Stan Lepeak, Global Research Director, KPMG LLP
Every December, KPMG annually polls its professionals globally as well as third-party business and IT service providers as to what they see as the top trends affecting their client organizations in the coming year. This poll is conducted as part of the quarterly Sourcing Advisory Global Pulse survey and this year’s results were released via a white paper and Webcast conducted on January 23. The focus of this Pulse survey is primarily global business services (GBS), but the annual trends poll also looks more broadly at general economic and geopolitical trends globally.
This year’s poll identified talent shortages and talent management challenges as the top 2014 trend that will have the biggest negative impact on businesses and organizations in 2014 (see Figure 1). Ranked second was weak global and regional economies and the threat of a “double-dip” recession (ranked first in last year’s poll) and weak consumer and customer demand was ranked third (ranked second last year). The trending compared to last year’s poll was positive for weak global demand (down 17 percent year over year) and weak consumer and customer demand (down 12 percent) but negative for the top ranked talent challenge whose citations jumped 15 percent year over year.
Given still relatively, and in some cases record, high unemployment rates in many Western countries, it may seem on the surface surprising that talent shortages is identified as a major negative trend. The key here, however, is quality and not quantity of talent, along with accessibility. There are many skills high on the demand list for employers that are not readily available in many markets. One example of this is around data and analytics skills both pure (data scientists) and applied (business professionals that can understand and exploit “big data” in the context of whatever their roles in the organization are). These skills are underpinned by solid foundational knowledge in topics such as mathematics and statistics and augmented by practical business experience and strong functional and industry knowledge. On the IT side, sought after skills include advanced programming languages, “app” development (combining IT, creative, and digital skills), security and encryption, and more fundamentally, the capability to combine and embody both IT and business acumen and prowess. The shortage is for skills such as these, not just warm bodies.
Talent shortages is a recurring theme across KPMG research and a key driver for increased adoption of a GBS model and framework. The converse to the negative issue of shortages is the positive potential benefits derived from quality talent management capabilities. Organizations that excel at talent management can leverage this skill for meaningful competitive advantage. Recent KPMG research on the “intelligent” finance function bore this out and was addressed in a prior blog. This research found that organizations that placed a high value on talent management and felt they were skilled at it performed better in terms of revenue and earnings growth than firms that placed less emphasis or were less skilled at talent management.
Some argue that there are no real skills shortages and that employers that cite them are simply just too cheap to pay a compelling or competitive wage. While there are certainly situations where this is true, it is difficult to consistently make the case that there is an overabundance in the market of, for example, data scientists with strong knowledge of the finance function or software engineers that understand operational complexities of global banking. The appalling state of the education systems in many parts of Western markets adds to the credence of the skills shortages argument.
There is also the talent management side of the challenge, regardless of the abundance or dearth of available skills. Many organizations struggle with the basics of finding, attracting, and recruiting talent. This is exacerbated by the complexity of staffing new business models such as GBS operations, the need to take a global approach to talent management, and understanding and dealing with the nuances of Gens X, Y, and Z in general and in terms of integrating them with legacy staff and legacy work and reward models. In other cases, it is simply that organizations lack appeal (nearly regardless) of pay. Try and entice gangs of skilled and ambitious Millennials to (insert name of flat, cold, boring, and isolated section of your market here) and it becomes clear their value proposition goes beyond just compensation.
Talent shortages is one of the drivers behind organizations’ adoption and expansion of the GBS operating model. By consolidating and integrating service delivery models globally and the staff that support them, organizations can gain economies of scale for skills, share and extend best practices, and gain greater utilization of scare talent resources. They can integrate internal resources with those from third parties and better leverage these external skills. This is where talent management capabilities come in, above and beyond just having access to adequate talent.
Talent management is one of the challenges facing organizations’ attempt to excel at and drive GBS maturity. But it also creates opportunities for firms that can master its nuances under the GBS model to further drive the maturity and capabilities of their GBS operations. This involves taking the following steps: developing a global approach to talent management; building a compelling GBS “brand”; creating a consistent and global GBS recruitment policy and plan; deploying reward and incentive programs that motivate the right behaviors; employing training programs that address relevant GBS skills development; utilizing targeted interventions such as coaching programs for key employees; taking a proactive, transparent approach to succession planning; and continuing to proactively address the change management issues associated with GBS expansion. Regardless of whether talent shortages are real or the result of miserly management, talent management prowess is critical to the success of GBS efforts.