How to find good quality employees, how to hang onto them, and how to develop them into better employees — these are the questions managers across the world constantly wrestle with. I’ve heard them in Europe at Davos this year, and from multinationals across the globe. I’ve seen them ripple across the booming economies in Brazil and Asia, where my colleagues and I have studied the operation of Indian companies, which make huge investments in developing talent. We’re now in the process of studying Chinese companies, where it appears at a minimum they are beginning to do the same.
The one place the picture looks different is the United States. There certainly are complaints here as well about the difficulty finding the right candidates, but the narrative is quite different. Here the story is about getting a “just-in-time” workforce, finding the precise workers we need just at the time we need them but letting them go when our needs change and then replacing them with new ones. It’s a “plug ‘n play” approach to the workforce, and it’s not working that well. (In full disclosure, I wrote about this phenomenon in a book called Talent on Demand, describing how companies in the US have adopted this approach to talent management in order to deal with highly uncertain and volatile environments).
The weak link in that approach is that with the focus on outside hiring to get skills, few employers are providing development opportunities. Why bother developing when we can get the skills on the outside? US large companies have been filling 66 percent of their vacancies from the outside, in contrast to a generation ago where 90 percent were filled from within. Because one company’s outside hire of an experienced candidate is another company’s retention problem, employers rightly look around and wonder whether investments in their employees will pay off. These patterns reinforce each other: less development leads to a greater need to hire skills from the outside, and doing so reduces the need to develop internally; it also creates spillover problems for other employers for whom turnover reduces the ability to finance training.
All that would be ok except that employers are finding it difficult to hire the skills they need. The supply of skills in specific areas is uncertain, so the quality and price jumps around a lot. Some jobs require skills or at least sets of skills that are unusual, and finding a good fit outside is very difficult. Skills that one learns through training become scarce because few employers train.
For the employees, it’s not working well because they find themselves stuck in their current jobs. No one wants to develop them, no one wants to let them grow into a job when the alternative is to find someone who can “hit the ground running” because they have done that job elsewhere. So development and advancement are hard to come by.
Especially in slack labor markets like the one we have now, employees are also petrified that they will not appear to have the skills that are required to fit changing jobs, especially as companies restructure, losing their jobs in the process to some outside hire. So they freeze up, afraid to do anything that might look like a mistake.
Is it time to bring back the Organization Man?
In that model, which drove the US economy for most of the last century, employers made longer-term commitments to employees, where they invested in development to fill jobs, and where employees responded with commitments of their own in terms of performance. Jobs were filled internally with people prepared to do them, skill shortages were unknown, and employees were engaged with the needs of their employer.
A critic would say that if employers did that, employees would simply take those investments and leave. The only reason they leave, though, is because they can get a better job elsewhere than their current employer will give them. To keep good people, employers need to take a bit of a risk on them by giving them jobs that they haven’t already done. The employer should be able to take that risk; first, because they should have inside knowledge about who is promising and, second, because if they are right, the bet pays off by filling jobs more cheaply than outside hiring. The end result is that companies would be able to retain talented employees who are more committed to the organization. And employees would win too, growing in jobs and companies that they are loyal to.
What won’t work is pursuing this model half way, giving some employees some development opportunities but then still filling more senior vacancies from the outside. Why would someone wait around if it looks as though opportunity will not come?
Clearly, the jobs issue is not going to go away unless US companies figure out how to hire, and train, the talent they need.