Skills shortages seen as major threat to business expansion.
PricewaterhouseCoopers (PwC) recently released results of its 15th Annual Global CEO Survey based on interviews with 1,250 chief executives from 60 countries who shared their thinking on hiring and retaining talent. Here are some of the PwC study’s key findings:
We Have A Skills Shortage
One in four CEOs reported being unable to pursue a market opportunity or having to cancel or delay a strategic initiative because of talent.
One third are concerned that skills shortages impact their company’s ability to innovate effectively.
Zsolt Hernádi, chairman and CEO of MOL Plc recently said: “Close to 15 percent of energy-related investments around the world fail or are lost because a suitable workforce is not available”. This is the talent crunch. It’s a complex and frustrating challenge and is being felt worldwide. 23% of respondents expect “major change” to the way they manage their talent.
Theoretically, finding a good candidate to fill a position should now be a very straightforward exercise.
There are many more educated people in the world, and it has never been as easy for companies to access such a huge talent pool online. Highly skilled talent is also highly mobile. Networking advances mean that many more tasks can be handled remotely or outsourced.
But the reality is far different. A Chinese automaker attends job fairs in Germany, even though China produces large numbers of graduate engineers each year. High jobless rates persist in the United States and Europe, disproportionately among the young, even as businesses fret that they cannot attract the digitally adept “Millennial” generation to pursue careers in their industries. Too many well-educated citizens of the Middle East and elsewhere are not in the workforce at all. “Before, people looked for jobs. Now, companies look for talent,” said Erdal Karamercan, president and CEO of Eczacıbası Group A S.
Another talent concern for CEOs today is the frequent job-hopping that is endemic to many markets, at all levels of the organization. A 2010 survey by MRI China Group of more than 2,200 mid-to-senior-level managers in mainland China found that two-thirds had received at least one competing job offer in the last 18months,and that nearly half (46%) had moved to a new role with a more than 30% increase in compensation.
High-potential middle managers are the employees more CEOs across all industries and regions fear losing the most. These operational managers are often the most sensitive to changing customer demands and the ones charged with executing the strategic direction.
Succession And Talent Planning
This is one reason why formal succession planning in some companies is starting to go deeper into the organization. Efforts to identify the talented managers earlier in their careers, and to specifically devote development resources to them, are taking place in more organizations.
Two-thirds of CEOs say it’s more likely that talent will come from promotions within their companies over the next three years. While outsiders bring many benefits, the loss in productivity and time when a valuable employee leaves, as well as the expense related to retraining, are beginning to be better appreciated.
Twenty-one percent say the information they receive on the cost of employee turnover to their organizations is inadequate and 47% receive some information but want more. “We need to grow our own talent,” said Nancy McKinstry, chair of the executive board and CEO of Wolters Kluwer, an information services and publishing company. “It’s often very difficult to take people from outside to come into the company and have them be productive in a short period of time.”
To develop talent better, companies will need to understand that what works in one market might not work in another. Mentoring programs, for example, are popular in some countries but fail in others because of the way coaching is received in different cultures. Even companies that are well respected for their development practices are rethinking global talent strategies and adapting them for different markets.
A minority of CEOs expect to undertake deep restructuring measures specifically to fill the talent gap. As CEOs consider how to build the future of their workforce, a third or less expect to make dramatic changes, such as making an acquisition to secure needed talent, seeking partnerships to get access to skills, or moving operations to more talent-rich areas. Slightly more CEOs (38%) expect to make significant investments in technology to circumvent shortages.
What Is Leadership’s Role?
More CEOs are now integrating Human Resources with business planning at the highest levels of the company: 79% of CEOs say that the chief human resources officer, or equivalent, is one of their direct reports (most have 10 or fewer direct reports). They are also seeking a better understanding of the scale and effectiveness of their investments in talent. Productivity and labor costs remain important measurements; these are the tools investors, lenders, and businesses use to benchmark progress (or a lack thereof). They are largely standardized in many industries, and thus easy to implement. Yet for many CEOs, those tools aren’t enough.
The current reporting tools focused on productivity and labor costs are very good at telling a CEO how the business is performing today relative to its peers, but do not provide insight into whether the organization is investing enough in employees to generate future growth. Such measurements cannot isolate skills and gaps, and often struggle to identify the pivotal jobs that drive exponential value; they do not measure employee engagement or team performance, both of which are so critical for investments to foster innovation to bear fruit.
These measurements are much harder to make, which is one reason why they’ve been neglected and why today, so many CEOs are frustrated with the issue of talent.