Plugging the Skills Gap

From IT businesses to manufacturers, U.S. companies share a growing dilemma: not enough skilled workers to fill job vacancies and a struggle to retain the ones they already employ. Many executives believe this reality stands to worsen. That’s why they are looking to strategic workforce planning (SWP) to help address and resolve skills shortages and rapid staff turnover. In April 2016, a study conducted by The Economist Intelligence Unit (EIU) and supported by the ADP Research Institute® surveyed more than 500 C-suite respondents who shared where and why they are feeling the labor pinch and what changes could help narrow the skills gap.

How Did We Get Here?

In decades past, companies didn’t have to look far to fill positions. “Before the 1980s, 90 percent of vacancies were filled internally and 10 percent were hired outside,” says Peter Cappelli, professor of management and director of The Wharton School’s Center for Human Resources. “Now, 65 percent of vacancies are filled from outside.”

Cappelli blames corporate training policies, or lack thereof, for the skills shortages, pointing out that training budgets fell by 20 percent from 2000 through 2008. The number of apprenticeships halved in that period as well. Concurrent with their weaker emphasis on skills development, companies have experienced the trend of splitting conglomerates into separate profit units, exacerbating staffing problems by making it harder to rotate employees between business units to gain experience.

Flash forward to present day and most respondents (80%) believe top management difficulties stem from the shortage of skilled workers, be it finding highly skilled people (28%), rising costs (27%), or holding onto experienced staff (25%). Asked about future business challenges, more than three-quarters (76%) of respondents expect the market for skilled talent to tighten.

It Takes Experience to Get Experience

Though they’re sometimes criticized for lack of loyalty and job-hopping to gain promotion, millennials (here, defined as those from 20 to 40 years of age) are sometimes faced with inadequate advancement opportunities where they are. “Millennials are more concerned with career progression than with money,” says Nicole Cunningham, head of recruiting and employee experience at Knot Standard, a custom menswear company. “They want career progression and are very concerned with company fit.”

One potential explanation for this age group’s stalled career trajectory may be the trend of work beyond traditional retirement age. More than one-third (37%) of survey respondents say their companies continue to employ people past their normal retirement age. However, fewer respondents (29%) expect to continue this practice, which perhaps suggests that older employees are being kept in role until younger employees have acquired the “old” skills.

Naturally, some skills shortages result from fast-evolving technology that changes the manner of business and demands new proficiencies. Companies are having to “buy in” new tech skills, as should be expected, but they also lack people internally with traditional skills found among older employees.

So What Are the Answers?

As a starting point, many companies are working to identify skills they’re likely to require in the future and how to better secure them from both within and outside of their organizations. For example, U.S. office supplies giant Staples may build offices in additional cities to access a broader talent pool. Hospitality chain Marriott International has created a professional development program to encourage departmental cross-training. Leaders from both companies acknowledge that such recalibration carries a financial cost but also delivers an operational payoff.

To learn more about those strategies and gain deeper insight into how HR is identifying and addressing skills shortages in the workforce, read the full white paper “Strategic Drift: How HR Plans for Change.

About this report: Strategic Drift: How HR Plans for Change is an Economist Intelligence Unit report, supported by the ADP Research Institute. The Economist Intelligence Unit bears sole responsibility for the content of this report. The findings do not necessarily reflect the views of the sponsor. The report draws on two main sources for its research and findings:

  • A survey that included responses from 502 C-suite respondents in the U.S., evenly distributed across four geographic regions: the Northeast, the Midwest, the South and the West. Some 11% of respondents came from companies with fewer than 20 employees, 23% had 20-49 employees, 34% had 50-499 employees, 21% had 500-999 employees and 13% had more than 1,000 employees. Respondents came from four functional areas: 10% finance, 41% general management, 39% HR and 10% IT. They held a variety of C-level positions: 40% were CEOs; 10% were CFOs, treasurers or heads of finance; 40% were CHROs or heads of HR; and 10% were CIOs, CTOs or heads of technology.
  • A series of in-depth interviews conducted with senior executives.

TAGS: Human Capital Management Human Resources Talent Management Performance Management Technology