SI Review: November/December 2014

Print

Bridging the Recruitment Gap

How staffing firms can take advantage of the skills shortage and put people to work

By Greg Palmer

More than 4.1 million jobs go unfilled in the US every month, according to the Bureau of Labor Statistics (BLS). On the surface, this sounds incomprehensible, especially when you consider there are 12 million workers who are unemployed, have quit looking for work (and not counted in the unemployment statistics) or who are underemployed. These folks are captured in the “U6” unemployment numbers published by the BLS (line U6 of Table A-15 of the BLS’ monthly employment situation report). The U6 number has been hovering around 13 percent of the labor force. How can unfilled job numbers continue to persist when there are so many people who are eager to fill them? This is due to the much-discussed skills gap. There is a significant gap between skills these open positions require and skills of the available talent pool.

But this is also an opportunity for the staffing industry. Savvy firms are stepping up, investing in a variety of options so they can fill the gap. But to know how to address the issue, one has to understand the underlying causes.

Why Is There a Gap?

There are seven primary reasons for the skills gap.

1) Workforce demographics. The largest single reason is the dramatic changes occurring in the demographics found in the shifting US workforce. Workers are retiring and leaving the workforce at a faster rate than ever before and new job entrants (particularly in “skilled” positions) are not entering the market at a fast enough rate to keep pace. (See graph below).

2) Hiring managers. There’s a different kind of perception prevailing among engagement managers. Many managers think that there are plenty of people available with the right skills primarily because many identify with the official unemployment rate, also known as the U3, which has been hovering around 6 percent for some time now. A recent CareerBuilder survey found that 81 percent of hiring managers said they could be highly selective and did not feel they had serious issues finding talent despite the fact that they could not fill a third of their job openings. It’s true there are plenty of people available and wanting to work, but they aren’t an exact fit with the proper experience, skill, geographic preference and education.

3) Workers Unprepared. Many of today’s workers are not prepared to enter the job market because they lack the requisite skills. Some realize they don’t have the right skills in today’s highly competitive job market, others don’t. As a result, they are unprepared and unable to take advantage of the opportunities and are floundering in their search for appropriately matched employment.

4) On-the-job training programs. Fewer organizations are willing or able to train workers; additionally there are fewer apprentice programs than in the past. According to a recent Harvard Business Review article, apprentice programs have declined 36 percent since 1998 and enrollment in the programs are down 16 percent from the peak of 2003.

5) The US workforce is less mobile. With workers’ mortgages underwater and people being dramatically downsized during the recent great recession, workers are fearful to pull up stakes and make a major career change in an uncertain economy.

6) Lack of a comprehensive immigration policy. Congress has not been able to address the skills gap through any type of strategic immigration policy that would allow enough skilled workers to enter the US legally. Take the H-1B visa program, for example. Each year, visa requests reach the cap level within days of the petition period, triggering a lottery for the visas and leaving tens of thousands of needs unfilled due to artificially low caps.

7) Education falling short. To illustrate this point, only 15.5 percent of students entering a community college complete their AA degrees within three years of enrolling and more than half never complete their degree at all — despite the fact that those with an AA degree out-earn those without by 13 percent. Furthermore, only about 30 percent of workers entering the workforce between the ages of 25 and 29 have any type of degree at all. As a result, there are not enough new entrants with the right skills entering the labor market.

Where Are the Gaps?

The gaps cut across all segments of the staffing industry. Many assume the gaps are centered around the STEM jobs (science, technology, engineering and math), but other skills are lacking as well. A recent ManpowerGroup survey identified the top 10 most difficult jobs to fill today:

  1. Skills Trades
  2. Restaurant & Hotel Staff
  3. Sales Reps
  4. Teachers
  5. Drivers
  6. Accounting/Finance
  7. Laborers
  8. IT Staff
  9. Engineers
  10. Nurses

In addition, a 2011 McKinsey Global Institute survey of 2,000 US companies found two-thirds of employers had difficulty finding qualified applicants in a range of high- and low-skilled positions in management, science and engineering, sales and marketing, customer service, transportation, skilled trades, and production. Moreover, 30 percent reported having positions open for six months or longer that they could not fill. In 2012, 45 percent of employers surveyed said the lack of worker skills is the main reason for entry-level job vacancies.

The skill-gap situation is real and growing. Staffing firms are just now beginning to realize that the skills shortage is costing them money — and that when they help solve this problem on behalf of a client, they add real value and are rewarded for their efforts with more business and higher margins.

Staffing Firms Step Up

Staffing firms are beginning to educate clients to help them speed up hiring decisions, raise wages, add training, and develop other solutions. CareerBuilder has created what it calls the “Supply and Demand Portal,” which measures the job markets in the US for the supply of active candidates looking for work by a specific skill and demand by location and skill. CareerBuilder then supplies a predictive gauge it calls the hiring indicator, which shows the estimated difficulty of filling particular type of job in a particular market.

Staffing firms are using this tool and other data to have solutions-based conversations with clients, where they are beginning to talk about the root causes of the gaps and are examining the problem at a much deeper level. Top firms are beginning to offer some of the follow solutions:

  • Creating flexible work arrangements that include telecommuting, flex hours, job sharing, and part-time work.
  •  Tapping into niche labor segments such as older workers, stay-at-home parents and offshore workers.
  • Educating both clients and candidates about today’s labor markets so that solutions can be found and clients are sensitized to the severe and growing shortages.
  • Stretching clients (orders) and candidates (expectations) to make more matches. Once both sides are aware of the reasons for the gaps, there is a greater chance to make a match.
  • Charging appropriate margins for difficult-to-find positions because the cost of recruiting is rising and the match is more difficult.
  • Adding direct hire and charging temp-to-hire fees to clients that traditionally did not pay fees.
  • Creating partnerships with government, companies and workers. In Chicago, for example, TrueBlue collaborated with Mayor Ram Emanuel to create a program called Skills for Chicagoland’s Future. Through this partnership alone, TrueBlue has hired more than 600 workers in the Chicagoland area.
  • Joining existing partnerships. Staffing firms are jumping in at a grass-roots level. Many community colleges are already at the core of creative new models that are focused on labor market outcomes. Apprenticeship 2000, for example, is a collaborative effort between eight non-competitive manufacturing companies and Central Piedmont Community College in Charlotte, N.C. Together, they designed a three- to five-year curriculum in “mechatronics” (an emerging discipline that combines mechanical engineering and electronics), specifically targeting the skills and knowledge needed in regional factories. Students accepted into the program receive a salary, hands-on experience, and upon graduation, an associate degree and journeyman’s certificate. In California, PG&E is working with community colleges to train students for careers as utility technicians. Such models show the effective role that community colleges can play when they are fully tuned to the needs of the local economy. Staffing firms are joining these partnerships in increasing numbers.

Summary

Staffing firms can no longer try to solve their recruiting problems simply by hiring more recruiters or spending more money on job boards. It’s clear the issues are complex and solving them will require a commitment from the ecosystem: staffing firms, candidates, clients, government, educators and many others.

Further, one of the key issues is an information gap. Lacking enough data on the precise skills required for most jobs, the organizations design training programs that may not be teaching the right skills. This has to change. One way is to create more direct partnerships between employers and educators. This will help design appropriate worker training and is a helpful start. More importantly, this is a role that staffing firms can and should play.

The fact is both the opportunity and the challenge involved with the skills gap are growing. How can staffing firms and its clients thrive in this changing, complex environment? Now is the time to weigh in, change and take the necessary steps needed to adjust and prosper in the months and years ahead.

Greg Palmer can be reached at gpalmerandassociates@gmail.com