It’s been exactly one week since we all gawked over the latest U.S. jobs report. The 53-year low unemployment rate, contrasted with seemingly endless headlines announcing mass layoffs, has left many scratching their heads. So I went to an expert to find out how HR heads are experiencing and navigating the dizzying labor market. 

Katy George, chief people officer at McKinsey & Company, has been at the consulting firm for 27 years and has a Ph.D. in business economics from Harvard University. George spoke with Fortune about the current labor market trends on the ground and how they’re influencing McKinsey’s talent strategy. (Hint: It’s had to get much more creative to recruit potential employees.)

This interview has been edited and condensed for clarity.

Fortune: What’s your take on the labor market right now?

Katy George: One of the things that I’ve talked about with a lot of other CHROs is that we’ve seen a permanent shift in work. We’ve accelerated into something we only talked about vaguely as the future of work before COVID. 

We’ve seen this huge focus change in how work is done and what it means for career-pathing, skills, and skill requirements. But we’ve also seen this massive change in workforce expectations. People are very focused on building real skills and developing themselves. And they realize they can do that with more flexibility than they’ve had in the past—they don’t have to stick with a company to give them that opportunity. 

If you look at the jobs report, we are seeing a culmination of this, and there are new skill and job categories that are still in short supply. Not everybody’s back in terms of labor force participation, and while we see significant layoffs in some industries, it’s really a reallocation of the workforce across industries.

How do those labor market trends show up at McKinsey? What are some of the challenges?

We have been making real changes to accommodate some of the forces at work that we’ve seen across the board. One example is that we see a need to continue expanding our sources of talent beyond some of the traditional schools we hired from in the past. For the first time, we’re really hiring at scale at all parts of our pyramid, not just entry-level jobs, because our clients demand that we have real expertise and a wider variety of experience and skills. For many years, we’ve been moving toward [recruiting] more functional expertise with deeper industry experience and much more tech talent.

One of the things we discuss internally is pivoting from pedigree to potential and how we think about where talent comes from as we scale. We used to source from about 700 schools; we’re now at about 1,500 and want to go to 5,000.

It’s kind of our contribution to the ‘paper ceiling’ movement in that we believe great talent is everywhere. We want to increasingly create digital tools and use new ways of assessing talent to bring in the best.

Where’s McKinsey recruiting new talent?

HBCUs are a relatively new source that we are excited about. But I would say even more than individual schools, we are recruiting tech talent in whole new ways through digital hackathons and things like that. 

We now have a video game out in the market that’s been tested for a couple of years called Solve. We look for people to demonstrate their problem-solving capabilities in a way that does not require the same kind of preparation and insider understanding of a McKinsey case interview. We know that people spend a tremendous amount of time studying and preparing for the McKinsey case interview, and if you’re on a campus with lots of other people doing that, there’s a real benefit—you learn and teach each other. Some people even pay people to help them study for the McKinsey interview. We wanted to find ways of really reaching talent that didn’t require all that preparation and didn’t require people to know business terms. So the Solve video game approach is a way to test problem-solving. We’ll be using more and more of that approach going forward. 

What are the results of using Solve thus far?

Even if a person is the only person at their school who might be interested in connecting with McKinsey, they can now join us online, and we can get them into our process. We don’t currently have the number of hires, but over 150,000 candidates have used our game over the last two years.

Amber Burton
amber.burton@fortune.com
@amberbburton

Reporter's Notebook

The most compelling data, quotes, and insights from the field.

Childcare costs are driving women out of the workplace. The annual cost for childcare ranges from $5,357 to $17,171, according to a 2018 calculation from the Women's Bureau of the Department of Labor. And on average, families in the U.S. spend about 18% of their paychecks on childcare. More mothers now say they feel forced to step back from work to care for children due to the rising costs.

“If childcare costs eat away a quarter of their paychecks, nearly half of parents with young children under the age of 5 would consider being a stay-at-home parent,” writes Fortune's Megan Leonhardt. 

Read the full story here.

Around the Table

A round-up of the most important HR headlines, studies, podcasts, and long-reads.

- Delta will give employees their second pay bump in less than a year after pausing raises during the pandemic. CNBC

- In an effort to “flatten” its organizational structure, Meta is asking some managers to move to new roles where they won’t oversee other employees—or leave the company. Insider 

- A new Flex Index aims to consolidate the remote work policies of different workplaces so employees can better compare them. Forbes

- Disney and JPMorgan announced job cuts.

Watercooler

Everything you need to know from Fortune.

Big tipper. Delivery apps often conceal an order's tip amount, so drivers can't avoid stingy tippers. Gig workers are fighting the practice. —Stephanie Vigil 

Slow and steady RTO. There won’t be a watershed moment when workers return to offices. —Jane Thier

Flying high. An airline pilot shortage has bolstered the negotiating power of the industry’s unions. —David Koenig

More layoffs. The Microsoft-owned developer platform GitHub announced it would lay off 10% of its employees and transition to fully remote work. —Kylie Robison