The Talent ShiftConventional thinking obscurestalent crisis

Awareness levels differ significantly by country.

The Talent ShiftConventional thinking obscurestalent crisis

Awareness levels differ significantly by country.

A crisis that will blow up, not blow over

How should leaders act now to ensure their organizations thrive despite a talent crunch? Paying inflated wages is not a sustainable solution. Korn Ferry’s The Salary Surge study shows that the annual salary premium could increase by 152% between 2020 and 2030 due to skilled talent shortages. Yet only 43% of leaders believe that shortages will force them to increase salaries unsustainably.

Increases in the contingent workforce may be an alternative, as identified by 78% of leaders. This also suggests that a more fluid, agile approach to the workforce may be a likely result of the talent crunch. Although business leaders may think increasing their freelance and contract workers is a way to deal with talent shortages, skilled labor will be tight across all sectors, Korn Ferry research has found, meaning there are no guarantees that an adequate, flexible workforce supply will be available to meet businesses’ contingent needs.

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Salary surge uncertainty

60%

Of business leaders in China expect to increase salaries because of talent shortages, compared with only 26% of UK respondents

54%

Of business leaders in Singapore have no idea whether a talent shortage could force them to increase salaries unsustainably.

Korn Ferry’s The Global Talent Crunch study found that the worker deficit could surge from 20.3 million in 2020 to 85.2 million by 2030. But leaders, in contrast, said that they believe the talent shortages they’re starting to experience are cyclical rather than structural: While 66% of executives predict a shortage of highly skilled talent by 2020, only 52% believe there will be a deficit by 2030.

C-suite leaders know that talent grows more vital by the day; 84% of corporate leaders told us that to survive in the future of work, their company will need more highly skilled workers as a proportion of its workforce. But, at the same time, they aren’t seeing the severity of impending talent shortages and the disruptive impact these will have on their business. Their competitors also aren’t grasping the scope of these talent challenges, obscuring the magnitude of the issue.

To be sure, awareness levels differ significantly by country. In the United States—its economy already struggling with talent shortages—there’s growing awareness of how acute the problem may be: 79% of American business leaders think there will be a shortage of highly skilled talent by 2020. That compares with 47% of British business leaders who see similar shortfalls. In fact, leaders in the United Kingdom have a starry-eyed view of the future: 32% of them, in comparison with only 17% of surveyed executives globally, predict a surplus of highly skilled workers by 2025. By that date, the UK can expect a deficit of almost half a million workers.

Talent crisis under the radar

Business leaders are not looking far enough ahead to mitigate the talent crunch. Even among those that have formal forecasts for their skilled talent needs, how many are planning to 2030?

"Historically, ever-more sophisticated technology has created more demand for highly skilled workers than it has consumed. This trend is likely to continue. But the talent shortfalls that nations and companies are experiencing are not part of a short-term economic shift. They’re a structural change. Companies need workers with creativity, emotional intelligence, diplomacy, and negotiation skills to navigate the new world of work."

Alan Guarino
Vice Chairman, CEO and Board Services, Korn Ferry

Growth plans ignore talent reality

Business leaders globally are confident their companies can meet their talent needs to fulfill ambitious organizational growth plans: 86% of leaders expect to increase their revenue by 2020, and 64% of them expect to increase their staff by more than 20% by 2025.

How realistic are those targets? With so many companies seeking to boost their headcount in the decades ahead, talent shortages will only grow more acute—unless the supply of skilled workers increases. Still, 95% of leaders express confidence that their organization can meet its future talent needs. They aren’t oblivious to deficits of skilled talent, but they may think it will be others’ problem, not theirs: 60% of CEOs who plan to increase their headcount by more than half also recognize there will be talent deficits.

In the face of talent shortfalls, how do leaders expect to increase headcount? They’re optimistic but unsure of their actual course: 84% said their company has a formal forecast and plan for the skilled talent it needs to deliver its strategy. But only 9% said these plans extend as far as 2030. Of the companies in the UK that rate people as the highest priority in their business strategy, 69% lack a formal forecast for their talent needs. In the US, only 2% of companies have a plan for skilled talent needs that goes as far as 2030.

By delving deeper into existing plans, we can see how actual data undercuts the key assumptions they’re built on. While leaders express support for retraining existing workers, seeing it as an imperative when talent is tight, they may fail to factor it into their talent planning, especially if they assume that shortages are cyclical rather than structural. If 8 of 10 business leaders acted on their expressed belief that their company must constantly boost the skills of and redeploy its workforce because this is critical to its success, why aren’t retraining programs a priority for executives and organizations? It may be that the C-suite lacks faith in employees’ potential: Just 30% of business leaders think that the majority of their workforce successfully can be retrained and redeployed into needed new roles. This is a concerning figure: as huge deficits in highly skilled labor loom, companies need to look at their workforce in new ways, identifying the people with the right mindset and capabilities, and putting training programs in place to build the capacities they need.

Divergent Country Perceptions

Of the leaders who expect their organization’s headcount to grow by more than 50% by 2030...

86%

In the US think there will be a talent deficit by 2030

78%

In Germany think there will be a talent deficit by 2030

71%

In the UK think there will be a talent surplus by 2030

"In the new economy, the speed of change means that it’s very difficult for leaders to predict what’s going to happen to their market or their business. The companies that will thrive in this environment are those that can build the capability to learn and react swiftly to changing market needs."

Jean-Marc Laouchez,
President, Korn Ferry Institute

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