Mind the gap: Who’s next?
When it comes to succession planning and the skills gap in today’s workforce, companies around the world are approaching the subject in a variety of ways, before it is too late.
Around the time I was asked to contribute to this section, I had had two completely unrelated conversations with senior executives (one in the oil industry and one in banking), but, in both conversations, pretty much the same thing was said: “I am not sure exactly when I am going to finally retire, but it will not be so far off.” My question was, “who will replace you—is there a plan?” In both conversations, the answer was, “I have no idea, and it doesn't seem like there is a plan.” It didn't stop there. The thing is, they went on to say that they were supposed to be their bosses’ successors, so now they have even less of a clue about what is to be done.
If these random conversations were simply an exception, then there would be little to discuss. But, while the conversations may not be commonplace, the problem is frequent. I say that the conversation is rare, in the sense that a lot of people don't really want to talk about it. Could this be, because they don't have the answer to a problem that is, in effect, business-critical and, therefore, potentially damaging? I suspect that the answer is “yes.” In the past several years, I have had discussions with people, who would rather not bring up the subject of succession planning or retirement.
There are two directions, with respect to succession planning. The first is, to an extent, generational: the Baby Boomers. In this context, the succession has to do with the retirement situation. While the recession certainly slowed down the rate for a while, the harsh reality is that, five-plus years on, everyone is, of course, five years older. No math award for that calculation, but maybe there should be an award for spotting the fact that many people are now adjusting to the new reality of their circumstances, and ready to press on with their retirement plans.
There are, of course, more people eligible for retirement now than when we were first getting worried about it, before the recession. So, if there are more people eligible for retirement now than there were five years ago, and the desire to retire (at least in part) is increasing, the compound effect is staggering. In some oil and gas companies (and others), the proportion of full-time employees who are eligible for retirement now exceeds 50%. The other aspect is that of general movement through, in and out of the organization, especially involving promotions and attrition.
BY THE NUMBERS
In my simplified opinion, the industry has been on a plateau for three years, and that, although the cyclical nature of the industry suggests a slowdown at some stage, drilling and production will continue to rise. This means that we can expect that companies will continue to grow, thus increasing the pressure on already stretched resources, at all levels of the organization.
Over in the North Sea, the BBC (amongst others) reported that oil and gas firms in the UK expect jobs growth. Companies in the UK oil and gas sector expect to create up to 39,000 jobs over the next two years. A survey of 100 companies, commissioned by the Bank of Scotland, found expectations of employment growth had increased since last year. A clear majority (69%) of executives in the companies were optimistic about their growth prospects in 2014/2015. A total of 38% of those responding said a shortage of skilled workers would be their greatest challenge.
On a broader scale, ManpowerGroup recently surveyed over 38,000 employers across 42 countries and territories for their annual Talent Shortage Survey. They say that today’s competitive business environment continues to increase pressure on employers, as they seek more cost structure flexibility, while negotiating increasingly volatile economic cycles. Business leaders must confront the challenge of executing business strategies and remaining competitive, while simultaneously dealing with value/margin compression amid ongoing economic uncertainty.
As is becoming clear in the Human Age, securing access to the increasingly finite pool of individuals with in-demand skillsets will be fundamental to business success. Worldwide, 35% of more than 38,000 surveyed employers report that they are experiencing difficulty filling jobs, due to lack of available talent. This represents a slight rise in comparison to the 2012 survey, and is the highest proportion of employers expressing concern about talent shortages since 2007.¹
More than half of employers say skills gaps impact the ability to serve clients to a high or medium degree. One of the obvious questions associated with skills gaps is the level of impact these shortages have on the ability to satisfy client needs. This marks the third year that ManpowerGroup has asked the question. Last year, the firm noted a surprising drop in the percentage of employers who indicated talent shortages were having a noticeable impact on their client-facing capabilities. The percentage of employers reported that talent shortages were having either a high or medium impact on their business shrank from 57%, in 2011, to 42% in 2012. In 2013, that percentage climbs to 54%.¹
Of the more than 16,000 hiring managers who reported difficulty filling jobs, more than half told ManpowerGroup that talent shortages are impacting their ability to meet client needs to a high (19%) or medium (35%) degree. An additional 26% say talent shortages have a low impact, while less than one in five (19%) believe that their client-facing capabilities and responses to stakeholder needs are currently unaffected by skills gaps.¹
In 2013, ManpowerGroup asked employers to provide additional details on how the inability to find talent impacts their organizations, as a whole. The impact on client service remains the chief concern, but the survey reveals additional ways that skills gaps negatively impact an organization. Chief among these is the reduced ability to adequately serve clients, reported by 43% of employers, Fig. 1. In addition, 39% say that talent shortages reduce competitiveness and productivity in general. According to 25% of employers, talent shortages actually result in increased staff turnover, while 22% believe talent shortages can reduce creativity and innovation. More than one in five employers say talent shortages lead to increased compensation costs (21%), and also have a detrimental effect on employee engagement/morale (21%).¹
As previously mentioned, the oil business is set to continue its growth, and this growth takes capital. However, it is capital of the human variety that presents the greatest challenge. Money is available. As Manpower Inc. Chairman and CEO Jeffrey A. Joerres said, at the World Economic Forum in 2011, that organizations need to have access to talent, not just capital.
Quite rightly, great emphasis these days is being given to succession planning and employee engagement. Unfortunately, according to the reality, rather than the aspiration, this is mainly talk. Yes, there are companies who have great process and practice in both areas, but these are the minority. With a scarcity of the right skills and experience at all levels, the need for good work and succession planning, as well as employee engagement, is never more crucial.
For me, succession planning and engagement go hand-in-hand. I have seen, many times, that succession planning systems are used not so much for the execution of a plan, but rather to provide management with some means of determining who, if anyone, can replace someone who is about to leave, or has left out of sequence. In short, they’re engaging in firefighting. The outcome often works well enough, but is rarely optimal.
Of course, in a world where a job for life is no longer a concept (as it was when I left school), the chances of optimal results are questionable, but the majority of companies can, and should, do better. As I say, succession plans are fine, but, if you are not able to engage and retain employees at all levels, succession planning will end up on the scrap heap with the crystal balls (mine was broken when we moved the planning department) and silver bullets!
EXAMINING THE WORKFORCE
I have to concur with the Deloitte’s Global Human Capital Trends 2014 report, especially the information presented in the section entitled, “The quest for workforce capability.” The report states that “one of the ways to assess a company’s competitiveness is to understand its talent and workforce capabilities.”²
The 2014 Deloitte survey suggests that respondents clearly understand this challenge, with 75% rating workforce capabilities as “urgent” or “important.” However, only 15% believe their companies are “ready” to address the challenge. This gap is particularly wide in many major economies, including Japan, Brazil, the UK, South Africa and the U.S.² The authors emphasized that “it takes many years to develop deep skills within the workforce.”
A notable reason behind the present gap, according to the survey, is the way in which many companies have structured their development programs, to date. Traditional programs, which were sprinkled across departments and timeframes, are “simply not dynamic enough.” Deloitte’s authors noted that today’s employers “have the opportunity to build more integrated development strategies.”²
Regarding the important, and potentially underappreciated, aspects of succession planning, the authors stated that “given the competitive challenges of finding talent in the marketplace, coupled with the long lead times needed to build deep skills, succession management should expand well beyond the C-suite.”²
Having said all of this, there is no one-size-fits-all way of thinking. My purpose was to highlight the issues and I hope that it is clear: There is a great need to take action, as well as recognize that the current situation is not the same as the previous situation. The way that work is done is changing and the solutions have to embrace this.