It may sound like the preview for an end-of-the-world B movie, but the fears of an impending global war for talent are based on very real factors. The converging forces of aging workers and retiring baby boomers, the tech savvy Millennial Generation's foray into employment, females exiting the workforce, and shortages of skilled workers will soon produce a labor shortage the likes of which the industrialized world has never experienced.
Research bares this out. Development Dimensions International reports that one-fifth of this country's large, established companies will be losing 40 percent or more of their top-level talent in the next five years. The Bureau of Labor Statistics confirms that "by 2008 the number of young adult workers, from 25 to 40 year olds, will decline by 1.7 million" overturning a historic growth rate from 54 percent to 3 percent in the next 20 years. By 2010, the U.S. will face a 10 million workforce shortage and an unemployment rate of just 2 percent.
The Conference Board CEO Challenge of 2007 points out that "Cracking the U.S. Top 10 this year is finding qualified managerial talent and top management succession." Simply put, the looming war for talent is very real and, left unaddressed, stands to dramatically alter the economic performance of companies and countries. That's why informed CEOs around the globe are challenging their HR leadership to develop winning strategies for recruiting and retaining the top talent that will continue to drive growth and performance. These combined strategies, technologies, and processes are now encompassed in talent management.
A brief history of talent
Before 1997, the word talent was primarily used to describe people in the entertainment industry. Managing talent was a profession for agents, casting directors, and publicists. Then The War for Talent was coined that year by three McKinsey consultants who compiled their research into a bestseller published four years later. Management tended to ignore the implications because the authors mainly explored macroeconomic workforce issues that were perceived to be too academic for the frenzied landscape of the dotcom gold rush. Had the book been published today, it would be required reading for all managers.
Shifting workforce dynamics
Welcome to the new millennium. Your company's brainpower is now more valuable than your bricks. Outsourcing to emerging talent markets has delivered mixed results. And the top college graduates you recruit are entering your workforce with new attitudes. We no longer enjoy a climate where employers can handily recruit top talent. Workforce dynamics have fundamentally shifted in three major ways now giving preferential treatment to the employee and challenging employers to adapt.
Intellect vs. hard assets
As the major industrialized nations moved from a producing economy to a service economy, so has the value of our companies. While it is still easier to understand the value of a truck or an airplane compared to an employee, the world is moving in this direction of placing a premium value on talent. In fact, The Economist reported that intangible assets have shot up from 20 percent of the value of companies in the S&P 500 in 1980 to around 70 percent today. A fundamental shift has occurred where the executive team's primary responsibility has changed from access and management of capital to access and management of talent.
Not convinced? Then think about the rise in both power and valuation of companies that have very little hard assets. Think about the economic power of companies like Google, Microsoft, Apple, Goldman Saks, Bank of America, Citigroup, and JPMorganChase. All of these companies have little to no hard assets other than office equipment and buildings. Their true value is measured by the strength of their intellectual property and people.
The Employment Policy Foundation reports that by 2030 the U.S. will experience a labor deficit of 35 million workers. Many Western economies believe that the large populations of India and China will solve all their talent problems. While outsourcing may help to mitigate some of the talent management shortfalls it is likely to be only a partial solution. Talent shortfalls will not be solved by leaning on other countries but by relying on our own innovation and execution to acquire and retain top talent to drive company performance.
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