You’re a business executive operating in a remarkably volatile, competitive and unpredictable global economic environment. The demands on your organization have never been greater.
Every day you are asked to deliver more with improving performance. You need more skilled people, but management does not want you to hire. And when they do authorize new positions, it’s difficult to find candidates in your local labor market who meet your capability requirements and are willing to work for the compensation you have to offer.
Sound familiar? Then, you too are experiencing the talent paradox.
The Great Recession that struck in 2008 – 2009 continues to reverberate. Stakes remain high for today’s corporate leaders as they are being asked to do more with less. Fixed cost structures are out, variable ones are in. Cyclical demand and productivity requirements will be met increasingly with contingent labor. A paper from the McKinsey Global Institute reports that 58% of employers say they will hire more temporary and part-time workers.
That may be well and good for the present, but demographic trends suggest there is big risk lurking on the longer-term horizon. For one, highly-educated and experienced Baby Boomers have started reaching retirement age. The vanguard of the post-World War II baby boom (those born in 1946) turned 65 last year; the tail end of the Baby Boom (born in 1964) will turn 65 in 2029, taking an enormous number of highly trained and experienced professionals out of the workforce over the interim.
While McKinsey projects that the U.S. labor force will continue to grow over the coming decade, reaching 168.9 million in 2020, it warns that a high job-creation scenario could lead to a supply deficit in the U.S. of some 1.5 million college graduates. What is more, McKinsey suggests “…the configuration of the labor force will not neatly fit the requirements of employers.”
While offshore and developing economies may alleviate some of the expected skilled-labor supply deficit in the U.S., there is talent trouble brewing overseas as well. The past three Lloyd’s Risk Index reports (2009, 2011 and 2013) have all named talent and skills shortages among top risk factors cited by global corporations across a broad variety of industries and geographic regions. Lloyd’s 2011 report also noted that talent and skills shortages are risks for which companies feel they are insufficiently prepared.
After soaring from a rank of 22 in 2009 to two in 2011, the risk talent and skills shortages dropped to an 11 rank in Lloyd’s more recent Risk Index 2013, supplanted by additional worries such as high taxation, corporate belt tightening worldwide, cyber risk and materials price inflation. But, a deeper read of Lloyd’s Risk Index 2013 finds talent still very much in play as a risk in key large economies and outsourcing regions. “For economies such as China,” notes the 2013 report, “…the lack of suitably skilled staff remains a serious threat to business. As the number one risk for Chinese business leaders in 2011, it has dropped just one place to joint-second in 2013. In Brazil, the risk was placed 13 by companies in 2011; it is now fourth.”
There are other trends exacerbating the talent paradox in the U.S. The housing market, while finally showing signs of renewed life, still has a long road to full recovery. Mortgage lending standards remain on the strict side and people lost significant wealth when their home values plunged, leaving them either unable or reluctant to sell and move wherever there careers might lead them. Supply of rental properties has also tightened substantially, driving up rents and making it more difficult for young professionals to move about easily and economically. While certain U.S. cities and states are experiencing talent shortages, others have large surpluses of talented people who are either unable or, for any number of reasons, unwilling to move in search of well-paying work in their fields of expertise.
While current drags on workforce mobility will eventually work themselves out in the marketplace, the bigger questions should be: Does workforce mobility even matter in today’s hyper-connected economy? Is there value to be found in experienced and talented professionals’ needs or desires to live in one place, yet work in another? And what role does domestic outsourcing play in addressing the talent access challenge?
