Short and long term picture of the talent shortage

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Fiscal policy and spending, inflationary pressures, combined with the recovery from the recession linked to the COVID-19 pandemic, have resulted in the current overheating of our economy which demands a larger workforce. Combine this demand with the multi-year global talent shortage, as well as the social dynamics of the “big quit” and post-COVID early retirements. This is much more than a dilemma of short-term staffing and attrition. At Everest Group, we have studied this situation and what it means for short and long term business concerns. Read on to find out the reality of what awaits you.

Short-term situation

Some companies have the thesis that monetary policy will tighten, inflation will slow, the work environment (whether at home, in the office or a hybrid model) will improve and talent markets will resume their historical capacity. They hope that the current difficult situation will soon pass.

According to this thesis, companies think they just need to find ways to keep their existing talent from leaving and hire a few more to fill in the gaps. Then they can scale their operations. In fact, that’s how most companies now view the immediate, short-term situation. This is the “pig in python” theory, i.e. trying to swallow something huge and bulging (like pent up demand).

Long-term situation

This is the problem of the thesis that I have just described: there is a cow behind the pig. It’s a huge and growing cow – a demand for talent that cannot be met with the existing workforce and the dwindling number of people entering the workforce. And that cow was the situation even before the Russian-Ukrainian war disrupted the Eastern European workforce.

The cow has both immediate short-term drivers and long-term drivers. The immediate driver is the growth of digital platforms that companies are deploying to compete in the marketplace. As I’ve explained in previous blogs about how platforms evolve over time, this growth creates an exponential need for engineering and IT resources. News articles on the Internet are now proclaiming that companies predict they will need to double or triple the size of their IT and engineering organizations. Many need to hire thousands of people, not hundreds.

So, it’s clear that the demand will far outstrip the supply of talent – ​​not just in North America and Europe, but globally. Talent pools in India and Eastern European countries were once considered inexhaustible. Now they are quickly being called upon to try and keep up with demand. And that’s just the short-term aspect of the cow.

For the long-term aspect of the cow in python, the main driver is the shrinking workforce demographics in North America, Europe, China, and other developed countries. We are only a decade away from what is happening in India.

These factors cause the shrinkage effect:

  • Populations are declining; there are therefore not enough new arrivals on the labor market. This is especially the case for engineering and IT talent (STEM workers)
  • Populations are aging – baby boomers are reaching retirement age (they started turning 65 in 2011), along with other waves of people retiring early after the impact of COVID-19 on the redesign of lifestyles

Need proof? According to the June 2020 US Census Bureau report, the population over 65 in the United States increased by one-third (34.6%) between 2010 and 2020 and by another 3.2% between 2019 and 2019. The Census Bureau also reported in 2016 an almost stable youth population (less than 20%) and only a moderate increase in the working-age population (20-64).

Thus, the thesis that this is a short-term problem is incorrect. In the third-party services market, the fastest growing companies are those focused on addressing the current talent shortage. I expect this picture to grow as more companies deploy platforms to compete in the marketplace, but lack the engineering and IT talent to build and/or scale the platforms.

Where should leaders focus their attention?

Executives and managers have little time and attention. So they need to focus on their most pressing needs. For many, that need is to save money.

They can achieve this goal by basing their decisions on the short term pig theory in python. Don’t invest in finding new people because that’s not in the budget. Let’s just assume that some workers will be recruited from outside and leave. But don’t invest in replacing them; just do the job with a small staff. Yes, it is an approach. But not a winning approach.

The alternative is to spend money – to invest in how to find and retain exceptional talent, not only to be able to swallow the pig in the short term, but also to swallow the cow in the long term of a population in declining working age.

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