How companies can find required skills despite acute talent shortage
Companies today face a global acute talent shortage for the next three to five years. The pressing issue in this situation is finding or accessing the necessary talent to meet a company’s business needs.
Companies have used a variety of recruiting tools over the years, all of which required investment as well as a consistent approach. But in the face of the global imbalance between the demand and available supply of talent (especially for engineering and IT talent), companies must address the talent-access issue in a much more systematic way because the post-COVID boom in hiring (especially for engineering and IT skills) is happening at the same time as the talent shortage.
Underlying this situation are the following factors:
- The post-COVID economic boom with large segments of the economy doing extremely well and hiring more than before. There is also wage inflation in this hot labor market
- During the initial 18-months lockdown in the pandemic, there was almost no job movement. Working from home during the pandemic severed workers’ collegial bonds, so people became more willing to move. Consequently, we are in the midst of the “Great Resignation,” with a rash of early retirements, people changing careers or shifting to part-time jobs, and people wanting to stay home and change their lifestyle.
- The growing number of companies assembling or building digital platforms that enable them to compete better and to manage their employees and supply chains more effectively adds to the talent demand. As I have blogged in the past, platforms constantly evolve, which then escalates the need for more engineering and IT talent to maintain and evolve them
The traditional recruiting methods and channels are no longer effective enough for enabling large and small companies to find the necessary talent and survive the acute talent shortage. Here are five vehicles that companies might want to consider.
1. Retraining: Companies can use boot camps or other training programs to retrain current employees who wish to move into higher-paying, interesting roles, including engineering. A company can build its own boot camps and training platforms or lease them from third-party providers
2. Build on the Work-From-Home Model: Companies can expand their labor pool by aggressively building on the work-from-home model. It enables widening their footprint and recruiting across not only all the US but also in other countries. There are firms that enable companies to reach into the underutilized engineering skillsets in places such as Greece or Eastern Europe. And the workers can work virtually, which moves past the challenges of these countries’ adverse labor laws
3. Establish Micro Centers: Companies can put in place micro centers of 30-50 people in remote locations, allowing a company to take advantage of underutilized labor pools. For example, there is a high-quality labor pool of fintech or financial services and IT and technical expertise in Jamaica, where they are asking for companies to invest in micro centers.
The cost of putting in place micro centers – also known as a Global Business Services center (GBS) or a “captive” – dropped dramatically in the last few years because of the leadership and ecosystems that are now available in those locations, as well as the available real estate and tax expertise. Ten years ago, GBS centers only made sense if they scaled to potentially 1,000 people; today, they clearly have a strong return at a much lower level of 15-50 people. Furthermore, companies can stand up a micro center relatively quickly and manage them cost-effectively.
Effectively, micro centers are just office spaces (and sometimes involve a subsidiary) that are set up with the explicit intent to capture a labor pool that the company needs at an affordable cost. Micro centers allow companies to expand their labor pool in a variety of locations across a wide geographic footprint instead of going big in one location
4. Campus-to-Work Pipeline: This vehicle for finding and hiring talent (especially with engineering and IT skills) deserves a close look. Both large and small companies now find this pipeline model is a reasonable-cost investment compared to alternatives, and it provides a steady, robust flow of excellent talent.
5. Third-Party Service Providers: Companies can access talent through third-party service providers on an as-needed basis or on a long-term basis. However, companies will need to complement third-party talent with their own acquisition of talent. The service provider model can only go so far. Although the offshore model is booming now, third-party service providers struggle with the same talent shortage as their enterprise clients. Service providers that have a wider geographical footprint may be in a somewhat better position to deal with it
Because services providers also now struggle with the talent shortage, a company that uses all third-party services tends to be in a very high-risk situation as the company becomes more aggressive in competing in the marketplace. A balanced approach is necessary to reduce risk.
When assembling or building a platform, a company can complement its talent resources with third-party providers. But because platforms are becoming so integral to a company’s ability to compete, companies increasingly seek to exercise more control over their platforms (especially as they evolve); this is difficult to do through third parties.
Another challenge in using third-party providers is that they have unaligned incentives. In this new tech-driven world, companies need talent that is in fixed, or persistent teams, where the people stay in the same team over multiple years. The use of persistent or fixed teams greatly increases productivity. But it is a significant challenge for the service providers’ model, which churns talent, moving people when one project ends and bringing in more junior people over time. This results in a continual learning curve that hinders productivity.
Companies that see the value of persistent teams need to work out a different relationship with their service provider and/or create their own talent structure.
Because of the acute talent shortage that looks to stay with us for the next three to five years, I believe companies need to closely examine and consider each of the above-described methods or vehicles for finding talent.