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Do We Have a National Skills-gap Crisis? 6 Morsels of Food for Thought

by May 17, 2012, 5:52 am ET

This past week I was interviewed by a reporter from a major news magazine. He contacted me about a controversial article I had written on ERE addressing the lack of forward-thinking when it comes to companies developing talent acquisition strategies. In the article I suggested that follow-the-leader seemed to be the dominant strategy of choice used by most companies.

We then got around to talking about the skills gap in the U.S. workforce, whether it was real or imaginary, and if anything could be done about it. “Plenty” was my instant comment. Here’s what came next:

  1. We don’t have a skills gap; we have a thinking gap. I suggested that the real problem was the wrong strategy. In a talent scarcity world, you can’t use skills to screen out people who don’t have them. I describe this as the sourcing Catch 22. (Here’s a video I did for LinkedIn summarizing the problem.) The solution is rethinking how we screen, assess, and hire people. (Here’s a link to an upcoming webcast on one way to do this.)
  2. HR leaders aren’t willing to own and implement the “talent is No. 1” vision. I’m working with a number of CEOs right now on how to get HR leaders to take a lead on owning the whole talent process from beginning to end. It seems that all too often, HR leaders aren’t chosen for their ability to execute the vision of making talent No. 1, despite their lofty pronouncements and best intentions. To me, HR leaders should be equally as committed to ensuring great people are being hired as the CFO is to maximizing profitability. This means being more forceful in implementing programs that raise the talent bar, not maintain the status quo. Few people enjoy preparing a detailed ROI analysis to justify a $200,000 capital investment. Yet HR allows these same people a great deal of leeway in spending the same amount to hire someone.
  3. U.S. Department of Labor regulations worsen the problem. The government is equally as culpable, if not the root cause, of the national skills gap. Here’s why: its compliance method of choice is to use “objective” criteria as a means to ensure fairness in the hiring process. Somehow this got translated into using a list of quantifiable skills and experiences to advertise and screen candidates. This is the Catch-22 mentioned above, screening out people for something we already know they don’t have. Making matters worse, there is very little science behind the objective criteria used for screening. When people ask me how much experience people need for a job, I always say “enough to do the work required.” Taking this one step further, maybe we should define the work instead of the skills needed to do it. It seems to me that, something like “design a circuit to double battery life in the iPhone 5” is more objective than “5 years of power circuit design experience and a BSEE from a top-tier university.” The screening would then consist of proving they can do the work or learn how quickly.
  4. Hiring managers aren’t fully committed nor capable. Most hiring managers aren’t rewarded or promoted based on their ability to hire outstanding people. Short-term performance is at the top of their priority list, reinforcing the apparent need for a full laundry list of skills and experience. Flipping this mindset is part of the solution. Amazon’s raising the talent bar approach is another, where a talent advisory team ensures that every hiring decision balances both short-term performance with long-term potential.
  5. Substitute achievement, potential, and ability to learn to bridge the skills gap. This is really the key to the solution: the best substitute for the skills gap is to hire people based on their ability to learn, motivate, and lead others and achieve results. This would instantly open the prospect pool to vets, wounded warriors, and all types of diversity candidates. One of numerous ways of assessing this is to ask candidates about their biggest accomplishments where they had the least amount of experience. Then focus on their ability to learn, deal with ambiguity, leadership, and achieving results with limited resources. Regardless of how achievement is assessed, the only way to implement the concept is to first break the institutionalized habit of over-reliance on skills and experiences.
  6. Offer more apprentice-like programs to bridge the skills gap. A skills and experience gap of 10-20% can usually be addressed with specialized in-house training, coaching, and management support. This amount of “stretch” represents the typical promotion or lateral transfer. Skills gaps bigger than this need to be more formalized with some of the training offered by community colleges and trade schools in combination with local business support. Businesses need to pay for much of this training — not the taxpayer. One of the CEOs I worked with in the past created and paid for a state-sponsored apprentice program for toolmakers. Much of the hands-on was conducted at his facilities, and of course, he had the first chance to the hire the best of the group.

