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The Talent Tsunami: 3 Waves that Transfer Power from the Employer to the Employee

March 03, 2008

Three waves of change are converging worldwide to create a talent tsunami in the workforce, shifting power from the employer to the talented individual. Those three waves are (1) demographic changes, (2) candidate empowerment, and (3) the increasing value of talented employees relative to other success factors. Recruiters and managers who ignore this tsunami will be swept away; those who take action today will ride high.

Demographic trends

Global trends in population and education form the first wave of change. In the next few years, retiring workers around the world won’t be fully replaced by the workers that follow, thus creating a shortage—the usual number cited is a gap of about three million workers in the coming decade in the U.S alone. Low birth rates across the European Union and the developed countries of the Pacific, as well as the aging of populations across the industrialized world will exacerbate these demographic trends in many world labor markets both now and in the long term.

Numerous business sectors teeter on the edge of crisis even now: acute shortages of people capable of doing specific jobs in health care (for example, nursing, radiology, pharmaceutical), financial services, and technical management fields are driving up salaries and slowing growth.

Underlying these changes is the fact that schools aren’t preparing enough people to fill the high-demand jobs. The number of science and engineering degrees in the United States has actually been on the decline for two decades, while jobs in those fields remain among the fastest growing.

As globalization and international hiring expand, further educational issues arise. Language deficiencies are one obvious barrier to crossing borders. Educational quality also varies widely among countries. A 2005 McKinsey & Co. survey determined that only 13 percent of college graduates in low-wage countries were suitably qualified to work for multinational companies.

Demographic pressures range beyond white-collar professions. Jobs dominated by the baby-boom generation, such as qualified auto mechanics, will experience shortages caused by that group’s general retirement. The trucking industry suffers today from a shortage of 20,000 drivers. Utilities can’t find enough line workers.7 No significant economic sector is exempt from the trend. Neither rising productivity, nor offshoring, nor bringing new groups into the workforce will be sufficient to prevent the demographic wave sweeping through the labor markets.

Candidate Empowerment

The second wave of change is the growing power of the candidate in the employment equation. The Internet makes it easy for any candidate, whether unemployed or working, to locate new opportunities quickly, research the company and salary, and quietly apply online. It has become much easier for employers to locate great candidates in online résumé databases, and tempt them away from their current organizations. In a free-agent marketplace, the stigma of “job-hopping” is all but gone. Talent can easily look to other regions or countries for opportunity.

Monster’s 2006 workforce survey identified almost 70% of the employed workforce as “poised,” that is, willing to entertain a new job offer whether they are actively looking for work or not. Today’s employee keeps a resume online, an ear to the corporate rumor mill and an eye on the door. Our recent employer surveys show that 50 percent of online job advertising is due to employee turnover, an indicator that talented people are on the move.

Business is threatened, moreover, by its point of view toward employees. Executives talk about “human capital assets” and then treat employees like assets— financial instruments that can be written off, disposed of, traded away, or deemed obsolete and simply dumped onto the market for whatever gain can be made.

When people have a choice of jobs, they behave like consumers shopping among many products. If you want to attract the best, you have to compete for them. You have to offer them value. You have to understand why they might want to “buy” your company (that is, join your workforce). And then you have to get them to stay with you the same way that marketers gain loyalty—they offer consumers what they value, not once, but time after time.

Increasing Relative Value of Talent

The third wave forming the talent tsunami is the increasing value of talent to the bottom line, and the diminishing power of other assets to make a difference.

One by one the former advantages fall: capital flows much more freely than in the past; innovation is quickly copied; workplaces become decentralized (so location matters less); former monopolies fail to compete. These structural changes don’t mean the end of unemployment, when a business fails or moves, people lose jobs, but they do mean that talent is the remaining advantage. Talent creates the lion’s share of value in the developed world’s companies, and those who calculate the intangible assets of organizations (know-how, patents, brand names, ideas and processes) put the product of brainpower at 80 percent of a company’s value.

Globalization plays a part: As businesses in advanced economies cede manufacturing and low-end services to emerging economies, their survival depends on the products of high-end talent. Information-rich products and services, business innovation, sophisticated new technologies, better management, and more creative solutions drive first-world economies.

Recession only delays the reckoning, and in any part of the cycle, those with in-demand skills command higher wages and other concessions. During the 2000–2002 recession period, employment and wages for nurses rose because of the chronic shortage.

Companies talk about innovation, and it’s talent that innovates. A retailer like Wal-Mart revolutionizes supply chain management and then discovers that midlevel store managers are the lynchpins that determine whether all that efficiently delivered merchandise gets bought. What determines whether your Web site will help deliver profits? The people who design, build, and grow your Web site. The bottom line of finding keepers is the bottom line of your organization’s existence: delivering profits (to a business) and/or fulfilling the mission (to a not-for-profit organization).

What to Do

How can an executive, recruiter, or manager find, hire, and retain top performers given these dynamics? How to compete in this marketplace?

When the candidate is a consumer, compete with the tools of consumer marketing: Attract talent with a strong brand message, well targeted; acquire talent by delivering a recruiting experience that confirms the brand; advance talent by validating the brand promises in the real world of day-to-day work.

Google does it; Johnson & Johnson does it; Enterprise Rent-a-Car does it, and we know local diners that do it brilliantly: Hiring has to become a marketing and branding practice. It’s not just advertising, but a fully conceived, long-term practice of attraction using marketing disciplines such as profiling, segmentation and targeted outreach. It must be grounded in the understanding that talented workers view the employment market the way consumers consider a purchase.

The new practice of recruiting attracts candidates by speaking their language, by communicating over the long term with many potential employees, and by studying their values, beliefs, and work motivations. The new practice of recruiting is mindful of the intangible as well as tangible benefits of employment and creates a vibrant, appealing “employer brand” to attract, acquire and advance the right employees.

The quest for quality will determine whether your enterprise succeeds, survives, or fails in the coming decade. Those who integrate these principles to their particular business, culture, and mission will possess an abundance of the only remaining resource that matters—the human talent that is your company’s future.

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