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Tech Companies Fall Short in Managing Talent
North America finds itself facing a talent shortage. Many technology and telecommunication companies fail to make appropriate investments in retaining and attracting top talent despite the advantages of today's knowledge economy. Without significant investments in the right talent management solutions, these enterprises will find themselves struggling in the competition for global talent.
This article was originally published by Info-Tech Research Group. Copyright (c) 1998-2008 Info-Tech Research Group. All rights reserved. Reprinted with permission.
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Introduction
There is a shortage of talent in the US, characterized by the retiring baby boomer generation and an increasing skills gap. Retaining high performers has become a key issue that employers must address to remain competitive in their industries.
This note discusses the following topics:
- North America's talent shortage.
- Changing workforce demands.
- Shortcomings of existing talent management approaches.
- Info-Tech's predictions and key takeaways.
In order to triumph in the war for top talent, companies need to respond to workplace demands by offering stimulating, empowering, dynamic, and flexible career paths.
Trend Point
Financial incentives to attract and retain employees have become a thing of the past. Today's knowledge workforce values greater freedom in their schedules, a work-life balance, and control over where, when, and how they work. In order to triumph in the war for top talent, companies need to respond to workplace demands by offering stimulating, empowering, dynamic, and flexible career paths—creating an ideal situation where highly talented people vie for limited positions.
Situation Analysis
Top Talent Is Scarce
Technological advances, pressure for growth, and the ability to remain competitive in a quickly changing market is increasing the demand for highly skilled personnel in the technology and telecommunication industries.
Fueled by the looming threat of the retiring Baby Boomer generation and a rapidly growing skills gap among the workforce, the technology and telecommunication labor markets are already starting to face critical labor shortages.
Organizations are gearing up for a mass exodus of seasoned professionals from the Baby Boomer generation. According to Deloitte's report, the prime-aged share of the US workforce (those aged 25-40 years) will face a steady decline of 7% per annum from 2008 to 2020. In addition to the removal of a large volume of workers, and a significant decrease in the prime age of workers, organizations face a critical loss of talent and key knowledge as these Boomers enter retirement. (Source: "It's 2008: Do You Know Where Your Talent Is? Why Acquisition and Retention Strategies Don't Work," Deloitte Research, 2008)
Increasing skill gaps pose large problems for organizations. Increasingly obsolete education methods and training, declining enrollment in technology and hard skill disciplines, and declining education standards are contributing to the widening gap. According to the US Department of Education, an estimated 60% of jobs in the twenty-first century will require critical skills that are possessed by a staggering 20% of the current workforce.
Responding to Workforce Demands Means More than Offering a Good Paycheck
Jobs are no longer static. Gone are the days when people worked their way up through a company—often retiring only after 25 years of faithful service. Today's workforce demands corporate investment in programs to help employees deploy and develop.
Financial recognition and lavish compensation packages are no longer front of mind when it comes to staying with a particular organization. Additionally, rich compensation packages no longer offer an organization the upper hand on top talent as they are easily matched by competitors and do little for ensuring long-term commitment.
In addition to changing workforce demands, the war for talent of the late 90s has taught employers the high costs that are incurred to replace an employee. The average cost to replace an employee is approximately 1.5—2 times the average salary; this is another reason to focus resources on the continued development of existing employees.
Shortcomings of Existing Talent Management Approaches: Acquire and Retain versus Train and Develop
Managers recognize that high quality employees are the most significant contributing factor to growth in tech and telecom companies. However, organizations continue to find recruiting and retaining highly skilled workers their biggest challenge—and the hardest part of managing corporate growth (see Figures 1 and 2).
Figure 1. Factors that Contribute Most to Corporate Growth
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Source: "Talent Management for the Technology Sector," Deloitte Consulting, 2008
Figure 2. Biggest Operational Challenge in Managing Corporate Growth
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Source: "Talent Management for the Technology Sector"
Next: Info-Tech's Predictions
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