s Not a Talent War, It’s a New Reality | Blog

There is a global challenge to find talent across industries and departments. To find out how enterprises can better understand the talent shortage and start planning their talent strategy going into 2022, read on.

As we look past 2021 and the pandemic, it has become apparent that we are entering 2022 with a completely different and equally challenging set of issues. The more lasting impact will be disruptions and shortages affecting the talent supply brought on by an accumulation of social and cultural changes set in motion over generations and exacerbated by the pandemic.

To understand the talent shortage and what enterprises are doing to adapt, Everest Group is conducting a survey, in partnership with IAOP, to discover strategies and best practices that enterprises worldwide are applying going into 2022 including, key priorities, motivations, and initiatives from a sourcing perspective.

Participate in the Survey

“Winning the war” is no longer the goal, the challenge has become bigger

For the past several years, the “talent war” has had a special emphasis on the demand for high-end digital talent. Today, the challenge to find talent has become widespread across industries and departments and has spiraled into rising attrition rates, higher internal salary demands from employees, and increasing outsourcing rates across a range of job skill sets.

There isn’t an easy answer or a silver bullet to this conversation. The pandemic may have been the match to light the fire, but it’s no longer the root cause of what we’re dealing with now. Enterprises will ultimately need to shift their internal infrastructures to adapt to the change.

We can’t deny the urgency

Currently, there are now 2.7 million more job openings than people actively looking for work. In the US, 4.3 million people quit in August, up from 3.0 million one year ago. Yes, the pandemic set off a landslide of changes; however, the US had been moving toward a talent scarcity long before.

Workers’ life changes bring new realities

When the pandemic hit, a significant chunk of people began working from home – some doing so with children of all ages due to school and daycare shutdowns. Flexibility to allow for work-life blend and overall well-being became top priorities when it came to what people expected at work and how they engaged with their jobs. Now, over a year later, work from home has become a new desired working method, making companies that don’t support it less likely to attract some talent.

It was also during this time that many employees discovered how much they could save by not sending their young children back to expensive daycares. This, combined with the fear of exposing their children to COVID-19, drove some to quit their jobs and stay home with their children.

Further, a combination of all of the above is enough to overstress employees and cause burnout, leading some to leave their jobs to focus on their health. The bottom line is, employees today want flexibility, and they are willing to put their current jobs on the line to get it.

Among college students, we’ve also seen a decline in student Visas caused by worldwide shutdowns. Even now, Visa processing is delayed, lowering the number of possible graduates in the US eager to join the workforce. Since 2015, the number of students and their families, including commuter students, coming to the US has dropped by 300,000.

Finally, the baby boomer generation has experienced accelerated retirements, some due to the pandemic; for others, it’s just time. Across the US and Europe, as the majority of baby boomers retire and fewer people enter the workforce, there will be an estimated 2.3 million fewer workers annually for the next 10 years. And younger generations aren’t necessarily skilled enough or have the experience yet to fill many of the jobs left behind by the boomers, causing a gap for needed talent that just doesn’t exist.

How can enterprises adapt to the new reality?

Looking toward 2022, how should enterprises embark on their talent strategy? We now know that the talent shortage will not right itself, and there is no reset button. Companies cannot keep offering raises to keep employees because it’s costly and not sustainable. And stealing from your neighbor just causes them to steal back. The change will need to happen at the infrastructure level. Enterprises may adapt in a variety of ways, including changing the workforce structure, improving workplace culture, looking at other talent models, evaluating new geographies and looking to outsourcing, or leveraging digital/next-gen or automation capabilities.  At the end of the day there is no one strategy that will be sufficient to “win” this and it will require many different strategies and tactics to build out a successful talent strategy.

Find out what other enterprises are doing

To learn more about the global talent struggle, Everest Group is conducting a survey among global enterprises across multiple departments. The goal is to understand how leading enterprises plan to strategize for talent in 2022. The research will drill into enterprises’ challenges and priorities, attrition levels, resiliency and agility planning, changes in sourcing models or shoring mix, headcount and salary expectations, impacts on environmental, social, and governance (ESG) matters, and more.

We want to address the root cause and better understand what can be done to mitigate the impact of the talent shortage.

What’s in it for you?

Participate in the study, and we will share a complimentary summary of the research results so you can better understand the talent landscape going into 2022 and start a talent strategy.

Take the Survey

If you have any questions please reach out to michel.janss[email protected] or [email protected].

Serious Talent Shortage Deepens in Software Product Engineering, the Fastest Growing Segment of $1.27 Trillion Global Engineering Spend—Everest Group

Tremendous talent shortage anticipated as adoption of next-generation technologies—including cloud, AI/ML, IoT, analytics, cybersecurity, and AR/VR—grows exponentially over the next few years.

Everest Group reports that although a talent shortage exists across the overall engineering, research and development (ER&D) landscape, the supply crunch is much more pronounced for emerging skills, such as cloud engineering, artificial intelligence and machine learning (AI/ML), internet of things (IoT), analytics, cybersecurity, and augmented reality and virtual reality (AR/VR). According to Everest Group, the exponential growth in the adoption of these next-generation technologies over the next couple of years will cause a huge supply shortage in the software product engineering world.

Enterprises globally spent US$1.27 trillion on engineering in 2020, and more than one-third of that spend was on software product engineering. Software product engineering has been the fastest growing segment of engineering spending over the last four years and was the only segment to witness positive growth in 2020, even as overall global engineering spend declined by 2%. Contributing to sustained software engineering spending are commercial software sellers and internet companies as well as enterprises seeking to augment existing products with software-driven features and functionalities.

In its newly published report, “Reaching New Frontiers in Experience-centricity and Resilience –Software Product Engineering Services State of the Market Report,” Everest Group examines the dynamics of global software product engineering services trends prevalent among leading service providers. It includes an overview of the software product engineering market and an in-depth view of outsourcing in this space.