Eliminating the skills gap starts by first figuring out the real problem. Unfortunately, most HR execs don’t start here; instead, they follow the leader, purchase off-the-shelf solutions, cover the problem with a few Band-Aids, or apply short-term fixes, mistaking activity for progress. Long ago, a CEO I worked for loudly proclaimed that strategy drives tactics, not the other way around. Maybe this would be a good place to start.

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

  • Richard Melrose

    Lou,

    Thanks for the post. “We don’t have a skills gap; we have a thinking [and behaving] gap.” Amen!

    I wouldn’t blame the Government (US DoL) on this one, though. The Uniform Guidelines on Employee Selection procedures are helpful. The Guidelines start with Job Analysis – determine what it takes to do the job. Then use valid, job-related measures, uniformly applied, to determine the extent to which jobseekers “have what it takes”. Makes sense. Isn’t that what your “10-Factor” seeks to do? Moreover, the O-net Content Model ( http://bit.ly/J9YvsO )provides a very useful reference to discipline both job design and selection procedures.

    Mostly, the Guidelines are NOT followed, so that can’t be the problem. Instead, the problem is pretending that wish list (laundry list) “qualifications”, “education” and “experience”, along with “resume reads”, “application reviews” and “unstructured interviews” have significant predictive validity for job performance, training uptake, employee engagement and talent retention. They don’t.

    Today, a jobseeker might have what it takes, but if he/she graduated before a certain date, the odds of even being considered (making it past the resume screen) are very low, indeed, ADEA, notwithstanding. Other prevalent biases likewise shrink apparent talent availability.

    We have the means to implement compliant, high-performance selection procedures that work to benefit of applicants and employers alike. If we did, the perception of a skills gap would quickly disappear.

    Instead, however, we’re stuck in the ditch of the skills gap pretend game. As Peter Drucker wrote about employee selection incompetence: “In no other area of management would we put up with such miserable performance.” Indeed. Drucker’s guesstimate of an “at best” employee selection batting average of .333 is 200,000 times worse than the six sigma allowance of 3.4 DPMO.

    r.melrose@vision21.us

  • http://www.dinosaur-exchange.com Martin Suenson

    Please allow me to add a few morsels.

    I agree that it is more a question of mind-set than fact.

    Many companies implicitly expect new hires to be able to do the job from day one and that is rarely realistic. Some companies think long term and are willing to invest in training and development. Other companies do not. It is striking that in a recent survey by Accenture, most European companies said that they had slashed training last year and did not expect to increase training in the near future. In the US and in Europe, our competitive edge is our know-how and knowledge and that doesn’t come for free. Good general education is necessary to create the basis, but the rest will have to come from the companies themselves.

    The companies who complain about the lack of skilled labor could also reflect on the tendency to retire people early. We tend to look at cost, i.e. salary, but forget to divide by the value added to look at the cost/benefit ratio. Experienced people add more value and on balance, sending them home because of cost is counter-productive. Probably it comes from the fact that it is easy to quantify cost, but more difficult to put a hard number on the value added.

    In that context: Countries in Europe with strong apprenticeship programs like Germany have weathered the crisis better than most. But they admit that it is costly. And if all the experienced people have retired, who will be the mentors in an apprenticeship programme?

    You can read more on both in the blog

    http://www.dinosaur-exchange.com/wordpress/

    or in the document collection

    http://www.dinosaur-exchange.com/FTP/document_collection.html

  • Keith Halperin

    Thanks, Lou. Last I read we have an 18% underemployment rate (http://ycharts.com/indicators/underemployment_rate). I think we need a national business-driven program to determine the skills (NOT the background) to meet the demand needed for their workforce, and a public-private-union partnership to massively retrain these folks Multiple, rigorous training and apprenticeship programs would be set up- with commitments to hire (not just to CONSIDER hiring) the successful graduates….Or, we can continue to complain, basically do nothing, and watch how our economy continues to stagnate and the middle class diminishes.

    Keith

  • Richard Melrose

    5/17/12 According to Bloomberg and AllThingsD, Hewlett Packard (NYSE: HPQ)is planning to do its part to ameliorate the skills gap by putting another 25-30 thousand folks out on the street.

