By every measure of performance, 2018 was a great year for WHR Group. We consistently hit targets regarding financial performance, service levels, budgets, and cost management structures. We thrived in a world dominated by messy politics, global trade wars, and economic uncertainty.
The same can be said for many of our clients, however, there is one critical issue that continues to weigh heavily on future performance: sourcing and securing the right talent to drive business plans and achieve financial targets. Talent, or the lack thereof, is a major threat to growing businesses and achieving consistent financial success. This is a recurring theme that weighs heavily on the minds of organizations around the world.
Human resources departments and recruitment agencies work to find the best methods for attracting and retaining employees, and yet it still isn’t enough. According to Korn Ferry’s Global Talent Crunch Study, “A major commercial crisis is looming over organizations and economies throughout the world.” The study goes on to state that “by 2030, we can expect a talent deficit of 85.2 million workers,” which could result in “$8.5 trillion in unrealized revenue.”
According to “The Global Workforce Crisis” by The Boston Consulting Group, the following chart demonstrates the need for labor vs. the available supply in the coming decade:
Labor Shortage/ Surplus in 2020
Labor Shortage/ Surplus in 2030
Blue = Surplus; Gray = Borderline; Red = Shortage
Korn Ferry’s CEO Alan Guarino said “the right talent is the greatest competitive advantage there is for an organization – and that talent is getting scarcer every day.” Guarino also stated that “in the face of such acute talent shortages, workforce planning and a comprehensive understanding of the talent pipeline are critical.”
This is not a temporary blip or a short-term problem that will resolve itself overnight. This is a fundamental strategic issue that all major economies and companies will have to address. Case in point is the US unemployment rate. Since July of 2018, the monthly unemployment rate has consistently been below four percent (4%). Demographics in the workforce are shifting, making skilled workers increasingly difficult to find, especially in manufacturing, IT, and healthcare industries.
However, it’s not only these industries experiencing a talent shortage. According to the 2018 Talent Shortage Survey completed by Manpower Group, “more employers than ever are struggling to fill open jobs. Forty-five percent (45%) say they can’t find the skills they need, and for large organizations (250+ employees) it’s even higher, with sixty-seven percent (67%) reporting talent shortages in 2018.”
How is the issue solved?
After surveying current clients, we found that the following measures are currently being taken to address the issue of talent acquisition:
- Adding more recruiters
- Engaging with outside placement firms
- Providing training and educational opportunities
- Offering flexible working options
- Increasing salaries
- Improving the day-to-day working environment by offering enhanced amenities
- Replacing skilled workers with automation
However, these efforts are not all inclusive. There are significant costs in hiring a new employee when factoring in advertising, interviewing, screening, onboarding, and training. There is also the management time devoted to employees and the ramp-up time to full productivity. The Society for Human Resources Management (SHRM) has statistics showing hiring costs of six to nine months of an employee’s salary. The Center for American Progress also found that the turnover cost for highly paid or executive jobs is up to 213% of their salary.
The intangible, often overlooked, additional cost associated with hiring a replacement worker is the lost institutional knowledge of the company. Employees leave a knowledge gap of its product offering and the expertise they offer to clients, employees and service partners. You simply can’t transfer this “wisdom” and knowledge to a new worker. Most companies don’t track all the costs associated with these data points, so the true cost to hire is likely much higher than what most organizations believe.
Relocation and Talent Management
In the late 1990’s and early 2000’s businesses started to recognize the need for talent management functions to insure they kept their brightest and best performers. Talent management became ingrained into many corporate structures and jobs were established to drive a new HR discipline. This was done not only to provide career roadmaps for employees, but more importantly, to insure company success was aligned with the right employees that consistently deliver financial success.
As an HR function, relocation has not been integrated with the same success or popularity as talent management. Across most organizations relocation is seen as a cost center and has not been met with the same embrace that defines talent management. This is shortsighted in that both functions are trying to ensure you have the right talent in the right seat and just as importantly – in the right physical location.
Relocation provides a platform to the recruiting dilemma by investing in a known workforce of current employees. Providing a comprehensive relocation benefit package allows an employee to transition from one city to the next with minimal financial impact. That said, the history of the past 20 years has been to eliminate, reduce options and drive the costs of these policies down. Many corporate policies today do not reflect the true cost to relocate and consequently many people seek other employment opportunities if they are looking to enhance their careers.
It is not simply about adding costs or throwing money at the situation. It’s about addressing relocation policies in the context of today’s worker, evaluating their family situation, and customizing policies that will address their specific needs. The new workforce is demanding global experiences which will ultimately provide a wholistic benefit to a global organization. If you are willing to leverage these experiences, your workforce will be more diverse and knowledgeable than your competitors. The question becomes are you willing to embrace relocation and re-think mobility as a strategic solution to the talent crisis.