Ask anybody who manages a business and they will tell you how important it is to hire the right people. Top companies recruit at the most selective schools, offer excellent pay packages, generous benefits and a comfortable work environment.
Unfortunately, it seems that even the best firms are facing a widening skills gap and it will only get worse. McKinsey recently released data outlining a fundamental mismatch between the demand for skills and the supply of workers who have them.
Clearly, if businesses are to remain competitive, they need talented people, the right skills and there is growing evidence of a new productivity paradox, in which automation is rendering old skills useless. So even if your workforce is highly qualified by today’s standards, they might not be tomorrow. We need to rethink how we manage talent.
The Great Social Challenge of Our Age
Historically, productivity was a tide that rose all boats. As businesses adopted better technology, processes and practices, workers could produce more. As profits rose, so would demand for labor, which would result in higher pay. Better living standards would lead to higher aspirations and better education, completing the virtuous cycle.
Yet as MIT’s Andrew McAfee makes clear, that started breaking down in the early 1980’s. With the rise of automation, such as robots in factories, labor could be replaced by capital expenditure. While some of the effect was mitigated by more demand and better training, returns to capital outstripped returns to labor and income inequality rose dramatically.
In the years to come, the problem will only get worse as machines learn to take over even what were once considered highly skilled tasks. And the process is really just getting started. Technology will continue to accelerate and no one, it seems, will be safe anymore.
A Fundamental Shift In Skills
In past generations, prosperity was primarily an issue of high-skill versus low skill jobs and a poorly educated, low-skill workforce could be upgraded through training and education. Yet, things aren’t so clear-cut anymore because the types of skills needed in the new economy have changed.
Earlier machines excelled at doing simple, repetitive tasks and so primarily affected manufacturing. Yet today, we’re seeing computers perform well in legal discovery, medicine and even creative work. Going forward, it seems that there are two broad areas that will continue to be in demand: people skills and design skills
The need for people to deal with other people can be seen in the rise of retail employment. Unfortunately, these are predominantly very bad jobs. While earlier generations of low-skilled workers were employed in unionized manufacturing, today’s hamburger flippers are poorly paid, have few benefits and little job security.
Yet it doesn’t have to be that way. MIT’s Zeynep Ton, author of The Good Jobs Strategy, has found in her research that well-trained employees are not a cost driver, but a sales driver. A higher paid workforce results in less turnover, better customer service and greater efficiency. Even in retail, companies that invest in people outperform.
The Elance Model
As we move from the industrial economy to the digital economy, value has shifted to design. So, not surprisingly, most good jobs are design related (broadly defined to include, engineering, software, marketing, etc.). Yet today technologies change so quickly that even once highly coveted skills, like Flash development, can become obsolete.
Elance has come up with a new model for talent to fill the gap. On the surface, it’s just another freelance service, acting as a go between for companies that need short-term help with projects and people looking for work. But take a closer look and it becomes clear that the company is far more ambitious than that.
It tracks employments trends so freelancers can see where demand for skills is increasing and where it is declining. The firm also offers more than 20,000 training courses so that people can build new skills to meet demand. Then, as freelancers perform jobs and gain expertise, they build up their profiles and increase their earning power.
Fabio Rosati, Elance’s President and CEO, told me that he feels that it is this attention to developing talent that makes his company unique. It allows him to create partnerships with clients based not only on current needs, but also to build the skills that will be needed in the future.
The New Talent Ecosystem
It used to be that you would choose a career, join a company and work there for your entire career. Clearly, that time has passed. As business models rise and fall, firms need to adapt and acquire new skills in order to stay competitive. Talent, therefore, has become as central as marketing or finance to corporate strategy.
Yet it’s not as simple as bringing in “the best and the brightest” anymore. Today’s marketplace is becoming increasingly complex and enterprises need to build up talent on multiple fronts.
Employees: Top firms have long understood the need to invest training and some, like McDonald’s and General Electric, have gone to great lengths to develop extensive corporate training programs. More recently, executive education programs at universities have also begun to play an important role in developing new skills.
However, training of lower level employees is often neglected, but shouldn’t be. One study comparing Costco and Sam’s Club found that by investing more in front line personnel, Costco was able to increase revenues while actually lowering costs.
Contract Workers: Increasingly, work is project based. A company might need to develop a new website or have marketing materials prepared or build a new feature for an existing platform. This creates short-term demand for non-core skills that may not make sense to retain full time.
Elance has come up with an interesting solution it calls talent clouds. Rather than keeping talent on staff, employers can build their own network of freelancers, track their performance on projects and keep up with their progress learning new skills. So if they liked working with a Flash developer last year, they can see if he’s now certified in HTML5.
Academic Partnerships: Another strategy that some firms are adopting is partnering with universities to ensure that students are graduating with the skills they need. IBM, for example, has built an open source curriculum and works with over 1000 universities.
Educators themselves also realize the need to form close partnerships with industry. When developing the curriculum for UC Berkeley’s new Masters in Data Science program, the school’s Dean, AnnaLee Saxenian created an advisory board made up of top executives to ensure that graduates will gain the skills they need to compete.
Further, because the program is not designed for technology companies, but to help traditional industries build up big data expertise, she designed the curriculum to work online. That way, as students are developing new skills, they stay in touch with the everyday problems that they are learning how to solve.
Strategic Partnerships: As complicated as the world has become, the truth is that no company can build all the skills it needs, but many are learning to fill the gap with partnerships. For example, Xerox’s legendary PARC labs now undertakes projects for a variety of companies. Many of Apple’s legendary designs actually came from IDEO.
Yet, to be effective, these relationships have to be cultivated, monitored and deepened. Partnerships can no longer be treated as mere supply relationships, but extensions of the talent ecosystem.
Open Platforms: Another way that firms are tapping into talent is through open technology. Rather than building products as closed platforms, they are providing resources, such as SDK’s and API’s, so that outside developers can enhance and expand the capabilities that were designed in-house.
After all, the value of an iPhone depends not just on the hardware and the operating system, but on the hundreds of thousands of apps that others have built for it. In a similar vein, IBM recently opened up its Watson platform to outside developers to help reap the benefits of external talent.
The New War For Talent
In 1997, McKinsey declared a War for Talent and advised their clients to focus on recruiting and retaining the “best and the brightest.” They suggested that firms should create a compelling “employee value propositions,” invest in A players, develop B players and move quickly to get rid of C players.
However, those types of distinctions have become anachronisms. Today, you need not only a strong value proposition for employees, but for everybody in your talent ecosystem. Further, an “A player” with yesterday’s skills isn’t going to do you much good.
Most of all, in today’s semantic economy, it’s not the resources you own that are important, but what resources you can access and that’s especially true of talent. Corporate culture is still important, but you also need to have a company mission that is compelling enough that others want to contribute to it.
The truth is that today’s war for talent is asymmetric. Bigger pay packages and elite backgrounds no longer offer a clear path to success. The “best and the brightest” will have to make way for the highly motivated and deeply connected.
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Greg Satell is an internationally recognized authority on Digital Strategy and Innovation. He consults and speaks in the areas of digital innovation, innovation management, digital marketing and publishing, as well as offshore web and app development. His blog is Digital Tonto and you can follow him on Twitter.