Study after study shows that the main concern of business executives is ensuring their business has the right talent to survive digital disruption. This rings true of pretty much every piece of research on the matter conducted by all the leading consulting firms. The reason for this concern is simple, there are more jobs available, than people able to do them. Businesses are failing to adjust to this reality and adjust their approach accordingly to meet business needs.
Historically, the approach to expanding a business has been simple, you hire more people. If you want to boost sales, you hire more salespeople. If you are struggling with processing sales, you hire more back office staff and so on and so forth. However, the dynamics of the world economy have changed. Simply buying more talent is no longer an option and businesses who have failed to invest in the relevant internal infrastructure to grow their own talent are hurting. This talent shortage applies across the board.
The United States had 7 million job openings in December 2018, but only 6.3 million people in the country were unemployed. This is not just vacancies for fancy technology professionals, this is cooks, cleaners, retail workers, call centre operators and other essential, but lower paid jobs. There are simply not enough people available with the relevant skills to do the jobs available. According to Manpower’s talent shortage report this is also a global phenomenon, there is a skills shortage of 89% in Japan, 56% in both Singapore and India, 19% in UK, 51% in Germany, 13% in China. This is before you factor in the future ready skills that organization are also going to be looking to acquire over the coming few years as they embrace the future of work. Quite simply, organisations cannot buy the required talent to meet their business demands.
The solution to this talent shortage, should be self-evident to these businesses. If you cannot find the talent, you will have to build the talent yourself. However, many organisations are reluctant to invest the time and effort in to doing this. Common excuses are that it will take too long or cost too much. Research has again shown that both concerns are based more in emotion than fact. As the research show, that financially, it is more costly and risky to buy talent than develop it.
Let’s use an example shared by Josh Bersin and assume you hire an experienced software engineer at an average salary of $150,000 a year. This usually comes with a recruitment cost of about $30,000 and a new hire is 2-3 times more likely to result in attrition. It then takes time for them to serve their notice and then several months to embed themselves into their new surrounding before they are productive. Whereas retraining someone internally would cost less than $20,000. This is a conservative example, there is also research conducted that has shown it can cost up to 6x more to fill vacancies with external talent than internal talent.
The impact of automation
Finally, when automation is also factored into the talent equation, it should be the most obvious decision in the world to build capability rather than rely on hopefully buying it. As automation displaces low level tasks, this frees up workers to be re-trained and re-deployed in new areas by their employers. There are countless government backed re-training schemes to support this, and in fact, most will pay employers to do this. A company can literally get paid to retrain an employee it does not need anymore, to do something it does need. And for those who need more employees than that number, there are currently over 200 million students at university globally right now who would love a job. Yet most firms also hire an appallingly low number of entry level graduate professionals each year compared to experienced hires. With all of this in mind, the only ones these businesses can blame if they are unable to meet their talent needs are themselves. The solution is obvious. Build talent.