5 Reasons Why Workforces Are Warping (and CEOs Aren't Shifting)

There’s a strange phenomenon happening in the labour market and its bad news for employers. Last year 14 million Americans were out of work, yet there were still 3.7 million unfilled jobs. In Australia, the number one survey issue keeping CEOs awake at night is sourcing and retaining skilled staff, yet unemployment this year is at its highest in a decade. On the surface it doesn’t make sense because more people in the labour pool should make it easier to fill vacancies. So what is causing this unnatural skew of the traditional supply and demand model?

The New Battlefront

What many employers don’t recognize is that the war for talent has entered a new phase of engagement. It’s no longer simply about filling vacancies, but rather attracting and keeping the talented people who in this rapidly changing global economy make businesses more profitable. Companies are now struggling to fill roles or are caught in a revolving door of damaging staff turnover because the number of these people is actually shrinking, even as the overall unemployment rate expands.

There are a number of factors contributing to this:

1. Positions that were once filled by unskilled workers now require more technical ability

With even the most basic jobs now requiring a familiarity with IT systems, those at the bottom end of the labour skill set are often unemployable. This has alarming ramifications for these workers, and for their erstwhile employers who are forced to compete for the smaller pool of skilled people who can meet their demands.

2. The Rise of the Home-Grown Entrepreneur

New technology advances allow people the flexibility to set up home-based businesses and still connect with a vast clientele. Women in particular are now leaving employers at break-neck speed. In America women are starting 1288 new businesses a day, double the rate from only 3 years ago. The number of female entrepreneurs in Australia has doubled since 2007 and there are currently around one million women business owners. The most significant statistic for corporate employers today though is that about 78 per cent of those who opted to resign from their work to start their own business previously belonged to middle or upper management. It appears the modern workplace is failing to adjust, to keep these valuable employees.

3. The ageing workforce

Baby boomers are exiting the workforce at a faster rate than the next generation entering it. Yet the qualifications and experience of entry level workers isn’t keeping pace with these exiting retirees. This means that candidates with the expertise to generate growth in business, such as leaders and specialists, are now at a premium.

4. The lack of convergence between graduate skills and positions vacant

Australia’s undergraduates have increased from 10% in 1990 to a high of 32% in 2013 yet there is little link between the degree skills they are getting and jobs available. For instance, in the early 2000s three vet schools were built, against the advice of the Frawley Report, with the result that the number of unemployed vets has quadrupled in six years. At the same time, enrolments in crucial disciplines such as engineering are dropping every year. Universities aren’t sausage factories for corporations, but there does need to be some overlap as the current balance of supply and demand for relevant skills sets is way out of kilter.

5. The end of the ‘job-for-life’ era

With more options available, people are changing roles much more frequently than in the 20 century. The average period employees stay in a job is now 4.4 years. Millennials and those employed in service industries have even shorter tenures, averaging only 3.2 years. This means applicants who ‘stick’ are now a much smaller group and staff turnover is reaching epidemic proportions.

What Are Employer’s Doing To Meet This Challenge?

So what are employers doing to meet the challenge of this radical change in the labour market? Not very much, apparently. In contrast to many avowed mission statements, talent strategies didn’t make the top five in any CEO’s operational priorities in Price WaterhouseCooper’s (PWC) latest global survey. Australia also rated as PWC’s world’s worst country for retention of white collar workers with 23% of our hires quitting in their first 12 months compared to 15% in the US and only 12% in the UK. So while executives may be claiming to suffer insomnia over this issue, they’re still doing very little to alleviate the problem.

The cost of this kind of inertia is enormous. A CEO told me recently that his staff turnover rate had soared to 60 per cent. We worked out the figures. He had 400 employees on an annual average wage of $80,000, so even at the lowest estimated cost of staff turnover at 50% of annual salary, this equated to $9.6 million per year. He was shocked. He’d never considered how much staff turnover was affecting his bottom line. Or the effect on the morale of the rest of his workforce, dealing with a revolving door of incompetent novices. I didn’t have the heart to tell him that with the economy starting to heat up again, his challenges were about to get a whole lot worse.

The Opportunity

It’s not all doom and gloom, however. With the majority of companies unaware of or under-prepared for this latest onslaught, those who do innovate have a huge competitive edge. I discovered this when at the height of the last ‘war for talent’, I shortened my time from advertisement to job offer from four weeks to one. I filled all my vacancies with brilliant new recruits, before other companies even began to interact with them. Speed is just one of the practical techniques that can make all the difference in this more-competitive marketplace. Yet change will only happen if CEOs take the blinkers off and make people strategies a priority. As John Paul Getty the rich American industrialist said, ‘The employer generally gets the employees he deserves’. In practice I’ve found this to be true every time.

Mandy Johnson is a best-selling author; a former UK director and Australian head of HR at global travel giant Flight Centre Limited; and an active speaker and advisor to both public and private organisations. Her first book Family, Village Tribe is now in Kobo’s top ten in the Business-Entrepreneurship category and her second book Winning The War for Talent- How to Attract and Keep The People Who Make Your Business Profitable came out in April and has been profiled on Sky News, The Australian Financial Review, Inside HR Magazine and in many other business media. Connect with her on LinkedIn; Twitter @mandyjohnsonoz; or email her on [email protected]