We’re unpacking the forces driving HR and business action over the next half-decade. We’re putting these forces in historical context, while also providing HR leaders with actionable advice on how to assess their risk, prepare their teams, and better understand the ramifications of inaction.
The notion of a widespread talent shortage might seem counterintuitive, given the prevailing concerns about AI coming for human jobs.
How can there be talent shortages in industries where technology is threatening our very livelihoods (or so we’ve been told)?
The reality is talent shortages are nagging many industries, from tech to transportation, and not because the workforce is simply shrinking. Labor participation rates have stayed relatively flat over the past half-decade, yet some prognostications estimate that by 2030, the global talent shortage could equate to around $85 trillion in lost revenue.
As an HR leader, it’s imperative you understand the factors driving the shortage, its potential long-term effects, and your level of vulnerability as a company.
That means:
- Understanding the current landscape
- Assessing and addressing your risk exposure
- Ensuring a positive brand experience with candidates
- Recognizing the implications of inaction
Let’s dive into each step in more detail.
Understanding the current landscape
The concept of a talent shortage will resonate more with some companies, and certain industries, than others. But whether you’re feeling it right now or not, there exists an imbalance in talent supply and demand across many global economies.
We can attribute this imbalance, in part, to demographic shifts affecting our existing workforces.
You might ask: Aren’t workforce demographics always shifting?
They are, but historically not with these stakes, and not at this pace.
Experienced workers are always retiring. Any cyclical economy will experience a natural ebb and flow of knowledge loss and transfer. But due to the rapid rate of technological change during the tenure of Baby Boomers – and to an increasing extent, Gen X – the current transition is marked by a uniquely pronounced skills drain.
In short, thanks to advances in generative AI and other emerging capabilities, the gap between available skills and employers’ ever-evolving needs is especially wide. And traditional education can’t always stay in lockstep with workforce needs – a misalignment that perpetuates itself in the form of underprepared graduates.
When your new hires aren’t schooled in the same tools as your existing workforce, it can make the transfer of knowledge and training especially laborious – and extend your onboarding process significantly. Frustration will abound, and frustrated new hires often quit at a greater clip.
HR prep step 👉 Revise your recruitment and training metrics to measure and prioritize the skills that matter most.
Economic and social shifts further complicating labor market dynamics
In addition to a general disconnect between the skills taught in educational institutions and those required by employers, certain sectors like healthcare, technology, and manufacturing are experiencing more acute shortages due to specialized skill requirements.
For one, globalization has intensified competition for skilled talent across borders. Remote work in many ways leveled the geographical playing field, with multinational companies able to pry talent from anywhere in the world, provided they’re willing to navigate the paperwork.
Employers are also dealing with changing worker expectations. The employer-employee pendulum continues to sway back and forth, from RTO mandates to benefits demands, and everywhere in between. Younger generations often have different priorities and expectations from employers, affecting retention and recruitment. Throw in a shortage of talent, and the supply-demand equation only makes things more complicated.
Burnout and mental health: The pandemic has exacerbated issues of workforce burnout and depression, leading many people to exit the job market, whether temporarily or permanently, over the past five years.
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Assessing and addressing your risk exposure
Your organization’s risk exposure in times of talent shortages might come down to its agility. Can you efficiently tweak your practices? How innovative are your people in leadership positions? How can you better understand people’s behavioral strengths to accentuate the versatility of your talent?
Employers can implement several strategies to offset talent shortages. For one, you can reimagine your hiring process so it focuses on skills and behaviors, rather than solely on traditional qualifications, like a resume. You can even tailor your interview questions to understand a person’s behavioral fit in a given role.
Perhaps more practically, every organization can look inward to reduce their risk exposure. That means:
1. Investing in your existing workforce
Reskilling and upskilling takes many forms. Offer training programs and opportunities for employees to learn new skills. Utilize peer mentoring to facilitate knowledge transfer. Encourage a culture of continual learning within the organization.
This approach is often more cost-effective than hiring new talent. On average, upskilling an existing employee costs about $1,300, compared to $4,425 to train a new full-time employee.
2. Enhancing the employee experience
Offer flexibility, higher wages, and remote work options to meet changing employee expectations. Reimagine productivity measures, focusing on quality of work rather than quantity. And provide career development opportunities and make them easily accessible.
Leverage technology and data differently. Use skills intelligence tools to understand current workforce skills and identify gaps. Implement AI-powered platforms to centralize learning resources, and suggest personalized development opportunities.
Fostering diversity and inclusion also has proven productivity effects. Expand the talent pool by embracing diversity in terms of gender, ethnic background, and age. Design more inclusive and flexible jobs to accommodate different types of people and working modes.
And don’t overlook external partners. Partner with educational institutions to develop curricula that align with industry needs. Work with employment programs like Generation to access a pipeline of trained talent. Utilize employee referral programs to tap into existing employees’ networks.
3. Focusing on retention
The final X-factor in the fight against talent shortages? Your existing talent.
Implement talent circulation strategies to retain existing employees. Create internal talent marketplaces to match employees with new opportunities based on their skills and preferences. This sort of mobility – or even the idea of mobility – is a core tenet of talent optimization.
By adopting these strategies, employers can better navigate the challenges of talent shortages and build a more resilient workforce for the future.
HR prep step 👉 Codify – and communicate – how you plan to get the most out of the people you already have on staff. Quantify the value they bring, and champion the efficiency of elevating internal talent over making more outside hires.
Ensuring a positive brand experience
Of course, you’ll still need to invest in external marketing and recruitment efforts. These should be a mainstay, and your success can hinge largely on your brand identity and credibility, especially in times of talent shortages.
Ask yourself: What does our website say about us? Does it accurately reflect our current culture, mission, and vision? What about our job ads?
Employers too often forget that employees are evaluating them, just as much as the opposite is true. And few things can turn off candidates as quickly as an outdated or uninspiring brand experience.
HR prep step 👉 Put yourself in the shoes of a candidate, and reassess every step of the user experience, from search to onboarding. Update your job ads so they key in on the behaviors that lend to success in a role, as opposed to solely skills and experience.
Recognizing the implications of inaction
The talent shortage is expected to persist and potentially worsen in the coming years. Addressing this challenge will require multifaceted approaches, including reskilling programs, education reform, and evolving workplace practices to attract and retain talent.
If you don’t get your people priorities in order, you run the risk of being left behind, or worse, rendering your business obsolete. Future-proof your business for tomorrow, by practicing talent optimization today. You need to be aligned on your approach to each of these forces. Measure what matters – and make it a collective business effort.
