According to a recent study by the The Manpower Group, a Milwaukee-based human resource consulting firm, employers are struggling to find talent as a result of a rapidly changing labor market.
“Technology, shorter product cycles, shifting consumer demand, and new ways of working all mean that the jobs employers need done are evolving, and they need people with different skills to do them,” explains Sunny Ackerman, the vice president and general manager of Manpower U.S.
While organizations are responding to these challenges with short-term solutions, a new report by the ADP Research Institute suggests that they are failing to get to the heart of the problem.
Dermot O’Brien, ADP’s chief human resources officer, and Ahu Yildirmaz, vice president and head of ADP Research Institute, writes in the report:
Many companies are experiencing a skills shortage, which we believe is caused by a number of factors, including the transition to a more transient workforce than in previous generations; a lack of training company employees to take on other tasks and transfer into new positions; and a failure to train younger staff to replace people when they retire.
The report—which draws on an earlier survey of more than 500 senior executives by the Economist Intelligence Unit and ADP, among other research—suggests that while most organizations acknowledge the talent shortage, few have a long-term plan to address it.
For example, 76% of respondents said the market for skilled talent will become tighter, and 69% agree that talent will become more expensive, but there is little consensus on who is responsible for solving these challenges. Of the 500 respondents, 58% believe it’s up to senior management, while 28% believe it’s the function of human resources.
The most popular response regarding a solution was to spend more money on strategic workforce planning software, which the study’s authors suggest isn’t the best approach.
“Companies will need to change their practices, particularly by rebuilding HR budgets for training, changing corporate culture to promote from within, and allow flexible work options,” the report’s authors write. “Our findings suggest that companies that have been recently focused on short-term needs are beginning to see that these bigger challenges require a long-term plan.”
The report points to a turnover cycle that ultimately has adverse impacts on both employers and employees. Instead of training staff in-house, companies are increasingly looking to outside hires. This, in turn, increases the rate of turnover, as staff feel they need to look beyond their own employer for career advancement. As a result, the company requires even more outside hires to fill the gap.
“The perceived skills gap is because companies have stopped training and developing people internally,” says Peter Cappelli of the Wharton School, who was interviewed for the report. “Before the 1980s, 90% of vacancies were filled internally and 10% were hired outside. Now, 65% of vacancies are filled from outside,” Capelli says.
Cappelli adds that corporate training budgets also dropped by 20% between 2000 and 2008. As a result, employees now need to switch employers in order to advance their careers, taking institutional knowledge and skills with them, and increasing the burden on employers to replace them.
Though it attempts to shine a light on this problem, the report concludes that it’s unlikely to improve anytime soon, as rapid technology advancement makes it difficult to set long-term staffing strategies. “Simply put, it has become impossible to know staffing and skills requirements well in advance,” the report’s authors state. As long as training budgets continue to decline and companies fail to advance their existing employees, their turnover rate, retention costs, and the shortage of skilled candidates will continue to grow.