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Skills crunch stifles future growth

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The current skills shortage affecting countries around the world is going to result in a crisis down the line when companies find they have been unable to develop leaders – and their ability to compete and grow will be severely hampered. 

According to a major new IBM study of over 400 human resource executives from 40 countries, more than 75% of HR executives say that they are concerned with their ability to develop future leaders. Given the explosive growth in emerging markets, and the retirement of experienced personnel in more mature economies, the study suggests that companies are placing their growth strategies at risk if they cannot identify and develop the next generation of leaders.
The study shows that leadership issues are surfacing worldwide, with organisations in every corner of the globe being impacted. Companies in the Asia Pacific region are most concerned with their ability to develop future leaders (88%); followed by Latin America (74%); Europe, Middle East & Africa, (74%); Japan (73%) and North America (69%).
The Global Human Capital Study titled “Unlocking the DNA of the Adaptable Workforce” was developed by IBM Global Business Services’ Human Capital Management practice and the IBM Institute for Business Value (IBV), with assistance from the Economist Intelligence Unit (EIU). Human resources executives participated in a structured interview, with many of them face-to-face, designed to capture insights on the subject of workforce transformation.
According to Mark Harris, MD of IBM South and Central Africa: “The ability of an organisation to look ahead and identify the skills it will need in the future, and then rapidly develop a critical mass of individuals with those skills in a cost-effective manner, will be a core competency for those companies looking to compete in the globally integrated world.”
Rotating employees across divisions and geographies is also an important way to hone future leadership talent. Yet, according to the study, 36% of HR executives state rotating leadership talent is a significant challenge in developing future leaders. Another key challenge is the generation gap – passing on knowledge from older to younger employees (28%).
In addition to being unable to develop effective leaders, the study finds that 52% of HR executives say a significant workforce-related challenge facing their organisations is the inability to rapidly develop skills to address current and/or future business needs. Furthermore, the study shows that more than one-third of study participants state their employee skills are not aligned with current organisational priorities (36%).
“In today’s business environment, organisations worldwide need to have a pipeline of future leaders who can deliver on today’s commitments, drive workforce and enterprise transformation, and lay the groundwork for future growth,” says Harris. “Effective leadership not only guides individuals through turbulent business conditions, but creates a climate that attracts and retains high performers, who will be in increasingly short supply in the future.”
For many companies participating in the study, employee turnover continues to increase, 47% of the organisations surveyed saying employee turnover has increased over the past two years, and only 16% saying it has decreased.
The study finds that HR executives and line of business executives appear to be more concerned about developing existing employee skills than attracting new talent. Many believe their corporate reputations will allow them to attract and retain the people they need. While 52% indicate an inability to rapidly develop skills is a primary workforce challenge, only 27% state the inability to attract qualified candidates is a problem.
Retention also seems to be less of a concern; only 18% say this is a high priority workforce issue. However, changing trends in workforce demographics and mobility patterns suggest they may need to invest more resources in recruiting, selection and retention.
An underlying cause according to the study is that HR executives believe that despite the ongoing war for talent, they are more capable of attracting and retaining talent than their competitors. Almost 60% of HR executives surveyed feel they attract and retain talent better than their peers, while only 10% state they are less effective.
Due to various internal and external pressures, companies today are forced to be more responsive to shifting market needs; more flexible in how they operate; more focused on their core competencies; and more resilient to external threats. Developing a workforce that is adaptable to change has become essential. According to the study, however, only 14% of HR executives state their workforce is very capable of adapting to change.
The Global Human Capital Study identifies three critical success factors to developing an adaptable workforce:
* The ability to predict future skills: Successfully anticipating future business scenarios enables organisations to know what key competencies to target in advance of critical market shifts. Only 13% of organisations interviewed believe they have a very clear understanding of the skills they will require in the next three to five years.
* The ability to locate experts: While predicting future skills is important, so is the ability to apply existing knowledge and skills to new challenges. Expertise location is cited by respondents as critical in identifying and allocating resources to address new opportunities and threats. Only 13% believe they are very capable of identifying individuals with specific expertise within the organisation. Companies are using a variety of techniques to improve their expertise location capability. More than 50% of companies that rate themselves as “very effective” in locating experts use some form of employee directory while only 39% of all respondents report using them.
* The ability to foster collaboration: Once the experts are located and identified, collaboration is the next step to foster innovation and growth. According to the study, only 8% of companies believe they are very effective in fostering collaboration across the enterprise. Surprisingly, technology is not the deterrent to effective collaboration, with only 28% of companies indicating this is a significant factor. Instead, organisational silos (42%) are the leading barrier of collaboration in an organisation, followed by time pressures (40%) and misaligned performance measures (39%).