Along with increasing talent scarcity, a sea of change is occurring in the marketplace, punctuated by shifting worker attitudes, rapidly changing technologies and evolving work models. As a result, employers are scrambling to acquire the talent to execute on business plans and stay ahead of the competition.
What are the biggest challenges talent leaders face, and what are they doing about them? Randstad Sourceright surveyed nearly 400 HR and procurement professionals. Based on the responses, our 2016 Talent Trends Report underscores key areas of concern, including:
- 72 per cent say talent scarcity has negatively affected their business
- 45 per cent believe it has threatened leadership continuity and succession
- 82 per cent say business leaders have, therefore, made talent acquisition a priority
These numbers reveal that employers are struggling to find the skills they need. Spending on talent acquisition is rising. Hiring managers are frustrated with finding talent in a timely manner. Executives aren’t able to execute on their growth plans, and business leaders are all turning to their talent leaders for a solution to the skills crisis
So what can talent leaders do? HR and procurement managers can start by identifying the workforce trends impacting their particular businesses and developing an effective strategy to leverage opportunities and minimize threats. The Talent Trends Report identifies 30 of the most important trends, with six critical developments that affect every organisation. These six developments are explained below:
1: Increasing worker protection
The use of freelance and contract talent is rising quickly. Authorities are taking notice of how companies are using this class of talent, and many countries are implementing regulations to increase protection for workers. For example, the Netherlands has enacted the Work and Security Act to restrict the number of consecutive contracts an employer may offer temporary workers before they have to be considered permanent and entitled to other worker rights. Additionally, the European Court of Justice recently ruled that the time spent traveling to and from first and last appointments by workers without a fixed office should be regarded as work time, a reversal from previous practices. This would enable many workers to claim compensation for this time.
Reacting to the growing use of contingent labour, some governments have started to crack down on misclassification of workers. In Europe and North America, government agencies have tried to ban some on-demand talent platforms, and legal battles continue to move through the courts in many countries. In our survey, more than half of respondents say a higher mix of contingent talent will be needed for them to remain competitive.
2: Regulating gig workers
Beyond worker classification issues, authorities are taking notice of the rapid growth in one particular segment of the contingent workforce: freelance talent and contractors. According to McKinsey, online talent platforms such as Uber, Upwork, TaskRabbit and others could add as much as US$2.7 trillion or two per cent to global GDP by 2025. At the same time, it could add 72 million full-time equivalent positions.
Easily sourced skills, lower costs and workforce agility have fueled the growth of these platforms, but regulators are taking a more critical look at how the gig economy is impacting both the traditional workforce and gig workers. Some governments are questioning and even banning on-demand talent for a variety of reasons – from safety concerns to regulatory compliance.
A key question is whether some of the new talent platforms should be considered technology enablers or as employers that should provide benefits and pay labour taxes. Because these on-demand technology platforms are relatively new in many countries, it’s likely their status will be played out in court.
3: Demographic time bomb
According to the Wall Street Journal, 2016 is the year when the working population will decrease for the first time since 1950. With large portions of their workforce nearing retirement, employers will struggle to find skills in the years ahead and may need to turn to more contingent talent to meet their needs. Many countries are already feeling the impact of this demographic shift. For example, Japan currently has 2.1 people aged 20 to 64 for every person over 65 – the lowest ratio of any country. That means Japan will be desperate for younger workers to support its aging population as more leave the workforce. By 2050 seven Asian countries, 24 European countries and four Latin American nations will have a ratio of less than 2.0.
Not only is the looming problem a sheer numbers challenge, but retirees will also be taking their knowledge and experience with them, leaving many companies with a gap in skills. To ensure they aren’t left in a lurch, organisations will need to not only acquire talent externally, but also focus on retaining and upskilling their current workers.
4: Reverse brain drain accelerates
For industrialised nations, the competition for talent will increase as skilled workers sourced from other parts of the world head back home. Markets such as the United States and Europe have always sourced talent from around the world, but some economies that experienced years of talent loss want their expatriates back. Countries such as China and India – a significant source of STEM talent for the United States and others – are making a greater effort to demonstrate that compelling career opportunities exist at home. European countries including Germany and France are also making a concerted push to draw talent back.
According to Foreign Affairs magazine, Europe’s digital sector will be short of 900,000 professionals by 2020. Germany faces a shortage of one million workers skilled in the STEM fields. Since the introduction of the euro, more qualified workers have left Europe than have arrived. EU governments, as well as others around the world, are aggressively trying to reverse the brain drain.
5: Talent mobility
The migration of talent from mature markets is part of a larger trend: rising global talent mobility. The Talent Trends Survey reveals that 54 per cent of respondents have expanded their geographic area of search to find what they consider to be the perfect talent.
Mercer’s 2015 Worldwide Survey of International Assignment Policies and Practices Report noted that 47 per cent of employers expected to increase locally hired foreigners. Along with that, 54 per cent anticipate an increase in permanent transfers abroad, and another 50 per cent will grow developmental and training assignments.
The rise of global talent mobility poses challenges for recruitment activities and employer branding. A ‘glocal’ approach that helps the organisation preserve its global employer brand, while making it relevant locally, can help address the challenges. Successful companies will find themselves further ahead in the global race for talent, while those who struggle will be at risk of losing workers to competition from abroad.
6: Talent scarcity threat
According to the Talent Trends Report, 72 per cent of survey respondents say that the difficulties of finding talent are having a negative impact on business growth. In 2014, the Centre for Economics and Business Research (Cebr) reported that the UK economy is losing out on £18 billion due to 520,000 job vacancies that small businesses are unable to fill due to a lack of skills.
In its 18th Annual Global CEO Survey, PwC found that 73 per cent of CEOs say the availability of key skills is one of their top three concerns, even as half of the respondents plan to add headcount to their workforce in 2016. With talent scarcity a serious issue, they will likely face headwinds that will slow their efforts.
Preparing for a difficult road ahead
Talent scarcity, a shifting workforce and regulatory pressures all pose potential problems for employers. Understanding how these changes affect talent strategies is the first step in addressing them. For organisations to gain a competitive advantage, it all starts with talent. Now more than ever, the C-suite and talent leaders must be aligned on the priorities ahead: acquire and retain the necessary talent needed to keep the enterprise growing.