  • Keith Halperin

    Yes indeed. I wonder if any of the HP’s CXOs will have their compensation reduced as a means of sharing the pain. Speaking of sharing, here’s info about work-sharing- an alternative to layoffs:

    UCLA Today
    Apr 04, 2011 By Lauren D. Appelbaum and Chris Tilly
    Job sharing lessens pain of unemployment on workers, state
    Lauren-AppelbaumChris Tilly 001Lauren D. Appelbaum is the research director and Chris Tilly is the director of UCLA’s Institute for Research on Labor and Employment. This op-ed appeared April 1, 2011, in the Los Angeles Daily News.

    California officials announced last week that the state in February made the largest jump in employment in the nation. While this is certainly good news, it’s important to realize that employment progress in recent months was not mainly due to an increase in job creation, rather it was the result of a decrease in layoffs.

    The fact is, public policy options for job creation are few. But there’s one way to head off layoffs: make better use of work-sharing programs.

    Work-sharing is not to be confused with job-sharing, where two workers split one full-time position by each agreeing to work part-time. Through work-sharing, workers don’t share a job, rather they share the work.

    A company with 20 employees that only has enough work for 16 employees would not have to lay off four people. Instead, all 20 employees could keep their jobs but see their hours reduced by 20 percent. Unlike furlough days, however, in which the employee loses a day’s pay for a day not worked, the employee receives a proportional amount of their unemployment benefit for the hours not worked.

    Thus, work-sharing saves jobs by using the unemployment insurance system to keep employees on the payroll. For example, an employee whose hours are cut back one day a week would receive 80 percent of her pay from her employer and partial pay from her unemployment benefit for the day not worked. Believe it or not, using this plan, the government spends little or no more than it already does for unemployment benefits. The state can partially pay unemployment insurance to five workers instead of paying one for a full layoff, and it comes out the same.

    Work-sharing has been widely and successfully utilized in Europe, a track record that we and other researchers will be examining todayand Saturday at UCLA’s conference “Reconnecting to Work: Consequences of Long-Term Unemployment and Prospects for Job Creation.” In Germany, for instance, the decrease in GDP during the 2008 economic downturn was steeper than in the U.S. However, with an extensive work-sharing program, Germany was able to stave off layoffs. Germany’s unemployment rate hovered around 7 percent, never increasing sharply as in the U.S., and started dropping many months before the recent U.S. unemployment rate decreases.

    California is one of 18 states that already have work-sharing programs. Under state law, any employer that wants to decrease by at least 10 percent the hours of two or more employees may use the program. Indeed, there has been a significant increase in the use of this kind of compensation program in California since the recession hit. The trend has surely saved jobs, but with California’s unemployment at 12.2 percent, work-sharing needs to be utilized more and expanded.

    Unlike its German counterpart, the California work-sharing program is not broadly advertised so few employers know about it. Also unlike Germany, California workers face an untenable choice because activating work-sharing benefits would cut into their unemployment benefits should they be laid off at later date. Meanwhile, participating in work-sharing can increase unemployment taxes paid by employers. If lawmakers removed these requirements, work-sharing would become a more viable option.

    Indeed, if all 50 states had work-sharing programs and these programs were used even modestly, job retention and unemployment could be powerfully affected. Nationwide, nearly 2 million people a month are involuntarily separated from their jobs. If even 10 percent of these people were able to hold on to their jobs through work-sharing, then 200,000 jobs per month or over 2 million jobs each year would be saved.

    With nearly 44 percent of the country’s unemployed out of work for six months or more — and more than 30 percent unemployed for over a year — it is clear that once people lose their jobs, it is a long and hard road to the next one. It doesn’t help that new studies show that the longer someone is out of work the less likely you are to get a job.

    If all 50 states had work-sharing programs and these programs were used even modestly, job retention and unemployment could be powerfully affected. Nationwide, nearly 2 million people a month are involuntarily separated from their jobs. If even 10 percent of these people were able to hold on to their jobs through work-sharing, then 200,000 jobs per month would be saved.

    Improving the odds of holding onto a job is the most efficient way to attack the problem. Work-sharing programs that slow job loss are an important weapon in mounting that attack.

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