Planning Ahead

Combat impending skill shortages and staffing challenges with strategic workforce planning.

Dermot O’Brien

It’s clear that the workforce is changing. As the U.S. unemployment rate holds steady under 5 percent, the competition for top talent has become fierce. Employers are complaining of a skills shortage, which could be attributed to under investment in employee learning and career growth, not to mention a failure to train younger staff to replace retiring employees. Simultaneously, technology and globalization are creating systemic changes in the way business is done, which can also impact staffing requirements.

Now, more than ever, companies must rely on strategic workforce planning (SWP) to get ahead of staffing challenges and skills shortages in the workforce. Employers should identify the skills they will need to be successful and focus on cultivating those skills in current employees and hiring new staff to ensure these needs are met. But where should employers start and how can they anticipate these needs in advance?

A new study, Strategic Drift: How HR Plans for Change, commissioned by the ADP Research Institute® and conducted by The Economist Intelligence Unit® provides valuable answers to these questions and four key trends around SWP:

1.Companies prefer to promote from within, but chronic job-hopping and a tightening labor market has forced them to look externally. U.S. companies are struggling to meet their strategic talent needs and will continue to face challenges—76 percent of survey respondents say the market for skilled talent will only become tighter.

Across the labor market, organizations are seeing that job-hopping is the new norm, particularly among millennials. Sixty-four percent of those surveyed witness high turnover among workers who are 20 to 30 years old. In addition, employees are putting off retirement at 37 percent of companies. This has created an environment where millennials are forced to look outward for advancement opportunities. In response, employers are also opting to look externally for needed skills.

2.While turnover is a primary concern, employers cannot agree on the solution. According to the Strategic Drift survey, managers don’t see an end to employee turnover. Seventy-three percent expect high turnover rates and shorter employee tenures to continue. Three-quarters of respondents consider SWP the greatest strategic challenge their company will face.

But these respondents aren’t completely clear on what the focus of SWP should be. Thirty-six percent say SWP is about retaining key people to avoid skills gaps; thirty three percent say it is understanding what talent will be required in the future and how to find it; and thirty-three percent say it is recruiting qualified new people to plug existing skills gaps.

Respondents are similarly divided on who is responsible for the path forward: Forty-two percent believe it should fall on the CEO and board of directors, while 28 percent believe that the responsibility sits with HR.

3.Executives complain about the skills shortage in the workforce, yet many have reduced corporate training and development programs.

An overwhelming majority of managers worry about a skills shortage among millennials. Eighty percent of respondents said their top management challenges stemmed from a shortage of skilled workers. Younger employees aren’t developing new skills, and as a result, companies are likely keeping workers beyond retirement age and looking elsewhere for talent to help fill the gap.

However, smaller corporate training budgets have perpetuated the cycle of high employee turnover and increased reliance on hiring from the outside. Between 2000 and 2008, corporate training budgets fell by 20 percent.

It seems that millennials are switching jobs because they aren’t receiving the training and development they need to do well—not because they are impatient. They do not see internal promotion as a viable path up the corporate ladder, so they look elsewhere for opportunities.

4.Job seekers have leverage in the immediate future. In the short term, job candidates stand to gain the most from an increasingly competitive labor market. According to ADP’s Workforce Vitality Report, in the third quarter of 2016, full-time workers who stayed at their jobs for the past 12 months, had on average a wage increase of 4.2 percent, while those who switched to new jobs saw a five percent raise on average. Employers want to hold on to their skilled talent, and they are “paying up” to do so.

It’s easier to find a new position, too. Today’s talent now has access to a more robust, digitally-savvy, networked recruiting system that makes it easier for them to find new opportunities and leverage their sought-after skills.

Considerations for a Long-term Strategy

Offering benefits that help enhance company culture is the short-term solution employers have been using to prevent employee turnover. Seventy-six percent of respondents said they would do more to find internal opportunities that could prevent job switching, while 72 percent said they would invest in their culture, working environment, training, and benefits to retain staff. But real success will come when companies create long-term plans to adjust their practices as they look ahead.

Recommitting to strong employee training programs is a smart first step for employers. Employees, especially millennials, want to see clear opportunities for career advancement. To retain skilled workers, senior leadership should rebuild training programs while also continuing to foster more flexible working conditions.

It is clear that employers are concerned about the increasing turnover rates, but they are only just beginning to confront these challenges. As companies prepare for the future of work, determining how to recruit and retain top talent will be their most important task.

Dermot O’Brien is the chief human resources officer at ADP.

What is the main focus of strategic workforce planning?

36% say it’s about retaining key people to avoid skills gaps

33% say it’s understanding what talent will be required in the future and how to find it

33% say it’s recruiting qualified new people to plug existing skills gaps

Posted February 9, 2017 in Talent Acquisition

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