Looming Talent Crisis Signals Need for Firms to Employ New Strategies
Impending Baby Boomer retirements, a widening skills gap driven by declining educational standards, and outdated and ineffective approaches to talent management are combining forces to produce a "perfect storm" that threatens the global business economy, according to new research conducted by the Human Capital practice of Deloitte Consulting LLP ("Deloitte Consulting") and Deloitte Research, a part of Deloitte Services LP.
In a recent U.S. survey of human resources executives nationwide conducted by Deloitte Consulting, more than 70 percent of the 123 respondents say incoming workers with inadequate skills pose the greatest threat to business performance over the next three years, followed by Baby Boomer retirement (61 percent), and the inability to retain key talent (55 percent). These survey findings are underscored in Deloitte Research's report, "It's 2008: Do You Know Where Your Talent Is? Why Acquisition and Retention Strategies Don't Work."
"The overwhelming accumulation of data, including Deloitte Consulting's new research, points to an inescapable conclusion: the widening skills gap, particularly among the categories of workers who disproportionately drive companies' growth and performance, is a global phenomenon that will create unprecedented challenges for businesses," said Ainar Aijala, Vice-Chairman, Deloitte Consulting and global service area leader of Deloitte Consulting's Human Capital practice. "The confluence of demographic and social trends - the full force of which will begin to be felt in as little as three years -- will leave behind companies that do not begin to rethink and redesign their approach to managing human capital."
Unfortunately, few organizations have talent management processes in place to address the impending workforce shifts that will negatively impact critical talent segments. In fact, only half of the organizations surveyed by Deloitte Consulting have identified a list of the critical skills they need for future growth. Even more alarming, more than a quarter of respondents say defining critical skills as a workforce tool is "unimportant."
"Employers need to focus quickly on understanding which skills will make or break their business, where those skilled individuals will come from, and how to keep these workers engaged and committed within the organization," Fucci cautions. "Only those organizations that respond swiftly and plan effectively will find themselves on top of these new challenges."
Traditional approaches to talent management frequently focus on acquisition and retention. When the talent pool tightened in the 1990s, companies responded by offering rich compensation packages and "hot skills" bonuses. The end result, however, was often disappointing -- recruiting costs soared while investments in training languished. In addition, such compensation packages were often matched by competitors, contributing to high attrition rates of talented personnel.
Despite the changing landscape, organizations still plan to increase their investment in traditional talent solutions for 2005. Approximately 60 percent of survey respondents plan to increase experienced employee recruitment, while 42 percent plan to increase campus recruitment. Additional investment will also be given to rewards packages for experienced employees (39 percent) and new recruits (30 percent).
"Acquisition and retention strategies remain important parts of talent management. Such strategies, however, attend to the "end-points" of the process and only offer a quick fix to these new workforce challenges," says William Chafetz, national practice leader of Deloitte Consulting's Organization and People Performance Services. "To survive the changing labor landscape, organizations must employ more comprehensive talent management strategies that reflect an understanding of critical workforce segments and satisfy the conditions those employees need to succeed."
Companies can avoid sustaining a direct hit from the looming talent crisis, and in fact convert these challenges into an opportunity, by rethinking and reinventing their talent management processes into a well-designed talent strategy that truly utilizes critical workforce as a competitive advantage and, therefore, differentiates a company from its competitors.