The War for Talent Is About to Go Nuclear: What We Can Do About it
Shifting demographics, changes in consumer demand and growing global competition have set the stage for a War on Talent within America. The term War for Talent comes from a late-’90s warning from McKinsey & Co. that alerted business to a coming talent shortage and urged companies to prioritize talent strategies around recruiting, retaining, and developing key employees. In the years since, organizations heeding the alert focused mostly on recruiting the best people vs. aggressively developing internal talent.
Now, talent shortages are fast going from bad to worse: Research says that we are just seven years away from an unprecedented skills and experience gap. In fact, by 2020, employers in the world’s richest nations are forecast to be short as many as 18 million college-educated workers. Moreover, with baby boomers set to retire in record numbers over the next 10 to 20 years, the situation will likely worsen.
The 5 Factors Contributing to the War for Talent
#1: Unemployment rates already near historic lows
The monthly unemployment rate – which has dropped steadily since the Great Recession of 2008 – recently reached a 10-year low of 4.3% in May (up slightly to 4.4% in June). That number is below what the Federal Reserve considers to be the “natural rate” of unemployment (between 4.7% and 5.8%), putting the U.S. labor market not just at full employment but at the beginnings of a potential labor drought.
#2: Job creation is growing 2x faster than the labor pool
The U.S. engine of growth (GDP) has hummed along steadily for the past several years, averaging just under 4% annually for most years since 2010. As one would expect, new job creation has grown right along with it, adding an average of 2.2 million jobs each year to American payrolls over the same period.
However, the United States – like other developed nations – has seen a steady decline in the birth rate and net population growth over the last century. At present, the total U.S. population is growing at an annual pace of less than seven-tenths of 1% — barely enough to cover the growth of all new jobs even if every new baby could be immediately put to work.
Moreover, projected growth of the working age population (ages 15-65) is expanding by only a little over 1 million workers each year. This means for every new worker now entering the labor force, two new jobs are waiting to be filled.
#3: Every day, 10,000 baby boomers retire
Just as employers are growing increasingly thirsty for workers, the U.S. labor pool is evaporating at a rate of 10,000 retirees a day. This comes as the first wave of baby boomers reaches retirement age. In fact, according to The Conference Board, “retiring Baby Boomers are vacating jobs faster than young workers can replace them.”
#4: The surge in retirees will subsequently drive demand for service workers
Consequently, retiring Baby Boomers of America not only removes laborers from the market but also increases the need for service workers to care for them. Research identified nursing as having the most job openings of all careers, projecting a need for 440,000 additional workers by 2024, along with other service jobs such as home health aides, physical and occupational therapists, and medical assistants.
#5: Past sources of “overflow labor” are already tapped
The prime age employment-to-population ratio (EPOP) is frequently used by economists and historians to gauge overall levels of labor participation at any given time. It measures the share of the core working-age population (ages 25-54) that is either already working or actively looking for work.
In the decades following World War II, prime-age EPOP ranged consistently between 60% and 70%. After 1975, as a greater percentage of women joined the workforce, it grew to exceed 75% – reaching historic highs of 80+ percent for a brief period during the dot-com boom of the late 1990s. Currently, America’s prime-age EPOP is 78% approaching previous all-time highs.
How to Win the War for Talent
1. Redefine Success
Redefine “talent” by shifting the discussion from “high potential” to “high value” employees. We must get specific on where we need the most value added and the type of talent to fill all “high value” jobs (not just the positions in senior leadership).
2. Clarify the Development Path
Most people do not know what it really takes to progress in their careers, and most companies are not exactly clear on what’s necessary for employees to be ready for a promotion or other opportunity. So why not enlist the help of best performers in those high-value jobs?
Ask high performers about the knowledge, skills, experiences, and personal qualities needed to handle their most important responsibilities and challenges. Then make this information available to everyone. This will help employees and their managers to have fruitful discussions of what’s required to be successful today, as well as how to prepare for roles that fit the organization’s future talent needs.
3. Lift the Veil
Most of the attention these days is on identifying the next generation of leaders. The key challenge is how to mine the hidden leadership talent inside the organization beyond the obvious candidates that stand out. One way to do this is to tell everyone how to qualify to be on the “high potential” list and let employees who aspire to be on that list have the opportunity to prove themselves.
4. Build Agility and Versatility
If change is the only constant, knowledge and skills will rapidly becoming obsolete; job requirements will be redefined, and technology and automation will continue to change the face of the workforce. Employee agility and versatility will therefore be more valuable than ever.
So instead of putting people on a career ladder where they develop deep expertise but not the versatility needed to handle jobs in different areas of the business, forward-thinking organizations give their best performers a variety of experiences and challenges early in their careers that push them out of their comfort zones.
These experiences build their confidence to tackle bigger jobs and “first-time” assignments in other functions, businesses, and geographies.
Overview: A more bottom-up strategy, such as giving more people the ability to take control of their destinies–with understanding the needed development opportunities at the right time–and a clear path forward to achieving their career aspirations, is vital to making up for lost time and winning this war on talent.
Source:
Klemp, G. (2017). 5 ways to win today’s war for talent. Fast Company. Retrieved from https://www.fastcompany.com/3035836/5-ways-to-win-todays-war-for-talent
Graft, A. (2017). The war for talent is about to go nuclear. Here’s why and what you can do about it. TLNT. Retrieved from https://www.tlnt.com/the-war-for-talent-is-about-to-go-nuclear-heres-why-and-what-you-can-do/