Selected Highlights:

  • Overall enterprise spend for software product engineering has been growing at a robust pace, reaching approximately US$410 billion in 2020.
  • The supply crunch in the software engineering talent market is leading to a price war, where enterprises are having to pay a premium rate to access talent skilled in emerging software engineering themes.
  • The talent shortage in emerging skillsets is also compelling enterprises to explore non-traditional locations to access talent. As a result, nearshore locations have steadily been gaining prominence for talent sourcing.
  • Cloud engineering has emerged as the biggest spend area for enterprises, with more activity around cloud-native engineering, platformization, carve-outs of legacy products and verticalized solutions.
  • The software product engineering services market (i.e., outsourcing) has grown at a rate of 16% over the past year to reach approximately US$23.5 billion, which is 5.7% of the overall enterprise spend.
  • The hi-tech verticals continue to hold a large share of the services market, while the geography split reveals North America to be the largest location.

***Download a complimentary abstract of the report here.***

Talent Shortages in Software Product Engineering

About Everest Group
Everest Group is a research firm focused on strategic IT, business services, engineering services, and sourcing. Our clients include leading global companies, service providers, and investors. Clients use our services to guide their journeys to achieve heightened operational and financial performance, accelerated value delivery, and high-impact business outcomes. Details and in-depth content are available at http://www.everestgrp.com

IT Talent – Winning the Short-term Battle and the Long-term War | Blog

With the cost to secure IT talent internally and through third-party providers only continuing to rise, attracting and retaining technology workforce will require immediate and long-term tactics. Participate in our study to identify best-in-class IT workforce development strategies in leading global organizations.

Take the survey

July Quick Poll | How Recruiting, Hiring, and Retaining IT Talent Changed in Q2 2021

The cost of hiring top-tier IT talent is escalating by the day. The persistent skills shortage has been exasperated by increasing post-COVID digital transformation spend and pent-up business demand, creating an intense short-term talent scramble.

Despite enterprises using known offensive (attraction) and defensive (retention) tricks, a demand-supply gap of 15%+ for critical roles in cloud, data, automation, agile, and security is being seen across regions. Offering compensation corrections and counters, bonuses, flexible location options, or job rotations are keeping companies in the race, but more ingenious measures are needed.

July Quick Poll | How Recruiting, Hiring, and Retaining IT Talent Changed in Q2 2021

Insights to win the short-term battle

Enterprises are realizing that classical attraction and retention strategies are being relegated to “common differentiators.” Many enterprises are starting to max out on the stretched end of their annual IT workforce budgets – even as attrition levels spike beyond 30 percent for key roles.

We see this scramble persisting over the next 3-6 months. However, as pointed out by our CEO Peter Bendor-Samuel recently, fulfillment of pent-up demand and potentially increased cross-border talent movement is expected to start narrowing the demand-supply gap from the current dizzying levels as we enter 2022.

IT Talent War

 

Here are a few novel approaches enterprises can take to alleviate workforce challenges to a certain extent, especially around access and time-to-hire:

  • Relax shortlisting criteria: Recalibrate technical competency thresholds (e.g., the stringency of HackerRack test ratings and additional technical rounds), within reasonable limits, to broaden the talent funnel in the short term. Consider increased training at the start and onboarding graduates with dedicated training investments
  • Involve business and operations: Follow the lead of best-in-class enterprises by having:
    • IT engineers, product managers, and agile coaches – actively recruit and scout in online communities
    • Senior IT and business leaders – elevate brand value and excite prospective candidates via informal discussions
    • IT teams – screen candidates to cut down shortlisting efforts, especially for critical/complex roles
    • Team members – approach candidates before the on-boarding to build rapport
  • Upskill rapidly: Stagger skilling and training for new employees joining the organization and existing employees switching roles to reduce deployment time (e.g., from 8-9 weeks to 4 weeks)
  • Focus on internal mobility: Re-evaluate internal career progression designs and create better growth opportunities for employees by properly mapping competencies, clearly articulating alternative roles/paths, and incentivizing critical skills development
  • Explore alternative channels: Expand staffing partnerships, leverage hackathons/online competitions, proactively reach out to developer communities (Hacker News, Github, Stack Overflow, and Reddit), and engage with boot camps to improve channel access
  • Hire location-neutral: Hire talent remotely with no requirement of the work location to tap into the broad IT pools and push decisions on Work from Home (WFH) or visas for later. Consider pods, satellites, and Centers of Excellence (CoEs) to access niche skills
  • Increase referral premiums: Jack up referral premiums by 50 to 100 percent, especially for critical positions
  • Award retention bonuses: Offer retention bonuses with a time lag of only a few months to counter immediate attrition

Staying ahead in the long-term talent race

With IT at the front and center of every business, enterprises across industries are inevitably competing for the same target talent pool. With demand expected to outstrip supply, only enterprises that take their tech workforce destinies into their own hands will survive. And the planning and structural interventions required to drive IT talent self-sufficiency need to begin today, if not already.

IT Workforce Strategy and Planning

If you are interested in learning how other organizations are addressing the IT talent shortage, Everest Group is currently conducting an extensive study to identify best-in-class, or Pinnacle, IT workforce development strategies in leading global organizations. Take the survey

We will share a complimentary summary analysis of the survey results highlighting how your organization compares against the peer group with respect to capabilities created and business outcomes achieved.

Please reach out to [email protected], [email protected], and [email protected] to discuss this critical topic.

Also watch Peter Bendor-Samuel’s two-part video series about the ongoing talent war.

Request a briefing with our experts to discuss the 2022 key issues presented in our 12 days of insights.

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