Another trend that Managing Principal at TalentLeap, Inc. and Chief Talent Strategist at Talent Management Academy Kevin Rutherford, and other industry experts are saying all businesses need to address is the change in workforce demographics.
Changing demographics mean that more workers are approaching retirement than are entering the workforce. The younger generation of workers has different needs and is rethinking their psychological contract with employers; they're quick to leave an organization if it's not meeting their expectations. And the workforce is becoming more diverse as a result of gender role changes, greater immigration and local skill shortages. Retaining and developing the right mix of people in the organization will be a critical success factor in the next five years. In fact, in their 2012 research Delivering results, Growth and value in a volatile world Pricewaterhouse Cooper found that skills shortages are seen as a top threat to business expansion.
Changing workforce demographics
Most industries have already seen fairly significant demographic shifts in their workforce. The healthcare field has already been impacted, and now many other industries are beginning to feel the pain of a changing workforce. Here are some sobering statistics from the U.S. Population Reference Bureau:
- The labor force is growing more slowly. Between 2010 and 2015, the rate of labor growth will slow to 1.0%; between 2015 and 2025 it will slow to 0.2%. By 2012, there will be a 6 million person gap between demand and supply of knowledge workers in the U.S. alone.
- The labor force is growing older. Baby Boomers are leaving the workforce and there are not an equal number of qualified workers to replace them. Every day, 7918 people turn 60 years of age. The number of workers aged 25 to 34 shrank by almost 9% between 1996 and 2006.
- The American workforce is becoming more diverse. Nearly one-half of all new American workers in the past decade were born outside the U.S.
- There is a domestic skills shortage. 60% of future jobs will require training that only 20% of the current workforce possesses.
U.S. Population Reference Bureau, 2009
As a result of the shrinking labor force and skills shortage, more and more organizations are looking for talent globally, making for a more and more diverse workforce.
The needs of Millennial workers
Several books have been written and much research has been conducted confirming the fact that Gen Y or Millennial workers have different expectations of their managers/employers.
In a 2008 survey by CareerBuilder.com, more than 85% of hiring managers and HR executives said they feel that Gen Y employees have a stronger sense of entitlement than older workers.
The survey found the generation's greatest expectations included:
- higher pay (74%)
- flexible work schedules (61%)
- a promotion within a year (56%)
- more vacation or personal time (50%)
Other experts point out that Millennial employees need more frequent feedback, guidance and coaching, and want a greater connection to their organization's mission.
All of this is challenging their mostly Gen X and Baby Boomer managers.
Increasing employee turnover
Effectively retaining workers is another organizational challenge. Analysts and researchers are seeing a shift to a more independent, knowledge-thirsty and demanding workforce with a lot of pent up frustration. That has led many of them to predict a "resume tsunami" in the near future.
Results from Deloitte's most recent global employee Talent Edge 2020 survey show how dire this situation is turning out to be.
As of the spring of 2011, only 35% of employees globally expect to stay with their current employer, versus 45% in 2009. That's 65% of employees who clearly indicated that they are passively or actively looking at new potential employers. Even more compelling and frightening is the fact that 45% of all employees expect an increase in turnover in 2012.
The some 65% of employees exploring their career options cite several factors as their impetus for jumping ship when the economy recovers:
- 57% believe their companies do a "poor" or "fair" job of creating career paths and challenging job opportunities
- 35% rate their companies' leadership development programs as "poor" or "fair"
- 57% rank their companies' ability to effectively inspire trust as "poor" or "fair"
- 50% believe their companies are doing a "poor/fair" job of retaining top performers
- Nearly half (48%) believe their companies are doing a "poor/fair" job managing and delivering training and development programs
Many employers are already seeing an increase in voluntary employee turnover. As companies begin to move out of the recession, hiring is slowly picking up. And as opportunities open up, valued employees who may have stayed loyal during the economic downturn will start to flood the market. In February, 2010, The Bureau of Labor Statistics in the U.S. reported that the number of employees voluntarily resigning from their jobs surpassed involuntary terminations (e.g., layoffs or discharges) for the first time since October, 2008.
Couple this rising turnover among the organization's most critical employees with the timing of "when" the resume tsunami hits, and the impact could be devastating to employers fighting to keep their top talent intact. Academic research reported in The Journal of Management indicates that nearly 40% of employees are likely to act on their turnover intentions. Ultimately this could hit companies just as many of their senior leaders are anticipating talent shortages in areas needed to drive innovation and competitive advantage.
In a knowledge economy, where human capital forms the basis for value and competitive positioning, this has serious implications for any organization.
How do you address these workforce changes?
The questions for organizations are how and when to start to address these trends, and how to assess their potential impact on organizational performance. In many companies, the response is to invest in talent management programs and strategies now.
To protect their most strategic assets, HR teams need to help their organizations:
- Address employee drivers of engagement to help retain valuable employees (e.g., need for ongoing feedback and recognition, opportunities and support for development and career progression, clarity of roles and expectations so employees can do their best, goal alignment so employees feel connected to the organization's mission and see the impact of their work, etc.).
- Identify high-performing and high-potential employees so they can put specific retention strategies in place for these employees.
- Put a succession planning program in place to groom successors for key roles across the organization.
- Identify knowledge/skill/experience gaps in the organization and put development and recruiting plans in place to address them.
- Become an employer of choice.
Integrated, mature talent management practices, supported by best-practice automated tools, can help your organization accomplish all of these critical tasks.
Read how others are managing their changing workforce
CarVal Investors' global workforce is extremely diverse. By improving their talent management processes, they've better aligned their workforce and are driving high performance.
Read Part 1: The rising importance of intangible assets
Read Part 3: Strategic issues facing the c-suite